<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF l934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1359
PUBCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0246410
(State of incorporation) (I.R.S. Employer Identification No.)
3830 Kelley Avenue, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-5300
Securities registered pursuant to Section l2(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section l2(g) of the Act:
Common Stock, Par Value $.0l Per Share
Class B Stock, Par Value $.01 Per Share
Common Stock Purchase Rights
(Title of class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At March 3, 1997, the aggregate market value of the common shares held by
non-affiliates of the registrant (based upon the closing price of the Common
Stock), was approximately $13,021,457.
As of March 3, l997, 3,752,473 common shares (Common Stock and Class B Stock)
were outstanding.
Documents Incorporated by Reference Form l0-K Reference
None
The exhibit index begins on page of this Form l0-K.
<PAGE>
PART I
ITEM l. BUSINESS
(a) General Development of Business.
Pubco Corporation ("Pubco") owns Buckeye Business Products, Inc.
("Buckeye"), which manufactures and markets computer and data processing
supplies, Aspen Imaging International, Inc. ("Aspen"), which distributes
computer and data processing supplies, and approximately 85% of Allied
Construction Products, Inc. ("Allied"), which manufactures and
distributes products for the construction and related industries. Pubco
also owns certain apparel-related and printing-related trademarks and
tradenames which it licenses to others, as well as other income
generating assets. Pubco was established in 1958 and is a Delaware
corporation. Pubco and its wholly-owned and majority-owned subsidiaries
are collectively referred to as the "Company". As of December 31, 1996,
the Company employed approximately 215 persons.
The present corporate structure came about on June 27, 1996, when
Bobbie Brooks, Incorporated ("Brooks"), then a publicly traded Delaware
corporation, merged into Pubco, and the assets of Aspen, then a publicly
traded Delaware corporation, were acquired for Pubco Stock. At the time
of the Merger, Pubco owned over 90% of the Brooks Common Stock and 100%
of the Brooks Preferred Stock, Brooks owned approximately 62% of the
Aspen Common Stock, and Buckeye operated as a division of Brooks.
(b) Financial Information About Industry Segments.
For purposes of industry segment reporting, the Company's operations
are conducted in two segments: computer printer supplies and construction
products. See Note K of Notes to Consolidated Financial Statements for
further information on industry segment reporting.
(c) Narrative Description of Business.
Computer Printer Supplies Segment
Buckeye, which operates as a division, manufactures and markets
computer ribbons, cartridge ribbons, computer paper, laser toner,
remanufactured toner cartridges and thermal transfer ribbons. Buckeye
also re-markets ink-jet supplies, magnetic media and copy paper. Aspen
markets toner, ribbon products and other supplies for printing devices
which it purchases from various suppliers, including Buckeye. Some of
Aspen's suppliers produce component parts on molds owned by Aspen. Aspen
also publishes and sells its AspenGuideR, the definitive computer printer
industry compatibility guide which provides cross-reference information
concerning ribbons, fax, laser and other related supplies.
Buckeye markets its products exclusively through an in-house
telemarketing organization primarily to end-users in the United States.
Buckeye also produces products for the original equipment manufacturer
2
<PAGE>
market. Aspen's products are sold primarily through dealers located in
the United States who resell the products to end-users, sometimes
utilizing their own labeling.
Buckeye has approximately 10,000 accounts, none of which represents
5% of its business. Aspen has approximately 2,000 accounts, none of
which represents 5% of its business.
Principal raw materials used by Buckeye are nylon impression fabric
which is primarily purchased from one weaving mill, but is readily
available from other sources, uncoated free sheet paper, which is
purchased primarily from two suppliers, but is also readily available
from numerous sources, and plastic cartridge components, which are
purchased from numerous suppliers.
Neither Buckeye's nor Aspen's business is seasonal and neither relies
on patents or trademarks for any material part of its business.
Backlog is not important to Buckeye's business which depends on sales
to end users who purchase product when needed or on scheduled
deliveries. Backlog is not important to Aspen which depends on sales to
dealers who purchase product when needed. Both Buckeye and Aspen
maintain a one to two month's supply of inventory.
There are no dominant suppliers of product in the computer printing
supplies market which has numerous manufacturers and resellers.
Construction Products Segment
Allied designs, manufactures, assembles and distributes products for
the construction, utility and mining industries. Primary product lines
are divided into (A) products which are mounted on excavators, industrial
tractors, loaders and other equipment, including (i) hydraulic hammers
used for breaking rock, concrete and similar materials, (ii) hydraulic
mounted compactors used for soil compaction and pile and sheeting driving
applications, (iii) grapples used for material handling and demolition,
(iv) asphalt cutters, and (v) hydraulic pedestal boom systems used for
breaking oversize material at rock crushing operations and for waste
handling operations; and (B) underground products, including (i)
pneumatic piercing tools used to make horizontal holes for placement or
repair of underground utility lines, and (ii) aluminum trench supports
used to support the walls of open construction trenches. During the last
three fiscal years, mounted products represented approximately 80-85% of
Allied's sales while underground products represented the balance.
Allied maintains a long-term contractual relationship with Krupp
Bautechnik GmbH, a German manufacturer of hammers and the component parts
thereof, under which these component parts are purchased by Allied,
assembled by Allied and exclusively sold and distributed in the United
States and Canada under Allied's own tradenames. These purchases have
represented approximately 50% of Allied's total component and material
purchases during the past three fiscal years.
3
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Other sources of components and materials for Allied's products
include various metal products manufacturers, hydraulic system component
suppliers, and steel and aluminum suppliers, principally located in the
United States. No other supplier represents more than 5% of Allied's
component and material purchases. Raw materials used in the manufacture
of Allied's products are available from a variety of sources.
Allied's business is seasonal with approximately 60% of its annual
sales generated during the first half of the calendar year.
Allied actively sells to over 200 customers, none of which represents
more than 5% of Allied's annual sales.
Firm order backlog totalled approximately $4,168,000 as of
February 20, 1997 compared to approximately $4,286,000 at February 23,
1996. Average backlog ranges from a high of $5,000,000 to a low of less
than $1,000,000. Backlog represents orders expected to be filled within
the current fiscal year.
Allied markets its products principally through distributors. Allied
competes with approximately 15 other foreign and domestic manufacturers
in the mounted product market and approximately 10 other foreign and
domestic manufacturers in the underground product market. None of
Allied's competitors are believed to hold a dominant position although
some have greater financial resources than Allied.
Trademark Licensing
Since 1986, Garan, Incorporated, a New York City based AMEX company,
has been using the "Bobbie Brooks", "New Expressions by Bobbie Brooks"
and "Present Co. by Bobbie Brooks" registered trademarks under a
licensing agreement with the Company. Garan and its sublicensees sell
sportswear under these labels exclusively at Wal-Mart Stores. While the
license agreement allows sales throughout the United States, Canada,
Puerto Rico and Mexico, sales are actually occuring only where Wal-Mart
operates retail stores. Effective for the three year period commencing
January 1, 1996, the Company receives a set annual licensing fee of
$475,000, payable quarterly. Under separate licensing agreements with
two unaffiliated commercial printers, the Company has been licensing the
use of its "Tabard/Copley" tradename in the cities of New York and
Atlanta in exchange for monthly licensing fees based upon sales of
printing services by such printers using this tradename. All licensing
fees are recorded within the Corporate segment in Industry Segment
Information at Note K.
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ITEM 2. PROPERTIES
The Company owns or leases the following properties:
Owned or Square
Location Leased Footage Use
- ----------------- -------- -------- ------------------------------
St. Louis, MO Owned 100,000 Commercial printing/offices
leased through 2001
Havana, IL Owned 25,000 Retail; leased through 2000
Cleveland, OH Leased 312,000 Buckeye's/Allied's operations
executive/administrative
facilities; portion subleased
to third party
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 3l, l996.
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PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
Pubco's Common Stock is traded over-the-counter and quoted on
NASDAQ's SmallCap Market under the symbol "PUBO". The following table
presents for 1995 the high and low bid prices of Pubco's Common Stock as
reported by NASDAQ. Quotations are interdealer prices which do not
include retail markups, markdowns or commissions and do not necessarily
represent actual transactions. For 1996, the following table presents
the high and low sales prices of Pubco's Common Stock as reported by
NASDAQ.
1995 High Low
First Quarter $ 5 $ 4 1/2
Second Quarter 5 4
Third Quarter 5 1/4 4
Fourth Quarter 6 1/2 5 1/4
1996
First Quarter $ 7 $ 6
Second Quarter 9 6 3/8
Third Quarter 8 5/8 7
Fourth Quarter 8 7/8 7 1/4
Transferability of Class B Stock is restricted to certain family
members and others who are "Permitted Transferees" (as defined) and
accordingly there is no market for Class B Stock. However, Class B Stock
is convertible into Common Stock on a share-for-share basis.
(b) Holders.
There were approximately 10,800 holders of Common Stock of record and
approximately 450 holders of Class B Stock of record, as of March 3, 1997.
(c) Dividends.
Pubco has never paid cash dividends on its Common Stock and Class B
Stock and does not anticipate paying dividends on its Common Stock or
Class B Stock in the forseeable future. In addition, no dividends may be
paid on the Common Stock or Class B Stock while there is any unpaid
dividend on the Preferred Stock. Subject to the foregoing, the payment
of dividends will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company.
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(All numbers shown in 000's except share data and ratios)
Selected Statement of Operations Data
<CAPTION>
Years Ended December 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales (B) $ 51,069 $ 47,590 $ 46,016 $ 42,084 $ 25,030
--------- --------- --------- --------- ---------
Net Income (Loss):
Continuing Operations 6,291 3,953 3,380 2,386 925
Discontinued Operations (A) - 1,100 (13,588) (2,511) (8,555)
--------- --------- --------- --------- ---------
Net Income (Loss) 6,291 5,053 (10,208) (125) (7,630)
--------- --------- --------- --------- ---------
Net Income (Loss) Applicable
to Common Stockholders (D) 5,416 4,178 (10,908) (825) (8,365)
--------- --------- --------- --------- ---------
Income (Loss) Per Share:
Continuing Operations (D) 1.50 .89 .77 .49 .05
Discontinued Operations (A) - .32 (3.92) (.73) (2.47)
--------- --------- --------- --------- ---------
Net Income (Loss)
per Common Share (D) $ 1.50 $ 1.21 $ (3.15) $ (.24) $ (2.42)
--------- --------- --------- --------- ---------
Weighted Average
Number of Shares 3,610,278 3,463,387 3,463,727 3,463,727 3,463,727
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data
December 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Working Capital Ratio 2.8 to 1 2.3 to 1 1.3 to 1 1.5 to 1 2.0 to 1
Total Assets $ 63,359 $ 56,243 $ 50,106 $ 73,127 $ 76,771
Long-term Debt - 2,407 949 6,057 10,695
Stockholders' Equity 31,335 21,515 16,548 27,456 31,192
Common Stockholders'
Equity (C) 24,335 14,515 9,548 20,456 24,192
Per Common Share (C) $ 6.49 $ 4.19 $ 2.76 $ 5.91 $ 6.98
Shares Outstanding
at Year End 3,752,473 3,461,727 3,463,727 3,463,727 3,463,727
<FN>
(A) Includes the discontinuance of the commercial printing segment in 1993 and the
discontinuance of the apparel and retail segments in 1994. Refer to Note C of the
Consolidated Financial Statements.
(B) The increase in sales in 1993 is primarily due to the Allied acquisition.
(C) Common Stockholders' Equity and Stockholders' Equity Per Common Share are computed net of
the face value of Preferred Stock.
(D) Net of Preferred Stock dividend requirements.
</TABLE>
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of 1996 and 1995
The Company's 1996 results of operations improved over 1995 primarily as
the result of an increase in interest income, nonrecurring gains on sale
of fixed assets (included in other income), as well as improvements in
Allied's operating income.
Sales increased in 1996 from 1995 primarily as the result of the
inclusion of the sales of Aspen in 1996 due to the increase in Brooks'
ownership of Aspen to approximately 62% at December 31, 1995. In 1995,
the Company accounted for Aspen's results of operations using the equity
method which were not significant and were included in other income in
the Company's Consolidated Statements of Operations.
The gross profit percentage increase in 1996 compared to 1995 is the
result of a lower cost of sales at Allied resulting from favorable
currency fluctuations and product mix as well as the inclusion of Aspen
in 1996.
Selling, general and administrative expenses increased in 1996 from 1995
primarily as the result of the inclusion of Aspen in 1996.
Other income, net, increased in 1996 from 1995 primarily as the result of
net gains on sales of fixed assets.
The change in interest, net, is primarily the result of lower borrowing
levels at Allied during 1996 compared to 1995 and the significant
increase in interest income. Earnings from the Company's cash and cash
equivalents and marketable securities and other short term investments
increased because of increases in the amount of such assets. The Company
will continue to generate interest and other income on its available
funds until used to acquire other operating businesses. While no
particular acquisition is pending or has been identified, the Company
routinely reviews acquisition opportunities.
Comparison of 1995 and 1994
In 1995, the Company completed its transformation from a company with
predominantly retail and apparel operations to a company which
manufactures and distributes business to business products. The closure
of the Company's retail department store chain in 1994 and discontinuance
of its apparel manufacturing operations in 1994 were accounted for as
discontinued operations. Income from discontinued operations, net of
taxes, for 1995 was the result of actual results being more favorable
than anticipated when the accrual was established during 1994.
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The Company's continuing operations primarily consist of Buckeye and
Allied. Each of these operations is located at the Company's
manufacturing facility in Cleveland, Ohio.
The increase in sales from 1994 to 1995 is primarily due to an increase
in sales at Allied resulting from the introduction of a grapple product
line in late 1994, as well as increased sales of pedestal boom systems
and trench shoring equipment.
The decrease in gross profit percentage in 1995 from 1994 is primarily
due to a lower gross profit percentage at Allied. Because Allied
purchases components from a German manufacturer, the lower value of the
Dollar versus the Deutsche Mark in 1995 compared with 1994 resulted in
increased cost of sales and lower gross profits at Allied.
Lower borrowing levels at Allied and Buckeye in 1995 compared to 1994
resulted in a decrease in interest expense in 1995. The 1995 results of
operations include interest income from the proceeds of the discontinued
operations. These factors caused the change in net interest from 1994 to
1995.
The dividend requirements for the preferred stock adjust annually, in
January, based on changes in the prime rate. The increase at January,
1995 caused the increase in preferred stock dividend requirements.
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LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $26,416,000 of cash, cash
equivalents, marketable securities and other short-term investments and
no long-term debt. The securities are subject to risk of loss and
fluctuations in value. The income generated from such marketable
securities and other short-term investments may not be the same from year
to year. The Company will continue to buy, hold and sell marketable
securities and other investments to the extent funds are not required to
make an acquisition of other operating businesses. The Company also has
a $10,000,000 line of credit which can be used for acquisitions. The
Company regularly reviews acquisition opportunities, but no particular
acquisition is currently pending.
Stockholders' equity of $31,300,000 at December 31, 1996 includes Common
and Preferred stockholders' equity. In order to calculate Common
stockholders' equity at December 31, 1996, the face value of the
Preferred Stock ($7,000,000) and any unpaid cumulative dividends on the
Preferred Stock must be subtracted from total stockholders' equity.
There were no unpaid cumulative preferred stock dividends outstanding at
December 31, 1996.
To the extent that the Company is able to utilize its net operating loss
carryforwards, there will be a positive impact on the Company's future
cash flows and liquidity.
On October 30, 1995, Pubco announced that it would purchase from time to
time in the open market up to 175,000 of its shares. Through December
31, 1996, the Company had purchased 2,000 of its shares at a purchase
price of approximately $12,000.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
PUBCO CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1996
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REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Pubco Corporation
We have audited the accompanying consolidated balance sheets of Pubco
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1996. Our audits also included the financial statement schedule listed
in the index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Pubco Corporation and subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Ernst & Young LLP
Akron, Ohio
March 21, 1997
12
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
PUBCO CORPORATION AND SUBSIDIARIES
($ in 000's except share amounts)
December 3l
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,539 $ 7,919
Marketable securities and other
investments available for sale--Note D 24,877 11,836
Trade receivables (less allowances of
$269 in 1996 and $279 in 1995) 4,410 5,058
Inventories--Note H 6,681 7,447
Deferred income taxes 735 -
Prepaid expenses and other current assets 1,085 756
-------- --------
TOTAL CURRENT ASSETS 39,327 33,016
PROPERTY AND EQUIPMENT--Note H 5,929 8,492
INTANGIBLE ASSETS ARISING FROM ACQUISITIONS
(at cost less accumulated amortization of
$677 in 1996 and $490 in 1995)--Note A 1,129 676
OTHER ASSETS--Notes F and H 16,974 14,059
-------- --------
TOTAL ASSETS $ 63,359 $ 56,243
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
($ in 000's except share amounts)
December 3l
1996 l995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,224 $ 4,738
Accrued liabilities--Note H 8,906 9,287
Loans payable-related party--Note G - 289
Current portion of long-term debt--Note G - 218
-------- --------
TOTAL CURRENT LIABILITIES 14,130 14,532
LONG-TERM DEBT--Note G - 2,407
DEFERRED CREDITS AND NONCURRENT LIABILITIES--Notes F and H 17,286 14,767
MINORITY INTERESTS 608 3,022
STOCKHOLDERS' EQUITY--Notes A and E
Preferred Stock:
Preferred Stock-par value $.01; 2,000,000
shares authorized, 70,000 shares issued
and outstanding in 1996 ($7,000 aggregate
liquidation preference in 1996 and 1995) 1 1
Convertible preferred stock-par value $1;
20,000 shares authorized, none issued - -
Common Stock:
Common Stock-par value $.01; 5,000,000
shares authorized; 3,198,088 issued
and 3,196,088 outstanding in 1996
and 2,906,697 issued and 2,904,697
outstanding in 1995 32 29
Class B Stock-par value $.01; 2,000,000
shares authorized; 556,385 issued and
outstanding in 1996 and 557,030 issued
and outstanding in 1995 6 6
Additional paid in capital 32,180 30,082
Retained (deficit) (3,101) (9,392)
Unrealized gains on investments available for sale 2,229 801
-------- --------
31,347 21,527
Treasury stock at cost, 2,000 shares
in 1996 and 1995 (12) (12)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 31,335 21,515
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 63,359 $ 56,243
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
PUBCO CORPORATION AND SUBSIDIARIES
($ in 000's except share amounts)
Year Ended December 3l
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 51,069 $ 47,590 $ 46,016
Cost of sales 36,747 34,844 32,402
--------- --------- ---------
GROSS PROFIT 14,322 12,746 13,614
Costs and expenses:
Selling, general and administrative expenses 11,339 9,956 10,132
Interest, net (2,287) (911) 398
--------- --------- ---------
9,052 9,045 10,530
Other income, net--Note F 558 335 370
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 5,828 4,036 3,454
Provision for income taxes--Note I (534) 53 38
--------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY INTEREST 6,362 3,983 3,416
Minority interest (71) (30) (36)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 6,291 3,953 3,380
Income (loss) from discontinued operations,
net of taxes--Note C - 1,100 (13,588)
--------- --------- ---------
NET INCOME (LOSS) 6,291 5,053 (10,208)
Preferred stock dividend requirements 875 875 700
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 5,416 $ 4,178 $(10,908)
========= ========= =========
Earnings (loss) per share--Note A:
CONTINUING OPERATIONS (NET OF PREFERRED
STOCK DIVIDEND REQUIREMENTS) $ 1.50 $ .89 $ .77
DISCONTINUED OPERATIONS - .32 (3.92)
--------- --------- ---------
NET INCOME (LOSS) $ 1.50 $ 1.21 $ (3.15)
========= ========= =========
Weighted average number of shares
outstanding--Notes A and E 3,610,278 3,463,387 3,463,727
========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PUBCO CORPORATION AND SUBSIDIARIES
($ in 000's except share amounts)
Three Years Ended December 3l, l996
Preferred Stock Common Stock Class B Stock Additional Retained
Par Par Par Paid In Earnings
Shares Value Shares Value Shares Value Capital (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 70,000 $ 1 2,904,293 $29 559,434 $ 6 $31,657 $ (4,237)
Conversion of Class B
Stock to Common Stock--Note E 932 (932)
Preferred Stock dividends paid
(paid at $10.00 per share)
--Note E (700)
Net (loss) for l994 (10,208)
------- --- --------- --- ------- --- ------- --------
Balance at December 31, 1994 70,000 $ 1 2,905,225 $29 558,502 $ 6 $30,957 $(14,445)
Conversion of Class B
Stock to Common Stock--Note E 1,472 (1,472)
Shares purchased to Treasury (2,000)
Preferred Stock dividends paid
(paid at $12.50 per share)
--Note E (875)
Net income for l995 5,053
------- --- --------- --- ------- --- ------- --------
Balance at December 31, 1995 70,000 $ 1 2,904,697 $29 557,030 $ 6 $30,082 $ (9,392)
Conversion of Class B
Stock to Common Stock--Note E 645 (645)
Preferred Stock dividends paid
(paid at $12.50 per share)
--Note E (875)
Shares issued--Note B 290,746 3 2,973
Net income for 1996 6,291
------- --- --------- --- ------- --- ------- --------
Balance at December 31, 1996 70,000 $ 1 3,196,088 $32 556,385 $ 6 $32,180 $ (3,101)
======= === ========= === ======= === ======= ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUBCO CORPORATION AND SUBSIDIARIES
($ in 000's except share amounts)
Year Ended December 3l
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 6,291 $ 3,953 $ 3,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Income (loss) from discontinued operations - 1,100 (13,588)
Write-down of assets of discontinued segments - - 3,836
Depreciation and amortization 1,358 1,379 2,255
Deferred income taxes (735) - -
Net (gain) on sales of securities (51) (75) (133)
Net (gain) loss on disposal of fixed assets (500) (256) 199
Minority interest (36) (55) 36
Changes in operating assets and liabilities
net of acquisitions and divestitures:
Trade receivables 648 1,292 6,919
Inventories 766 491 19,938
Other assets (539) (272) 1,006
Accounts payable 486 (2,121) (4,401)
Other current liabilities (380) (2,471) (929)
Deferred credits and noncurrent liabilities (216) (750) 750
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,092 2,215 19,268
INVESTING ACTIVITIES
Distributions from partnership and trust investments - - 25
Purchases of marketable securities (20,882) (11,764) -
Proceeds from sales of marketable securities 9,320 1,364 723
Purchases of fixed assets (173) (327) (3,808)
Proceeds from the sale of fixed assets 2,095 2,727 3,769
Purchase of subsidiaries' stock (43) (665) -
Cash acquired in Aspen investment - 4,359 -
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (9,683) (4,306) 709
-------- -------- -------
FINANCING ACTIVITIES
Net (repayments) on loans payable (289) (1,622) (300)
Net (repayments) on other facilities - - (1,577)
Proceeds from long-term debt 26,294 32,614 34,465
Principal payments on long-term debt (28,919) (32,678) (40,404)
Dividends paid on preferred stock (875) (875) (700)
Purchase of treasury stock - (12) -
-------- -------- -------
NET CASH (USED IN) FINANCING ACTIVITIES (3,789) (2,573) (8,516)
-------- -------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,380) (4,664) 11,461
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,919 12,583 1,122
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,539 $ 7,919 $ 12,583
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUBCO CORPORATION AND SUBSIDIARIES
December 3l, l996
($ in 000's except share amounts)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements of Pubco
Corporation ("Company" or "Pubco") include the accounts of the Company and its
wholly-owned and majority-owned subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.
The Company includes its Buckeye Business Products, Inc. division ("Buckeye")
and its Aspen Imaging International, Inc. ("Aspen") subsidiary which
manufacture and market computer and data processing supplies, and Pubco owns
approximately 85% of Allied Construction Products, Inc. ("Allied"), which
manufactures and distributes products for the construction and related
industries. Pubco also owns other income producing assets.
Cash and Cash Equivalents: Cash equivalents are composed of all highly liquid
investments generally with a maturity of three months or less at the time of
purchase.
Marketable Securities and Other Investments: Marketable securities and other
investments are classified as available for sale and, accordingly, are stated
at fair value, with the unrealized gains and losses reported in a separate
component of stockholders' equity. Realized gains and losses, and declines in
value judged to be other-than-temporary, are included in "other income, net"
in the consolidated statements of operations. The cost of securities sold is
based on the specific identification method.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out) or market.
Financial Instruments: The Company's financial instruments recorded on the
balance sheet include cash and cash equivalents and long-term debt. Because
of their short maturity, the carrying amount of cash and cash equivalents
approximates fair value. Because the majority of long-term debt is at market
rates of interest that adjust frequently, the carrying amount of long-term
debt approximates fair value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from time
to time, enters into foreign currency exchange contracts with banks in order
to fix its trade payables denominated in the Deutsche Mark. The contract
amounts outstanding and the net deferred gains or losses were not significant
at December 31, 1996 and 1995.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Long-lived Assets: Property and equipment are recorded at cost with
depreciation and amortization principally computed by the straight-line method
over the following estimated useful lives: buildings, 10 to 30 years;
machinery, equipment and fixtures, 5 to 10 years; and leasehold improvements,
5 to 10 years.
Intangible assets ("goodwill") represents the excess of the purchase price
over the fair value of the net assets of acquired businesses and is being
amortized by the straight-line method, in most cases over 10 to 15 years. The
carrying amount of goodwill is reviewed if facts and circumstances suggest
that it may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted cash flows of
the entity acquired over the remaining amortization period, the carrying
amount of the goodwill is reduced by the estimated shortfall of cash flows.
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset or related groups
of assets may not be recoverable. Measurement of the amount of impairment may
be based on appraisal, market values of similar assets or estimated discounted
future cash flows resulting from use and ultimate disposition of the asset.
Research and Development Costs: Allied performs research and development on
present and future products and all costs are expensed as incurred. Total
expenditures amounted to $385, $489 and $647 for the years ended December 31,
1996, 1995 and 1994.
Per Common Share Amounts: Per common share amounts are computed after
preferred dividend requirements on the basis of the weighted average number of
shares of Common Stock outstanding.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Reclassifications: Certain amounts presented in prior years' financial
statements and the notes thereto have been reclassified to conform to the 1996
presentation.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE B--BUSINESS COMBINATIONS
On June 27, 1996 Bobbie Brooks, Incorporated ("Brooks"), an approximately 90%
owned subsidiary, merged with and into the Company. As a result of the
merger, each Brooks stockholder received one share of the Company's Common
Stock in exchange for each six shares of Brooks Common Stock.
On June 27, 1996, the Company also acquired all of the assets of Aspen,
subject to all of its liabilities, in exchange for Common Stock of the
Company. As a result of the acquisition, each Aspen stockholder received one
share of the Company's Common Stock for each seven shares of Aspen Common
Stock.
The merger of Brooks into the Company and the acquisition by the Company of
the assets and business of Aspen, resulted in the Company issuing
approximately 290,746 shares of the Company's Common Stock to the Brooks and
Aspen minority stockholders. The Company paid cash in lieu of fractional
shares. The Merger of Brooks into the Company was accounted for under the
purchase method of accounting. The minority interest of Brooks acquired in
the Merger was valued for accounting purposes at an amount equal to the market
value of the stock of the Company issued to the Brooks minority stockholders.
Goodwill of $640,000 was recognized as a result of the Merger. The stock of
the Company received by the minority stockholders of Aspen was valued for
accounting purposes at an amount equal to the fair value of the net assets
acquired.
Brooks had increased its ownership in Aspen at year-end 1995 from
approximately 41% to approximately 62%. The Company's Consolidated Balance
Sheets at December 31, 1996 and December 31, 1995 include the accounts of
Aspen. The Company's Consolidated Statements of Operations for 1996 include
the results of Aspen's operations whereas the Company's Consolidated
Statements of Operations for 1995 and 1994 account for Aspen's operations on
the equity method.
The Company's financial statements include transactions with Aspen prior to
year-end 1995. Product sales to and purchases from Aspen approximated $1,001
and $147, respectively, for the year ended December 31, 1995 and $1,486 and
$296, respectively, for the year ended December 31, 1994. All such
transactions were at cost. In addition, during 1994, to replace Aspen's toner
filling operation which was eliminated when Aspen sold its Colorado building,
the Company constructed a toner filling room for Aspen's use at the Company's
facility costing approximately $40, which amount was reimbursed to the Company
by Aspen. Company personnel performed a variety of manufacturing, accounting,
shipping and other support services for Aspen at the Company's cost. During
1995 and 1994, these costs approximated $157 and $136, respectively which
amounts were reimbursed to the Company by Aspen.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE C--DISCONTINUED OPERATIONS
At September 30, 1994, the Company discontinued the operations of its retail
and apparel manufacturing segments. Accordingly, a charge was made in 1994
for such discontinued operations related to the write-down of net assets to
their net realizable value and to provide for operating losses during the
phaseout period. Operations of the retail and apparel manufacturing segment
in 1994 resulted in a loss of approximately $2,821 through the measurement
date. Operations of the retail and apparel manufacturing segment for the
fourth quarter of 1994 resulted in a loss of approximately $2,124 which was
charged against the reserve for discontinued operations. In 1995, the Company
reduced the reserve by $1,100 primarily related to actual results being more
favorable than anticipated when the accrual was established in 1994. The
remaining reserve balance of $1,284 at December 31, 1996, is believed to be
sufficient to provide primarily for the costs of future lease, employee and
other liabilities.
Results of these discontinued operations include:
Year Ended December 3l
1995 1994
Sales $ - $ 40,702
========= ========
(Loss) from operations - $ (2,808)
Income tax expense - 13
--------- --------
(Loss) income from operations - (2,821)
Income (loss) on disposals
(no tax effect) 1,100 (10,767)
--------- --------
Income (loss) from discontinued
operations $ 1,100 $(13,588)
========= ========
21
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE D--MARKETABLE SECURITIES
The following is a summary of available for sale securities:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
December 31, 1996
US Corporate Equity Securities $ 3,069 $ 409 $ (88) $ 3,390
US Corporate Debt Securities 11,132 635 (143) 11,624
Foreign Government Debt Securities 3,759 1,213 (9) 4,963
Foreign Corporate Debt Securities 4,688 212 - 4,900
-------- -------- -------- --------
$ 22,648 $ 2,469 $ (240) $ 24,877
======== ======== ======== ========
December 31, 1995
US Corporate Equity Securities $ 4,425 $ 176 $ (140) $ 4,461
US Corporate Debt Securities 3,056 30 - 3,086
Foreign Government Debt Securities 3,554 735 - 4,289
-------- -------- -------- --------
$ 11,035 $ 941 $ (140) $ 11,836
======== ======== ======== ========
</TABLE>
The gross realized gains on sales of securities available for sale totaled
$1,086 and $75 for 1996 and 1995, respectively. The gross realized losses
totaled $1,035 in 1996.
The cost and estimated fair value of debt securities at December 31, 1996,
by estimated maturity, are shown below. Expected maturities may differ
from contractual maturities because the issuers of the securities may have
the right to prepay obligations without prepayment penalties.
Estimated
Cost Fair Value
Due in one year or less $ 1,731 $ 1,739
Due after one year through three years 1,304 1,220
Due after three years 16,544 18,528
-------- --------
$ 19,579 $ 21,487
======== ========
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE E--STOCKHOLDERS' EQUITY
The Company's Common Stock has one vote per share and Class B Stock has ten
votes per share. Transferability of Class B Stock is restricted and,
accordingly, there is no market for Class B Stock. However, Class B Stock
is convertible into Common Stock on a share-for-share basis.
The Company's Preferred Stock is subject to redemption, in whole or in
part, at the Company's option at any time. In the event of a redemption of
the Preferred Stock or a liquidation of the Company, holders of Preferred
Stock are entitled to a distribution equal to the face value of the
Preferred Stock (and any unpaid cumulative dividends) before any amount may
be paid on Common Stock.
The Company's non-voting Preferred Stock Series A requires cumulative
annual dividends on the $100 face value per share at four percent above the
averaged base lending rate of three large commercial banks. No dividend
may be paid on Common Stock while there is any dividend arrearage on the
Preferred Stock. In 1996, the Company paid $875 ($12.50 per share) of
Preferred Stock Series A dividends which were treated as a return of
capital. As of December 31, 1996, there were no undeclared and unpaid
dividends on the Preferred Stock.
Stockholders' equity of $31,335 at December 31, 1996 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at December 31, 1996, the face value of the Preferred Stock ($7,000)
and any unpaid cumulative dividends on the Preferred Stock must be
subtracted from total stockholders' equity. There were no unpaid
cumulative Preferred Stock dividends outstanding at December 31, 1996.
The Company has an Incentive Plan that allows the granting of stock options
and stock awards to officers and key employees of the Company. Up to
80,000 shares of Common Stock are available under the Incentive Plan.
Stock options are generally not exercisable until five years after grant
and then vest over time. The exercise price per share must generally be at
least equal to the fair market value per share on the date of the
respective grant. All shares subject to a stock award are deemed
Restricted Stock until the fifth anniversary of the date of the award and
then lose such restricted qualification over time. Shares of Restricted
Stock are subject to forfeiture following termination of employment and
other events. To date, no options or stock awards have been granted under
such plan.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE F--RETIREMENT PLANS
The Company maintains two discretionary non-qualified profit sharing plans
to provide retirement benefits for certain of its key employees. The
assets are segregated, but are included in Other Assets. The liabilities
associated with these plans are included in Other Liabilities. Allied
maintains a 401(k) plan, with discretionary Company contributions.
Expenses under these various plans aggregated approximately $366, $346 and
$322 for the years ended December 3l, 1996, l995 and l994, respectively.
The Company makes contributions to a collectively-bargained, multiemployer
defined benefit pension plan. The Company contributed and charged to
expense $10, $8 and $73 for the years ended December 3l, l996, l995 and
1994, respectively, for the plan. These contributions are determined in
accordance with the provisions of negotiated labor contracts and generally
are based on the amount of time worked. Information as to the Company's
portion of the accumulated plan benefits, plan net assets and unfunded
vested benefits, if any, is not determinable. In the event of a withdrawal
from the plan, the Company may be subject to a withdrawal liability under
the provisions of the Multiemployer Pension Plan Amendments Act of 1980.
Management does not intend to take any action that would subject the
Company to any such liability under the plan.
The Company maintains a noncontributory defined benefit pension plan
covering employees who are under a collective bargaining agreement and
sponsors a pension plan for terminated employees of a former operation of a
predecessor company. The excess actuarial present value of accumulated
plan benefits over net assets available for benefits under these plans was
approximately $216 and $365 at December 31, 1996 and 1995, respectively,
which amounts have been reflected in the accompanying balance sheets.
Expenses under these plans were approximately $62, $50 and $48 for 1996,
1995 and 1994, respectively.
Since 1986, the Company's President has deferred his salary under the terms
of deferred compensation plans established for his benefit. As compensation
is earned by him, it is paid by the Company to deferred compensation trusts
and included in selling, general and administrative expenses. Amounts are
being distributed to him by the trusts in accordance with the terms of the
deferred compensation plans. The securities included in these trusts are
classified as trading and, accordingly, are stated at fair value. Unrealized
gains (losses) were $1,564, $2,004 and ($598) for the years ended December
31, 1996, 1995 and 1994, respectively. Realized and unrealized gains and
losses, interest, dividends and plan expenses are reflected in other income,
net, and total $3,013, $3,998 and ($42) for the years ended December 31, 1996,
1995 and 1994, respectively. There is no resulting effect on net income,
because these are matched by changes to deferred compensation expense, which
are also included in other income, net. The amounts of these changes were
($3,013), ($3,998) and $42 for the years ended December 31, 1996, 1995 and
1994, respectively.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE F--RETIREMENT PLANS--CONTINUED
The Company provides life insurance benefits and/or contributes to the cost
of medical insurance for certain retired salaried and commission basis
employees. The accumulated postretirement benefit obligation and related
expense recorded for each year are not material to the balance sheet or the
results of operations.
NOTE G--FINANCING ARRANGEMENTS
During 1996, the Company repaid Robert H. Kanner, the Company's Chairman,
President & CEO, the remaining $289 under a demand note. Interest expense
on this note was $10, $51 and $177 in the years ended December 31, 1996,
December 31, 1995 and December 31, 1994, respectively.
The Company has a $10,000 revolving credit facility at LIBOR plus 1.5% or
the lending bank's prime rate ("Prime"), at the Company's option, expiring
in 1999, with no outstanding borrowings at December 31, 1996. The Company
has a $2,500 demand credit facility at LIBOR plus 2% or Prime, at the
Company's option, expiring in 1997, with no outstanding balance at December
31, 1996. The Company has a $3,000 revolving credit facility at LIBOR plus
2.5% or Prime, at the Company's option, expiring in 1997, with no
outstanding balance at December 31, 1996.
Total interest payments by the Company were $120, $244 and $846 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Total interest expense was $113, $280 and $512 for the years ended December
31, 1996, 1995 and 1994, respectively.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE H--OTHER INFORMATION
December 31
1996 1995
Inventories:
Raw materials and supplies $ 4,472 $ 4,532
Work in process 356 484
Finished goods 1,853 2,431
-------- --------
$ 6,681 $ 7,447
======== ========
Property and equipment:
Land and buildings $ 1,571 $ 3,773
Machinery, equipment and fixtures 11,559 12,004
Leasehold improvements 3,050 3,115
Construction in progress 47 97
-------- --------
16,227 18,989
Less accumulated depreciation and
amortization (10,298) (10,497)
-------- --------
$ 5,929 $ 8,492
======== ========
Other assets:
Assets held for deferred compensation $ 13,874 $ 11,139
Other 3,100 2,920
-------- --------
$ 16,974 $ 14,059
======== ========
Accrued liabilities:
Payroll and other employee benefits $ 2,523 $ 2,207
Accrued taxes 1,823 1,867
Accrual for discontinued businesses 1,098 1,717
Other 3,462 3,496
-------- --------
$ 8,906 $ 9,287
======== ========
Deferred credits and noncurrent liabilities:
Deferred compensation liability $ 13,874 $ 11,139
Other 3,412 3,628
-------- --------
$ 17,286 $ 14,767
======== ========
Under current accounting rules, assets of the deferred compensation trusts
must be accounted for as if they are assets of the Company although the
assets are not available for general corporate use by the Company and could
only be available to creditors of the Company in the event of the Company's
bankruptcy.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE I--INCOME TAXES
Pubco and its consolidated subsidiaries file a consolidated federal income tax
return. The provision for income taxes for continuing operations consists of
the following components:
Year Ended December 3l
1996 1995 1994
Federal currently payable $ 156 $ 39 $ 20
Federal deferred benefit (735) - -
State and local currently payable 45 14 18
------ ------ ------
$ (534) $ 53 $ 38
====== ====== ======
Income taxes paid by (refunded to) the Company were $192, $30 and $(57) for
the years ended December 31, 1996, 1995 and 1994, respectively.
A reconciliation of the statutory federal income tax rate to the effective
rate for continuing operations is as follows:
Year Ended December 3l
1996 1995 1994
Statutory federal rate 34.0% 34.0% 34.0%
Deferred tax benefit (12.6%) - -
State and local taxes .5 .2 0.3
Utilization of net operating loss
carryforwards (32.0) (34.6) (33.4)
Other .9 1.7 0.2
----- ----- -----
(9.2%) 1.3% 1.1%
===== ===== =====
At December 31, 1996, the Company had available net operating loss
carryforwards of approximately $18,000 for federal income tax purposes.
Approximately $13,700 are subject to limitations based on certain
subsidiaries' ability to generate future taxable income. The loss
carryforwards, if not used, will expire as follows: $1,900 in 1997, $1,300 in
1998, $800 in 1999, $4,300 in 2000, $300 in 2002, $600 in 2006, $2,300 in
2007, $1,800 in 2008, $4,600 in 2009 and $100 in 2010.
In addition, for tax purposes, the Company has investment tax credit
carryforwards of approximately $98 which expire between 1997 and 2000 and
alternative minimum tax credit carryforwards of approximately $650.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE I--INCOME TAXES--CONTINUED
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities, for financial
reporting purposes, and the amounts used for income tax purposes. Significant
components of the Company's federal and state deferred tax assets and
liabilities are as follows:
1996 1995
Deferred tax assets:
Net operating loss carryforwards
and credits $ 8,300 $ 9,500
Accrual for discontinued operations 400 600
Deferred compensation 4,100 3,300
Other 3,800 3,700
-------- --------
Total deferred tax assets 16,600 17,100
Deferred tax liabilities:
Tax over book depreciation 600 700
Other 100 100
-------- --------
Total deferred tax liabilities 700 800
-------- --------
Net deferred tax assets 15,900 16,300
Valuation allowance for
deferred tax assets (15,165) (16,300)
-------- --------
Net deferred taxes $ 735 $ -
======== ========
A valuation allowance has been provided for 1996 and 1995 in the amounts of
$15,165 and $16,300, respectively, because of the uncertainty that any
additional future tax benefits will be realized.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE J--LEASING ARRANGEMENTS
As Lessee:
Pubco and certain of its subsidiaries are parties to separate leasing
arrangements for office and factory space in an approximately 312,000 square
foot building owned and operated by a partnership that is controlled by the
majority stockholder of the Company. Buckeye and Allied conduct substantially
all of their business activities from this building. Pubco has its corporate
offices at this building. The leases expire in 2005. The leases require
annual payments aggregating $549. Rent expense associated with these leases
was $549 for each of the years ended December 31, 1996, 1995 and 1994.
The Company and its subsidiaries lease certain facilities and equipment under
non-cancellable leases for periods ranging from 1 to 10 years. Total rental
expense from continuing operations under all operating leases is summarized
below:
Year Ended December 31
1996 1995 1994
Minimum rentals $ 600 $ 732 $ 707
Sublease rental income (61) (61) (60)
------- ------- -------
$ 539 $ 671 $ 647
======= ======= =======
At December 3l, l996, the commitments under non-cancellable operating leases
are as follows:
Operating
Leases
l997 $ 634
l998 609
l999 559
2000 553
2001 549
Thereafter 1,372
-------
$ 4,276
=======
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE J--LEASING ARRANGEMENTS--CONTINUED
As Lessor:
The Company leases certain land, buildings and equipment with an aggregate net
book value of $2,107 at December 3l, l996, under operating leases expiring
between 1997 and 2001. Upon expiration of the initial terms, the lessees have
options to renew for periods up to 10 years.
At December 3l, l996, future minimum rentals to be received under operating
leases are as follows:
l997 $ 822
l998 822
1999 822
2000 755
2001 741
Thereafter -
-------
$ 3,962
=======
30
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE K--INDUSTRY SEGMENT INFORMATION
Summarized industry segment information is as follows:
Computer
Printer Construction
Supplies Products Corporate Consolidated
1996
<S> <C> <C> <C> <C>
Net sales $ 25,930 $ 25,139 $ - $ 51,069
Trade receivables 2,445 1,909 56 4,410
Income from continuing operations
before income taxes and minority interest 3,344 1,624 860 5,828
Identifiable assets 10,610 8,528 44,221 63,359
Capital expenditures 45 57 71 173
Depreciation and amortization 348 381 629 1,358
1995
Net sales $ 22,735 $ 24,855 $ - $ 47,590
Trade receivables 2,603 2,433 22 5,058
Income (loss) from continuing operations
before income taxes and minority interest 4,127 101 (192) 4,036
Identifiable assets 13,223 8,998 34,022 56,243
Capital expenditures 51 141 135 327
Depreciation and amortization 192 374 813 1,379
1994
Net sales $ 23,356 $ 22,660 $ - $ 46,016
Trade receivables 2,170 2,321 1,317 5,808
Income (loss) from continuing operations
before income taxes and minority interest 3,966 632 (1,144) 3,454
Identifiable assets 6,124 9,551 34,431 50,106
Capital expenditures 245 663 2,900 3,808
Depreciation and amortization 215 352 1,688 2,255
<FN>
Corporate includes certain amounts related to the previously discontinued
segments.
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
PUBCO CORPORATION AND SUBSIDIARIES
NOTE L--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company's unaudited quarterly results of operations in 1996 and 1995 are set
forth below.
1996
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Net sales $ 14,079 $ 13,946 $ 11,716 $ 11,328
======== ======== ======== ========
Gross profit $ 3,780 $ 3,956 $ 3,494 $ 3,092
======== ======== ======== ========
Net income $ 1,575 $ 1,557 $ 2,233 $ 926
======== ======== ======== ========
Income applicable to
Common Stockholders $ 1,356 $ 1,338 $ 2,015 $ 707
======== ======== ======== ========
Net income per
common share $ .39 $ .39 $ .54 $ .19
======== ======== ======== ========
1995
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Net sales $ 13,459 $ 13,304 $ 10,759 $ 10,068
======== ======== ======== ========
Gross profit $ 3,572 $ 3,729 $ 2,769 $ 2,676
======== ======== ======== ========
Income from:
Continuing operations $ 1,369 $ 1,261 $ 1,191 $ 132
Discontinued operations - - 1,100 -
-------- -------- -------- --------
Net income $ 1,369 $ 1,261 $ 2,291 $ 132
======== ======== ======== ========
Income (loss) applicable to
Common Stockholders $ 1,150 $ 1,042 $ 2,073 $ (87)
======== ======== ======== ========
Net income (loss) per common
share from:
Continuing operations $ .33 $ .30 $ .28 $ (.02)
Discontinued operations - - .32 -
-------- -------- -------- --------
Net income (loss) $ .33 $ .30 $ .60 $ (.02)
======== ======== ======== ========
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors and Executive Officers
Stephen R. Kalette age 46, has been a Director of Pubco since
December, 1983 and has been an executive officer of Pubco since April,
1984. Mr. Kalette currently serves as its Vice President,
Administration, General Counsel and Secretary.
Robert H. Kanner, age 49, has been a Director and executive officer
of Pubco since December, 1983. Mr. Kanner currently serves as its
Chairman, President and Chief Financial Officer. Mr. Kanner is also a
Director of Riser Foods, Inc., a grocery wholesaler and retailer, and
CleveTrust Realty Investors, which invests in real estate.
Glenn E. Corlett, age 53, is a self-employed business consultant in
Cleveland, Ohio. Until November, 1996, Mr. Corlett was the Executive
Vice President and Chief Operating Officer of N.W. Ayer, Incorporated, an
advertising agency he joined in 1990. Mr. Corlett was appointed to the
Company's Board to fill the vacancy created by the death of Stanley R.
Browne in 1996.
William A. Dillingham, age 53, has been President of Buckeye for more
than the past five years.
Leo L. Matthews, age 57, has been President of Allied since it was
acquired in March, 1993. Between 1987 and 1993, Mr. Matthews provided
consulting services in strategic planning, marketing, management and
finance.
Family Relationships
There are no familial relationships between any Director and
executive officer of Pubco.
Board of Directors
The Board of Directors establishes broad corporate policies which are
carried out by the officers of Pubco who are responsible for day-to-day
operations. In 1996, the Board held two meetings and took action by
unanimous written consent on six other occasions. No Director was absent
during the year from any of the meetings of the Board of Directors or of
any of the committees of the Board on which he served.
33
<PAGE>
Committees of the Board of Directors
Pubco has a standing Audit Committee. The Audit Committee, which met
once in 1996, consists of the Director not otherwise employed by Pubco.
The Audit Committee (i) reviews the internal controls of Pubco and its
financial reporting; (ii) meets with the Chief Financial Officer and such
other officers as it, from time to time, deems necessary; (iii) meets
with Pubco's independent public accountants and reviews the scope and
results of auditing procedures, the degree of such auditors'
independence, audit and non-audit fees charged by such accountants, and
the adequacy of the Company's internal accounting controls; and (iv)
recommends to the Board the appointment of the independent accountants.
34
<PAGE>
<TABLE>
<CAPTION>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table discloses compensation paid or accrued, during each of the Company's last three
fiscal years, to the Company's Chief Executive Officer and to its other executive officers.
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Other Annual Restricted LTIP All Other
Principal Bonus Compensation Stock Options Payouts Compensation
Position Year Salary($) ($) ($) Awards ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kanner(1)(11)
Chairman, CEO, 1996 $525,000 --- $64,917(2) --- --- --- $185,560(3,4)
President & 1995 525,000 --- 59,836 --- --- --- 188,973
CFO 1994 525,000 --- 56,145 --- --- --- 190,420
Stephen R. Kalette(11)
VP-Admin., 1996 $330,000 --- $25,022(5) --- --- --- $ 35,076(4)
General Counsel 1995 330,000 --- 25,776 --- --- --- 35,815
& Secretary 1994 330,000 --- 22,958 --- --- --- 35,640
William A. Dillingham(6)(11)
President of 1996 $450,000 --- $ 7,284(6) --- --- --- $ 30,000(7)
Buckeye Division 1995 450,000 --- 5,946 --- --- --- 30,000
1994 450,000 --- 6,105 --- --- --- 30,000
Leo L. Matthews(8)
President of 1996 $120,000 $ 85,055 $ 5,459(9) --- --- --- $ 7,200(10)
Allied 1995 120,000 10,000 4,817 --- --- --- 7,200
1994 120,000 22,000 6,314 --- --- --- 3,600
35
<PAGE>
<FN>
(1) Mr. Kanner deferred his entire Salary for each of the years reported under the terms
of deferred compensation plans established for his benefit. The amounts reported
for each year are the amounts deferred for that year. As compensation is earned by
Mr. Kanner, it is paid by the Company to deferred compensation trusts. These
amounts are being be distributed to Mr. Kanner by the trusts in accordance with the
terms of the deferred compensation plans.
(2) Of the amount shown in the table, $61,370 in 1996, $55,870 in 1995, and $50,870 in
1994 represents the premiums on life insurance paid for by the Company on Mr.
Kanner's life, and for which the Company is not a beneficiary; and $3,547 in 1996,
$3,966 in 1995 and $5,275 in 1994 represents the cost of providing Mr. Kanner with
use of an automobile during the year.
(3) Of the amount reflected, $127,900 in 1996, $130,100 in 1995 and $132,100 in 1994
represents a payment by the Company toward the premium on split dollar life
insurance on Mr. Kanner's life and for which the Company is not the beneficiary.
The amounts will be repaid to the Company out of the death proceeds from such policy.
(4) In 1988, the Company adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon
retirement, death or disability of the participant and benefits are subject to a
restrictive vesting schedule. $57,660 in 1996, $58,873 in 1995 and $58,320 in 1994
of the amounts shown in the table for Mr. Kanner and all of the amounts shown in the
table for Mr. Kalette are amounts contributed to such plan for the benefit of such
executive officers with respect to the years noted. Vesting of benefits under the
plan is phased in over 20 years and only a portion of the amount contributed for
each year has fully vested.
(5) Of the amount shown in the table, $21,396 in 1996, $20,546 in 1995 and $19,076 in
1994 represents the premiums on life insurance paid for by the Company on Mr.
Kalette's life, and for which the Company is not a beneficiary; and $3,154 in 1996,
$4,023 in 1995 and $3,883 in 1994 represents the cost of providing Mr. Kalette with
use of an automobile during the year
(6) All of the amounts shown as paid to or for Mr. Dillingham were paid by Buckeye. Of
the amount shown in the table, $3,535 in 1996, $3,205 in 1995 and $2,955 in 1994
represents the premiums on life insurance paid for by Buckeye on Mr. Dillingham's
life, and for which Buckeye is not a beneficiary; and $3,749 in 1996, $2,741 in 1995
and $3,150 in 1994 represents the cost of providing Mr. Dillingham with use of an
automobile during the year.
(7) In 1988, Buckeye adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon
retirement, death or disability of the participant and benefits are subject to a
restrictive vesting schedule. All of the amount shown in the table for Mr.
Dillingham are amounts contributed to such plan for the benefit of such executive
officer with respect to the years noted. Vesting of benefits under the plan is
phased in over 20 years and only a portion of the amount contributed for each year
has fully vested.
36
<PAGE>
(8) All of the amounts shown as paid to or for Mr. Matthews were paid by Allied. Mr.
Matthews has an employment agreement with Allied providing for a minimum $120,000
per year base salary; a share of Allied's earnings in excess of its operating plan
earnings, if any, and discretionary bonuses (as were paid in 1995 and 1994).
(9) Of the amount shown in the table, $1,710 in 1996, $1,710 in 1995 and $1,710 in 1994
represents the premiums on life insurance paid for by Allied on Mr. Matthew's life,
and for which Allied is not a beneficiary; and $3,749 in 1996, $3,107 in 1995 and
$4,604 in 1994 represents the cost of providing Mr. Matthews with use of an
automobile during that year.
(10) In 1993, Allied adopted a 401-K plan to provide retirement benefits for Allied's
employees, including officers. Participating employees make voluntary contributions
to the Plan, a portion of which Allied matches. All of the amount shown in the
table for Mr. Matthews was contributed by Allied to such plan. Vesting of benefits
under the plan is phased in over three years.
(11) Effective March 1, 1997, the Company adopted a 401K plan for certain of its
employees. Executive Officers of the Company are eligible to participate. The
Company will match up to $1,000 of amounts contributed to the plan.
Unless covered by an employment agreement with the Company, officers serve for one year terms
or until their respective successors are duly elected and qualified.
</TABLE>
Compensation of Directors
The Company pays its outside Directors an annual fee of $15,000,
payable monthly. The Company also reimburses its Directors for any
expense reasonably incurred while performing services for the Company.
Directors who are employees of the Company or otherwise receive
compensation from the Company do not receive any fee for acting as
Directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As Directors of the Company, Mr. Kanner and Mr. Kalette participate
in Board of Directors' deliberations and decisions concerning executive
officer compensation. Mr. Kanner and Mr. Kalette are executive officers
of the Company.
37
<PAGE>
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 1996 (i) the number
of shares of Pubco's stock owned, directly or indirectly, by each
Director and executive officer of the Company and by all Directors and
officers as a group, and (ii) the number of shares of Pubco's stock held
by each person who was known by Pubco to beneficially own more than 5% of
Pubco's stock:
Common Stock Class B Stock Aggregate
Amount and Nature Amount and Nature Percent of
of Beneficial Percent of of Beneficial Percent of Voting
Name of Holder Ownership (1)(2) Class Ownership (1)(2) Class Power
<S> <C> <C> <C> <C> <C>
Glenn E. Corlett -- -- -- -- --
Stephen R. Kalette 166 * 13,759 2.5 1.6
Robert H. Kanner 2,066,894 64.7 514,044 92.4 82.3
William A. Dillingham 3,725 * -- -- --
Leo L. Matthews(3) -- -- -- -- --
3830 Kelley Avenue
Cleveland, OH 44114
All Directors and
officers as a group 2,070,785 64.8 527,903 94.9 83.9
(6 persons)
<FN>
* indicates less than 1%.
</TABLE>
(1) Except as set forth below, each owner has sole voting and investment
power with respect to the shares beneficially owned by him.
(2) Class B Stock is convertible into Common Stock on a share for share
basis. Therefore, ownership of Class B Stock may also be deemed to
be beneficial ownership of the same number of shares of Common Stock.
(3) Mr. Matthews owns approximately 3.6% of the Common Stock of Allied.
Warrants and Options to Purchase Securities
No warrants, options or rights to purchase the Company's Common Stock
were granted by the Company to, or exercised by, any officer or Director
of the Company during 1996.
38
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 27, 1996, the Company completed its previously announced
combination with Brooks and Aspen.
Brooks merged into Pubco as of the close of business on June 27, 1996
and its Common Stock was converted into Pubco's Common Stock on the basis
of one share of Pubco's Common Stock for each six shares of Brooks Common
Stock.
Also on June 27, 1996, after the merger of Brooks, the Company
acquired all of the assets of Aspen in exchange for Pubco's Common
Stock. Aspen liquidated and its stockholders received one share of
Pubco's Common Stock for each seven shares of Aspen Common Stock held by
them.
As a result of these transactions, Pubco issued approximately 290,746
shares of its Common Stock to the Brooks' and Aspen stockholders, other
than Pubco.
The Company leases a general purpose 312,000 square foot building in
Cleveland, Ohio (the "Building") on a triple net basis. The premises are
used for executive and administrative facilities, Buckeye's manufacturing
and administrative operations and Allied's manufacturing and
administrative operations. Pubco subleases a portion of the building to
an unrelated party. The annual rental for the Building is approximately
$548,700. The Partnership that owns the Building is 80% owned and
controlled by Mr. Kanner. Mr. Dillingham, Mr. Kalette and five other
individuals have a minority interest in the Partnership.
Mr. Kanner made loans to Buckeye attributable to pre-1994
operations. During 1996, the final $289,000 of these loans were repaid.
Until repaid, these loans bore interest at 2% above the base lending rate
charged by the Company's lending bank.
39
<PAGE>
PART IV
ITEM l4. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) l. List of Financial Statements
Page Number
Consolidated Balance Sheets at
December 3l, l996 and l995........................ 14
Consolidated Statements of Operations
for each of the three years in the
period ended December 3l, l996.................... 16
Consolidated Statements of Stockholders'
Equity for each of the three years in
the period ended December 3l, l996................ 17
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 3l, l996.................... 18
Notes to Consolidated Financial Statements........ 19
2. List of Financial Statement Schedules
Schedule II - Valuation and Qualifying
Accounts.......................................... S-1
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been
omitted.
3. List of Exhibits
Exhibit
No. Description
10.22 December 4, 1996 (Sixth) Amendment to Credit
Facility and Security Agreement dated March 1,
1993 between Allied Construction Products, Inc.
and KeyBank National Association.
10.23 Master Promissory Note, Pledge and Security
Agreement dated October 3, 1996, between Pubco
Corporation and KeyBank National Association.
40
<PAGE>
10.24 Amended and Restated Master Promissory Note and
Security Agreement dated November 14, 1996
between Pubco Corporation and KeyBank National
Association for the Buckeye Business Products,
Inc. Division.
21 Subsidiaries of the Registrant.
The following exhibits were previously filed with the Commission as
indicated in the bracketed [] references and are hereby incorporated
by reference.
Exhibit
No. Description
2.1 Agreement and Plan of Merger dated April 26, 1996
between Pubco Corporation and Bobbie Brooks,
Incorporated [Registration Statement on Form S-4
No. 333-02951, Exhibit 2.1].
2.2 Sale and Liquidation Agreement dated April 26,
1996 between Pubco Corporation, PSI, Inc. and
Aspen Imaging International, Inc. [Registration
Statement on Form S-4 No. 333-02951, Exhibit 2.2].
3.1 Certificate of Incorporation of Pubco, as amended
[Form 10-K for year ended December 31, 1987,
Exhibit 3.1 and Information Statement dated June
27, 1990 for August 14, 1990 Annual Meeting of
Stockholders, Appendix I].
3.2 By-Laws of Pubco, as amended [Form 10-K for year
ended December 31, 1986, Exhibit 3.2(a)].
10.1 Security Agreement dated February 24, 1986
between Bobbie Brooks, Incorporated and
AmeriTrust Company National Association, as
amended [Bobbie Brooks, Incorporated Form 10-K
for year ended December 31, 1987, Exhibit 10.10].
10.19 Credit Facility and Security Agreement dated
March 1, 1993 between Allied Construction
Products, Inc. and Society National Bank [Form
10-K for year ended December 31, 1993, Exhibit
10.19].
10.20 Amendments to Credit Facility and Security
Agreement dated March 1, 1993 between Allied
Construction Products, Inc. and Society National
Bank [Form 10-K for year ended December 31, 1994,
Exhibit 10.20].
41
<PAGE>
10.21 June 30, 1995 (Fifth) Amendment to Credit
Facility and Security Agreement dated March 1,
1993 between Allied Construction Products, Inc.
and Society National Bank. [Form 10-K for year
ended December 31, 1995, Exhibit 10.21]
(b) Reports on Form 8-K Filed during Fourth Quarter
None.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities
Exchange Act of l934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PUBCO CORPORATION
By: /s/ Robert H. Kanner
---------------------------------
Robert H. Kanner,
Chairman of the Board, President,
Chief Executive Officer and
Chief Financial Officer
Date: March 21, l997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant, on the date indicated above:
/s/ Robert H. Kanner
----------------------------------
Robert H. Kanner, Director
/s/ Stephen R. Kalette
----------------------------------
Stephen R. Kalette, Director
/s/ Glenn E. Corlett
----------------------------------
Glenn E. Corlett, Director
43
<PAGE>
<TABLE>
<CAPTION>
PUBCO CORPORATION
AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(000's)
Column A Column B Column C Column D Column E
Balance at Additions Balance at
Beginning Charged to: End of
Description of Period Cost/Expense Other Deductions Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts-trade receivables
Year ended December 31, 1996 $ 279 $ 61 $ - $ 71 (A) $ 269
Year ended December 31, 1995 $1,250 $ 44 $ 66 (B) $ 480 (A) $ 279
601 (D)
Year ended December 31, 1994 $1,078 $ 794 $ - $ 608 (A) $1,250
14 (C)
<FN>
(A) Bad-debt writeoffs.
(B) Allowances for doubtful accounts acquired.
(C) Sale of receivables.
(D) Recoveries of accounts previously reserved.
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
2.1 Agreement and Plan of Merger dated April 26, 1996
between Pubco Corporation and Bobbie Brooks,
Incorporated [Registration Statement on Form S-4 No.
333-02951, Exhibit 2.1].
2.2 Sale and Liquidation Agreement dated April 26, 1996
between Pubco Corporation, PSI, Inc. and Aspen Imaging
International, Inc. [Registration Statement on Form
S-4 No. 333-02951, Exhibit 2.2].
3.1 Certificate of Incorporation of Pubco, as amended
[Form 10-K for year ended December 31, 1987, Exhibit
3.1 and Information Statement dated June 27, 1990 for
August 14, 1990 Annual Meeting of Stockholders,
Appendix I].
3.2 By-Laws of Pubco, as amended [Form 10-K for year ended
December 31, 1986, Exhibit 3.2(a)].
10.1 Security Agreement dated February 24, 1986 between
Bobbie Brooks, Incorporated and AmeriTrust Company
National Association, as amended [Bobbie Brooks,
Incorporated Form 10-K for year ended December 31,
1987, Exhibit 10.10].
10.19 Credit Facility and Security Agreement dated March 1,
1993 between Allied Construction Products, Inc. and
Society National Bank [Form 10-K for year ended
December 31, 1993, Exhibit 10.19].
10.20 Amendments to Credit Facility and Security Agreement
dated March 1, 1993 between Allied Construction
Products, Inc. and Society National Bank. [Form 10-K
for year ended December 31, 1994, Exhibit 10.20].
10.21 June 30, 1995 (Fifth) Amendment to Credit Facility and
Security Agreement dated March 1, 1993 between Allied
Construction Products, Inc. and Society National Bank.
[Form 10-K for year ended December 31, 1995, Exhibit
10.21]
10.22 December 4, 1996 (Sixth) Amendment to Credit Facility
and Security Agreement dated March 1, 1993 between
Allied Construction Products, Inc. and KeyBank
National Association.
<PAGE>
10.23 Master Promissory Note, Pledge and Security Agreement
dated October 3, 1996, between Pubco Corporation and
KeyBank National Association.
10.24 Amended and Restated Master Promissory Note and
Security Agreement dated November 14, 1996 between
Pubco Corporation and KeyBank National Association for
the Buckeye Business Products, Inc. Division.
21 Subsidiaries of the Registrant.
<PAGE>
Exhibit 10.22
SIXTH AMENDMENT TO
CREDIT FACILITY AND SECURITY AGREEMENT
WHEREAS, ALLIED CONSTRUCTION PRODUCTS, INC. (herein called the
"Borrower") and KEYBANK NATIONAL ASSOCIATION (formerly known as Society
National Bank) (herein called the "Bank") entered into a certain Credit
Facility and Security Agreement dated March 1, 1993, as amended by an
Amendment to Credit Facility and Security Agreement dated January 5,
1994, Second Amendment to Credit Facility and Security Agreement dated
June 1, 1994, Third Amendment to Credit Facility and Security Agreement
dated July 1, 1994, Fourth Amendment to Credit Facility and Security
Agreement dated March 16, 1995, and Fifth Amendment to Credit Facility
and Security Agreement dated June 30, 1995 (as amended herein called the
"Agreement"), and
WHEREAS, the Borrower and the Bank have agreed to further amend the
Agreement.
NOW, THEREFORE, for valuable consideration received to their mutual
satisfaction, the Borrower and the Bank hereby agree as follows:
1. Section 1.2 of the Agreement is hereby amended by deleting the
definition of "Bank" in its entirety and substituting the following in
place thereof:
"'Bank' means KeyBank National Association, a national banking
association, whose principal office is located at 127 Public Square,
Cleveland, Ohio 44114-1306."
2. The definition of "Borrowing Base" appearing in Section 1.2 of
the Agreement is hereby amended by (i) deleting the period at the end of
subpart (c) and inserting "; less" in place thereof and (ii) by adding a
new subpart (d) reading as follows:
"(d) any outstanding Letters of Credit."
3. Section 1.2 of the Agreement is hereby amended by adding the
following definition thereto:
"'Letter of Credit' means any outstanding letter of credit
issued by Bank on the account of Borrower."
4. Section 2.1(a) of the Agreement is hereby amended by adding the
following sentence after the first sentence thereof:
"Issued and outstanding Letters of Credit shall not exceed Two
Hundred Fifty Thousand Dollars ($250,000)."
1
<PAGE>
5. Section 2.4 of the Agreement is hereby amended by adding a new
subpart (g) reading as follows:
"(g) Borrower agrees to pay to Bank a letter of credit fee of
one and one-half percent (1-1/2%) per annum of the amount of any
issued and outstanding standby Letters of Credit, payable at
issuance."
6. Except as herein specifically amended, directly or by reference,
all of the terms and conditions set forth in the Agreement are confirmed
and ratified and shall remain in full force and effect.
7. In consideration of this Amendment, Borrower hereby releases and
discharges the Bank and its shareholders, directors, officers, employees,
attorneys, affiliates and subsidiaries from any and all claims, demands,
liability, and causes of action whatsoever, now known or unknown, arising
out of or in any way related to the extension or administration of the
Loan, the Agreement or any mortgage or security interest related thereto.
8. Borrower hereby represents and warrants to Bank that (a)
Borrower has the legal power and authority to execute and deliver this
Amendment; (b) the officials executing this Amendment have been duly
authorized to execute and deliver the same and bind Borrower with respect
to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions
hereof do not violate or conflict with the organizational agreements of
Borrower or any law applicable to Borrower or result in a breach of any
provisions of or constitute a default under any other agreement,
instrument or document binding upon or enforceable against Borrower; and
(d) this Amendment constitutes a valid and binding obligation upon
Borrower in every respect.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Sixth
Amendment to the Agreement to be executed by their duly authorized
officers as of the 4th day of December, 1996.
BANK: BORROWER:
KEYBANK NATIONAL ASSOCIATION ALLIED CONSTRUCTION PRODUCTS, INC.
2
<PAGE>
Exhibit 10.23
MASTER PROMISSORY NOTE
$10,000,000.00 Cleveland, Ohio, __________, 1996
Company promises to pay to the order of Bank at any of its offices
the principal amount of each Advance, together with interest on the daily
principal balance of such Advance at a rate per annum equal to the Interest
Rate applicable to such Advance. The principal amount of each Advance shall
be due and payable on the Maturity Date applicable to such Advance. Accrued
interest on each LIBOR Advance shall be due and payable on the Maturity Date
applicable to such Advance. Accrued interest on each Prime Advance shall be
due and payable on the _____ day of each month. During any Event of Default,
the daily principal balance of each Advance shall bear interest at a rate per
annum equal to the Default Interest Rate. Except during any Event of Default,
no LIBOR Advance may be repaid prior to its Maturity Date.
This note shall serve as a master note to evidence all Advances;
provided, however, that the aggregate unpaid principal amount of all Advances
shall not at any one time outstanding exceed the lesser of the amount
specified in the Line Facility or forty percent (40%) of the value of the
Collateral. In the absence of clear and convincing evidence established by
Company to the contrary, Bank's records as to (a) the principal amount, the
Maturity Date, and the Interest Rate applicable to each Advance, and (b) each
payment of principal and interest received by Bank applicable to each Advance
shall be conclusively deemed to be accurate.
For each payment of principal or interest not received by Bank when due,
the Company agrees to pay Bank a late charge equal to the greater of ten
percent (10%) of the amount of the payment or One Hundred Dollars ($100.00).
Company shall pay Bank commitment fee computed at a rate one-fourth of
one percent (1/4 of 1%) per annum (calculated on the basis of a year of 360
days for the actual number of days elapsed) on the average daily unused amount
of the commitment of the Bank to make the Advances hereunder during the period
from the date of this Note to the Maturity Date, payable starting on
_____________________, 1996, and continuing quarter annually thereafter, and
on the Maturity Date, with respect to the portion of such preceding period as
to which such fee has accrued and remains unpaid.
Company shall pay Bank a closing fee equal to Ten Thousand Dollars
($10,000), payable on the date of execution of this Agreement.
Company waives presentment, demand, notice, protest, and all other
demands and notices in connection with delivery, acceptance, performance,
default, or enforcement of this note. Any request, demand, or notice by or on
behalf of Bank, when delivered or deposited for delivery, postage prepaid, by
certified United States mail to Company at Company's address set forth below
shall constitute, but shall not preclude other means of, an effective request,
demand, or notice. Any request, demand, or notice by or on behalf of Company
must be in writing and shall not be effective until delivered to Bank at
Bank's address set forth below.
1
<PAGE>
At the option of Bank during any Event of Default, all Obligations shall
become immediately due and payable, Bank may terminate the Line Facility
(including, without limitation, any obligation of Bank to make any further
Advances), and Bank may apply or setoff any Cash Security against all
Obligations, all without any notice to or demand upon Company, in addition to
any other rights and remedies Bank may have pursuant to law, this note, or any
other instruments or agreements, which rights and remedies shall be
cumulative. If during any Event of Default any LIBOR Advance becomes due and
payable and is repaid prior to its Maturity Date, Company also promises to
reimburse Bank on demand for any resulting loss, cost, or expense incurred by
Bank as a result of Company's repayment of such Advance prior to its Maturity
Date including, without limitation, any loss incurred in obtaining,
liquidating, or employing deposits from third parties, but excluding loss of
margin for the period after any such payment. If, because of the introduction
of or any change in, or because of any judicial, administrative, or other
governmental interpretation of, any law or regulation, there shall be any
increase in the cost to Bank of making, funding, maintaining, or allocating
capital to any LIBOR Advance, then Company shall, from time to time upon
demand by Bank, pay to Bank additional amounts sufficient to compensate Bank
for such increased cost. If, because of the introduction of or any change in,
or because of any judicial, administrative, or other governmental
interpretation of, any law or regulation, it becomes unlawful for Bank to
make, fund, or maintain any LIBOR Advance, then Bank's obligation to make,
fund, or maintain any LIBOR Advance shall terminate and each affected
outstanding LIBOR Advance shall be converted to a Prime Advance on the earlier
of the applicable Maturity Date for each such Advance or the date the making,
funding, or maintaining of each such Advance becomes unlawful.
All provisions hereof shall be subject to, governed by, and construed in
accordance with Ohio law. Unenforceability of any provision hereof or any
application of any provision hereof shall not affect the enforceability of any
other provision or application of any provision. Any amendment or waiver
hereof or any waiver of any right or remedy otherwise available must be in
writing and signed by the party against whom enforcement of the amendment or
waiver is sought. After all Obligations evidenced by this note become due and
payable, any attorney-at-law is irrevocably authorized to (a) appear for
Company in any state or federal court of record, (b) waive the issuance and
service of process, all errors, and all rights of appeal and stay of
execution, and (c) confess judgment against Company in favor of Bank for the
principal balance of this note, the amount of all unpaid accrued interest, the
amount of all costs of suit, and the amount of a reasonable attorney's fee.
These authorizations shall survive any judgment(s) and any vacation of any
judgment(s). Company agrees that the Bank's attorney may confess judgment
pursuant to the foregoing warrant of attorney. Company further agrees that
the attorney confessing judgment pursuant to the foregoing warrant of attorney
may receive a legal fee or other compensation from the Bank.
2
<PAGE>
For the purposes of this note:
"Advance" means any loan advance made by Bank to Company pursuant to the
Line Facility;
"Bank" means KEYBANK NATIONAL ASSOCIATION, a national banking association
with its main office located at 127 Public Square, Cleveland, Ohio 44114,
and its successors and assigns;
"Business Day" means a day of the year on which banks are not required or
authorized to close in Cleveland, Ohio and, if the applicable Business Day
relates to any LIBOR Advance, on which dealings are carried on in the
London interbank eurodollar market;
"Company" means the undersigned and its successors and assigns; provided,
however, that Company may not assign or otherwise transfer any of its
rights under this note without the express written consent of Bank;
"Cash Flow Coverage Ratio" means (i) the sum of Company's net income
(after taxes paid in cash), plus depreciation, plus amortization, plus
interest expense to (ii) the sum of Company's current portion of long term
debt, plus capitalized lease payment, plus capital expenditures, plus
interest expense, plus dividends. The Cash Flow Coverage Ratio shall be
calculated on a quarterly basis.
"Cash Security" means any present or future (a) money in the possession of
Bank in which Company has or may have any right, title, or interest, (b)
Deposit Account maintained with Bank in which Company has or may have any
right, title or interest, or (c) Instrument or General Intangible issued
or assumed by Bank in which Company has or may have any right, title, or
interest;
"Collateral" means the custodial account at Key Trust Company of Ohio
known as Account No. 32859700 and the securities therein which are covered
by the Pledge and Security Agreement given by Company to Bank of even date
herewith ("Security Agreement").
"Debt to Worth Ratio" means the ratio of (i) Company's Total
Indebtedness, minus Subordinated Debt to (ii) Company's total equity plus
Subordinated Debt, minus related party advances, minus intangible assets.
The Debt to Worth Ration shall be calculated on a quarterly basis;
"Default Interest Rate" means that floating rate per annum (calculated
on the basis of a year of 360 days for the actual number of days elapsed)
equal to the greater of three percent (3%) in excess of the Prime Rate,
which rate shall be immediately adjusted to correspond with each change in
the Prime Rate, or sixteen percent (16%);
"Deposit Account" shall be defined as set forth in Article 9 of the UCC;
"Event of Default" means any of the following events or conditions:
(a) any Obligation evidenced by this note or the Line Facility is not paid when
such Obligation becomes due and payable; (b) any Obligation not evidenced by
this note or the Line Facility is not paid when (or within any applicable grace
period after) such Obligation becomes due and payable; (c) any material
3
<PAGE>
representation, warranty, certification, financial statement, loan application,
information, or record made, furnished, or made available to Bank by or on
behalf of Company in connection with any Obligation is inaccurate or misleading
in any material respect when made, furnished, or made available; (d) any
material provision of any documentation evidencing, securing, or otherwise
relating to any Obligation is breached; (e) Company (1) is adjudicated by any
court in any jurisdiction to be insolvent, (2) ceases, is unable, or admits in
writing the inability to generally pay its debts as they become due, (3) makes
any general assignment for the benefit of its creditors, (4) applies for or
consents to the appointment of or the taking of possession by any receiver,
custodian, trustee, liquidator, or similar representative of or for it or of or
for any material part of its property, or (5) commences or consents to the
commencement of any case or proceeding with respect to it or any material amount
of its property pursuant to any Insolvency Law; (f) any case or proceeding
pursuant to any Insolvency Law is commenced against or with respect to Company
or any material amount of its property without its consent which is not
dismissed or stayed within 30 days after its commencement; or (g) any
judgment, attachment, execution, or similar process aggregating in excess of
$1,000,000 is rendered, issued, or levied against Company or any material
amount of its property and is not fully satisfied, released, vacated, or
bonded within 30 days after its rendering, issue, or levy, or (h) Company
creates, grants, or permits to exist any lien encumbrance, or claim on the
Collateral, other than as created by the Security Agreement and either (i)
the Collateral does not equal or exceed in fair market value 200% of the
outstanding principal balance of this Note, or (ii) any such liens,
encumbrances or claims aggregate in excess of $500,000 .
"General Intangible" shall be defined as set forth in Article 9 of the
UCC;
"Insolvency Law" means any reorganization, arrangement, composition, or
readjustment of debts, bankruptcy, insolvency, dissolution, liquidation,
receivership, trusteeship, or similar law of any state or the United
States;
"Instrument" shall be defined as set forth in Article 9 of the UCC;
"Interest Rate" means (a) as to any Prime Advance, that floating rate
per annum (calculated on the basis of a year of 360 days for the actual number
of days elapsed) equal to the Prime Rate, which rate shall be immediately
adjusted to correspond with each change in the Prime Rate, and (b) as to
any LIBOR Advance, that fixed rate per annum (calculated on the basis of a
year of 360 days for the actual number of days elapsed) equal to one and
one-half percent (1.50%) in excess of the Reserve Adjusted LIBOR Rate;
"LIBOR Advance" means any Advance that bears interest determined with
reference to the Reserve Adjusted LIBOR Rate;
"Libor Reserve Requirements" means, for any Libor Advance, the maximum
reserves (whether basic, supplemental, marginal, emergency, or otherwise)
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" (as defined in Regulation D of the
Board of Governors of the Federal Reserve System) having a term equal to
the term of such Advance;
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<PAGE>
"Line Facility" means the revolving credit facility held available by
Bank for Company evidenced by a letter agreement dated __________________, 1996
and Financing Commitment attached thereto, and this note together with all
extensions, renewals, amendments, restatements, and substitutions thereof
or therefor, the provisions of which are hereby incorporated by reference
as if fully rewritten herein;
"Maturity Date" means the earlier of (a) the date all Obligations
evidenced by this note become due and payable or (b) (1) with respect to
any Prime Advance, April 30, 1999, and (2) with respect to any LIBOR
Advance, the earlier of (i) April 30, 1999 or (ii) the date selected by
Company that ends one, two or three months after the date of the making of
such Advance;
"Obligation" means any present or future obligation, indebtedness, or
liability of Company owed to Bank of whatever kind and however evidenced,
together with all extensions, renewals, amendments, restatements and
substitutions thereof or therefor (including, without limitation, any
evidenced by this note or the Line Facility);
"Prime Advance" means any Advance that bears interest determined with
reference to the Prime Rate;
"Prime Rate" means that interest rate established from time to time by
Bank as Bank's Prime Rate, whether or not such rate is publicly announced.
The Prime Rate may not be the lowest interest rate charged by Bank for
commercial or other extensions of credit;
"Reserve Adjusted LIBOR Rate" means, with respect to any LIBOR Advance,
the rate per annum (rounded upwards to the next higher whole multiple of
1/16% if such rate is not such a multiple) equal to the quotient of (a)
the rate per annum (rounded upwards to the next higher whole multiple of
1/16% if such rate is not such a multiple) at which deposits in United
States dollars are offered at 11:00 a.m. (London, England time) (or as
soon thereafter as is reasonably practicable) by prime banks in the London
interbank eurodollar market 2 Business Days prior to the day such Advance
is made in an amount and with a maturity comparable to the amount and
maturity of such Advance, divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date 2 Business
Days prior to the day such Advance is made;
"Senior Debt to Cash Flow Ratio" means the ratio of (i) Company's
Obligations and any liabilities incurred under capitalized leases, to (ii)
the sum of Company's net income (after taxes paid in cash), plus
depreciation, plus amortization, plus interest expense. The Senior Debt
to Cash Flow Ratio shall be calculated on a quarterly basis;
"Subordinated Debt" shall mean Indebtedness of a Person which is
subordinated, in a manner satisfactory to the Bank, to all Indebtedness
owing to the Bank;
"Total Indebtedness" shall mean the total of all items of indebtedness
or liability which in accordance with generally accepted accounting principles
would be included in determining total liabilities on the liability side of the
balance sheet as of the date of determination;
"UCC" means the Ohio Uniform Commercial Code, as amended.
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Company, to the extent permitted by law, waives any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise, between Bank and Company arising out of, in connection with, related
to, or incidental to the relationship established between Company and Bank in
connection with this note or any other agreement, instrument or document
executed or delivered in connection therewith or the transactions related
thereto. This waiver shall not in any way affect, waive, limit, amend or
modify Bank's ability to pursue remedies pursuant to any confession of judgment
or cognovit provision contained in this note, or any other agreement,
instrument or document related thereto.
WARNING: BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
COMPANY: PUBCO CORPORATION
By:________________________________
Title:_____________________________
And:_______________________________
Title:_____________________________
ADDRESS: 3830 Kelly Avenue
Cleveland, Ohio 44114
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PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, entered into as of ___________,
1996, by and between the PUBCO CORPORATION (herein called the "Pledgor") and
KEYBANK NATIONAL ASSOCIATION, a national bank with its main office at
Cleveland, Ohio (herein called the "Bank");
W I T N E S S E T H:
In consideration of and in order to induce the Bank, at any time and
from time to time, at its option, to grant the Liabilities (as herein defined)
to Pledgor, and in further consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
SECTION ONE
THE PLEDGE
As security for the payment of the Liabilities, the Pledgor hereby
grants Bank a security interest in and pledges, assigns and sets over to the
Bank the Collateral (as herein defined), and in particular the items listed in
Exhibit A attached hereto and made a part hereof.
Bank shall not perfect the security interest pledged herein until and unless
an Event of Default (as defined therein) has occurred in the Liabilities or a
breach has occurred in any of the Loan Covenants contained in the Financing
Commitment, as may be amended from time to time.
The Pledgor will pledge and set over to the Bank, as further security
hereunder, any additional securities as and when acquired by the Pledgor.
SECTION TWO
TERMS AND AGREEMENTS
Section 2.1. Definitions. The following terms, when used herein, shall
have the meanings stated.
(a) "Collateral" shall include any and all securities or other
property hereby or at any time hereafter pledged with the Bank by the Pledgor
and any replacement and proceeds thereof; and
(b) "Liabilities" shall mean loans in the maximum principal amount of
Ten Million Dollars ($10,000,000) made by Bank to Pledgor, which loans are
evidenced by a Promissory Note of Pledgor dated ________________, 1996, and
any renewals, or rearrangements of the above as the Bank and Pledgor may make.
(c) "Account" shall mean custodial account number 032859700 in which
the collateral is held by Key Trust Company of Ohio, National Association.
(d) "Financing Commitment" shall mean that Financing Commitment
issued by Bank to Borrower and dated ____, 1996.
<PAGE>
Section 2.2. Warranty. The Pledgor warrants that the Pledgor is the
sole owner of the Collateral; that the Pledgor has full power and authority to
pledge the same; that all the securities comprised in the Collateral are
validly issued, fully paid and nonassessable; that the Collateral is, and
during the term hereof will remain, free and clear of all liens, charges,
encumbrances, pledges, assignments or transfers of any interest therein or
thereto (other than to the Bank or as permitted in the Promissory Note) and
the Pledgor warrants and will defend the Collateral against the claims and
demands of all persons whomsoever.
Section 2.3. Possession of Securities. The Pledgor warrants that
possession of all certificated securities comprising the Collateral pledged
hereby are in the possession of Key Trust Company of Ohio, National
Association ("Custodian") and held by Custodian for safekeeping as custodian
and registered in the name of Custodian for the benefit of Pledgor and all
book entry securities comprising the Collateral are registered in the name of
Custodian.
Section 2.4. Execution of Instruments. Pledgor shall execute such
instruments as Bank may request in order to assign or endorse to Bank or its
order the title to all the Collateral and will pay the transfer tax or execute
such exemption certificates with respect to such taxes as Bank may determine
are required with respect to any such transfer.
Section 2.5. Discharge of Pledge. If the whole amount of the principal
of, premium (if any) and interest on, the Liabilities shall have been paid in
full and the Bank shall not then have outstanding any obligation to extend
credit to, or acquire the obligations of, the Pledgor, then, and in that
event, all rights and interests assigned and pledged hereby or pursuant hereto
by the Pledgor shall revert to the Pledgor and the right, title and interest
of the Bank therein shall cease, determine and be void and the Collateral
belonging to the Pledgor shall be free and clear of Bank's lien, and notice of
such event shall be given by Bank to Pledgor and Custodian.
Section 2.6. Acknowledgment by Custodian. At such time as set forth in
the letter agreement dated ____, 1996, between Bank and Pledgor, Pledgor shall
have delivered to Bank an acknowledgment by Custodian of the Pledge or
security interest granted hereby and Custodian's agreement to have said Pledge
noted in its records, and to only release the Collateral pursuant to the terms
hereof, all in form and substance acceptable to Bank.
Section 2.7. Reporting. At least once each month no later than the ____
day of each month, Bank shall receive a list of the assets held by Custodian
as Collateral hereunder.
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SECTION THREE
RIGHTS OF THE PLEDGOR
Section 3.1. Rights of the Pledgor Prior to Default. So long as (i)
the Collateral has a fair market value at least equal to 200% of the
outstanding principal balance of the Liabilities, (ii) the principal balance
of the Liabilities has not become due and payable, (iii) the interest on the
Liabilities is not past due, and (iv) the Pledgor has not become insolvent,
but not thereafter, the Pledgor shall have the right, from time to time, to
exercise all ownership rights, such as right to sell, reinvest in securities
of approximate equal fair market value, and to substitute for any Collateral
other securities of at least equal fair market value and comparable ratings.
The right of Pledgor to exercise the foregoing rights of ownership shall be
subject always to its obligation to maintain Collateral with a fair market
value not less than the sum of 200% of the outstanding principal balance of
the Liabilities. In the event said fair market value is not maintained and
not restored by delivery of additional Collateral within five business days
after notice thereof from Bank, all of Pledgor's rights of ownership shall
cease until the Collateral returns to said fair market value. Furthermore, if
a default of any of the Liabilities shall have occurred, then during the
continuance thereof, the Bank, in addition to the other remedies hereunder
provided, may disallow the distribution of all such dividends to the Pledgor
and, in its discretion, may vote or cause its nominee to vote the shares of
stock included in the Collateral. Pledgor shall have the right from time to
time to withdraw Collateral from the Account as long as the fair market value
of the remaining Collateral is not less than 200% of the outstanding principal
balance of the Liabilities. Any request for withdrawal after perfection of
Bank's interest in the Collateral shall be evidenced by a certificate of
Pledgor delivered to the Bank and Custodian setting forth the outstanding
principal balance of the Liability and the fair market value of the Collateral
as most recently determined by Bank. The Bank shall have the right to obtain
from Custodian an accounting of the Fund in addition to the monthly report
furnished to the Pledgor, at such times as the Bank may reasonably believe
that unusual market conditions exist.
Section 3.2. No Right of Exoneration. The Pledgor hereby waives,
releases and discharges any right of exoneration which it may have with
respect to the Liabilities and also any right which it has or may have at law,
in equity, or by statute to require the Bank to pursue or otherwise avail
itself of any rights or remedies which the Bank has or may have against any
other person with respect to any other security at any time held by the Bank
for the payment of the Liabilities.
SECTION FOUR
RIGHTS OF THE BANK
Section 4.1. Rights of the Bank on Default of Payment of Any of the
Liabilities. In the event that any of the Liabilities shall have become
payable pursuant to the provisions thereof whether at maturity, by
declaration, or otherwise and the full amount of such Liabilities or any of
them shall not have been paid in full, all of Pledgor's rights of ownership in
the Collateral referred to in Section 3.1 hereof shall cease and the Bank may
8
<PAGE>
forthwith apply any cash constituting a part of the Collateral to the payment
of the Liabilities ratably, and may collect or otherwise realize upon any of
the Collateral, or any part thereof. Without limiting the generality of the
foregoing, the Bank in making such realization may, or by giving notice to
Custodian to do so on its behalf, after ten (10) days' written notice to the
Pledgor, sell, assign or otherwise dispose of, or give options to purchase,
the Collateral through any exchange, broker's board or elsewhere, for cash or
credit, or for future delivery, without assumption by the Bank upon any such
sale or sales, public or private, to purchase the whole or any part of the
Collateral free from any right or equity of redemption in the Pledgor or any
one claiming through or under the Pledgor, which right or equity of redemption
is hereby expressly waived and released, and to apply the net proceeds of such
realization, after deducting all costs and expenses of every kind, to the
payment in full of the Liabilities. Any surplus shall be returned to the
Pledgor. The Pledgor waives, to the full extent permitted by law, all rights
of appraisement or valuation whether before or after sale.
Section 4.2. Right of the Bank to Deal With the Liabilities. The
Pledgor hereby grants to the Bank full power and authority, in the Bank's
uncontrolled discretion and without notice to the Pledgor, to deal with the
Liabilities or any of them, to the extent of the following powers:
(a) to grant any waiver or indulgence with respect to any of the
Liabilities; and to effect any release, compromise or settlement with respect
to any of the Liabilities;
(b) to waive, or enter into any agreement of forbearance with respect
to, any of the Liabilities, or with respect to all or any part of any other
security for any of the Liabilities at any time held by the Bank, and to
change the terms of any such waiver or agreement of forbearance;
(c) to consent to the substitution, exchange or release of all or any
part of any other security at any time held for any of the Liabilities, and in
the case of a substitution or exchange, whether or not the new security
received by the Bank shall be the same or of a different character or value
from the security surrendered by the Bank; and
(d) to accelerate the maturity of any of the Liabilities in accordance
with the terms thereof.
No action which the Bank shall take or fail to take pursuant to the
foregoing powers shall operate to release the pledge hereby created. The
Pledgor shall have no right of recourse against the Bank by reason of any
action which the Bank may take or fail to take pursuant to the foregoing
powers.
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SECTION FIVE
MISCELLANEOUS
Section 5.1. Persons Bound. This agreement benefits the Bank, its
successors and assigns, and binds the Pledgor and its successors and assigns.
Section 5.2. Fair Market Value. All determinations as to the fair
market value of the Collateral to be made hereunder shall be made by Bank, on
a reasonable basis. The reasonable judgment of Bank as to the fair market
value of any Collateral shall be final and binding upon all persons and Bank
shall not be liable to any person or any loss resulting from the exercise of
such judgment in good faith.
Section 5.3. Governing Law. This Pledge Agreement shall be deemed to
be a contract made under and shall be construed in accordance with and
governed by the laws of the State of Ohio. This Pledge shall be interpreted
so as to fully comply with the provisions of Section 8-313 of the Uniform
Commercial Code or any comparable and applicable State Law.
Section 5.4. Notices. All notices hereunder shall be deemed to have
been sufficiently given or served for all purposes hereof, when delivered or
deposited in certified or registered U.S. Mail, postage prepaid, and addressed
to the Company at the address given below or at such other address either
party may have designated to the other in writing.
Pledgor: Pubco Corporation
3830 Kelly Avenue
Cleveland, Ohio 44114
Attn: _____________________________
Bank: KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Attn: Manager, Structured Finance
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be
executed as of the date first above written.
PUBCO CORPORATION
By:________________________________
Title:_____________________________
And:_______________________________
Title:_____________________________
KEYBANK NATIONAL ASSOCIATION
By:________________________________
Title:_____________________________
10
<PAGE>
EXHIBIT A
TO
PLEDGE AND SECURITY AGREEMENT
BY AND BETWEEN
PUBCO CORPORATION
AND
KEYBANK NATIONAL ASSOCIATION
Description of Collateral:
All securities now held or to be held in an account known as Pubco
Corporation Custodial Account No. 032859700,
which securities are held by Key Trust Company of Ohio, National Association
("Custodian") pursuant to the terms of a Custodial Agreement between Pledgor
and Custodian dated July 16, 1996, a list of which securities currently held
is attached hereto as Exhibit A-1. This list may be updated and amended as
securities are sold, exchanged or substituted.
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<PAGE>
EXHIBIT A-1
SECURITIES
12
<PAGE>
ACKNOWLEDGMENT
Key Trust Company of Ohio, National Association ("Custodian"), as
Custodian of the _________________________________ ("Fund") under the Custody
Agreement ("Custodial Agreement") between itself and Pubco Corporation
("Owner") dated as of ______________, 1996, does herewith acknowledge the
pledge of all of the certain securities of said Fund by Owner to KeyBank
National Association ("Bank") pursuant to the terms and conditions of a Pledge
and Security Agreement dated ________________, 199__ ("Pledge"), a copy of
which is attached hereto as Exhibit "A" and incorporated herein, and agrees to
hold the Fund, until Custodian receives notice otherwise from Bank, subject to
the terms of the Pledge.
Custodian certifies that the Custodial Agreement is, as of the date
hereof, in full force and effect. Custodian further certifies that there is
nothing in the Custodial Agreement that prohibits the pledge of the assets of
the Fund.
Prior to execution of this Acknowledgement by Custodian, Owner shall be
permitted to deal with the Fund as it deems fit as provided in the Pledge,
including causing the disbursement of sums of money from the Fund. After
execution hereof by Custodian, thereby perfecting Bank's security interest,
Custodian agrees not to disburse any sum of money from the Fund without the
prior written consent of the Bank; provided Owner may exercise such rights
over the Fund as provided in the Pledge.
Custodian warrants and represents to Bank that it has marked its books
and records to reflect the Bank's security interest and pledge of the
securities held in the Fund to Bank and agrees to hold the securities as agent
for the Bank for the purpose of perfecting the Bank's security interest in the
securities. Custodian agrees to provide Bank a copy of the monthly account
statement that it provides to the Owner, which statement will contain a list
of assets in the Fund and a current valuation, and at other reasonable times,
upon request by Bank furnish Bank with an unaudited report of Fund assets.
Upon execution by Custodian hereof, Custodian agrees that until it is
notified by Bank that the Pledge is no longer in effect, it shall hold the
assets of the Fund subject to Bank's security interest, and upon receipt of
written notice from Bank that it is entitled to receive proceeds from the
Owner, Custodian will proceed to the extent necessary to liquidate the assets
of the Fund in accordance with the terms of the Pledge and deliver said
proceeds to Bank. Bank agrees to indemnify and hold Custodian harmless for
any such actions taken by Custodian in good faith at the direction of Bank.
All notices to Bank shall be given by certified mail to:
KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Attn: Structured Finance
IN WITNESS WHEREOF, the undersigned has executed this Agreement by its
duly authorized officers as of the ______ day of ____________ , 1996.
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<PAGE>
CUSTODIAN: BANK:
KEY TRUST COMPANY OF OHIO, KEYBANK NATIONAL ASSOCIATION
NATIONAL ASSOCIATION
By:_________________________ By:__________________________
Title:______________________ Title:_______________________
Consented to By:
PUBCO CORPORATION
By:______________________
Title:___________________
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<PAGE>
Exhibit 10.24
AMENDED AND RESTATED
MASTER PROMISSORY NOTE
WHEREAS, Ribbons, Inc. executed and delivered to Ameritrust Company
National Association ("Ameritrust") a Promissory Grid Note dated June 2, 1986,
in the maximum principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Note");
WHEREAS, as security for the indebtedness evidenced by the Note,
Ribbons, Inc. executed a certain Security Agreement in favor of Ameritrust
dated May 28, 1985, as amended by an Amendment to Security Agreement dated
June 2, 1986 and an Amendment to Security Agreement dated August 5, 1993 (as
amended, the "Security Agreement");
WHEREAS, Buckeye Business Products, Inc. is successor by a series of
mergers and name changes to Ribbons, Inc.;
WHEREAS, PUBCO CORPORATION ("Company") is successor by merger to Buckeye
Business Products, Inc. and KEYBANK NATIONAL ASSOCIATION (formerly known as
Society National Bank) ("Bank") is successor by merger to Ameritrust; and
WHEREAS, the business operations of the former Buckeye Business
Products, Inc. are currently conducted as a division of Company known as
"Buckeye Business Products Inc. (the Buckeye Division)", and separate books
and records, including financial records, are maintained therefor.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the Company and Bank hereby mutually agree that
the Note shall be amended and restated in its entirety as follows:
$2,500,000.00 Cleveland, Ohio, ____________, 1996
Company promises to pay to the order of Bank at any of its offices the
principal amount of each Advance, together with interest on the daily
principal balance of such Advance at a rate per annum equal to the Interest
Rate applicable to such Advance. The principal amount of each Advance shall
be due and payable on the Maturity Date applicable to such Advance. Issued
and outstanding letters of credit issued by Bank on the account of the Buckeye
Division shall not exceed Five Hundred Thousand Dollars ($500,000). Accrued
interest on each LIBOR Advance shall be due and payable on the Maturity Date
applicable to such Advance. Accrued interest on each Prime Advance shall be
due and payable on the first day of each month. During any Event of Default,
the daily principal balance of each Advance shall bear interest at a rate per
annum equal to the Default Interest Rate. Except during any Event of Default,
no LIBOR Advance may be repaid prior to its Maturity Date.
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This note shall serve as a master note to evidence all Advances;
provided, however, that the aggregate unpaid principal amount of all Advances
shall not at any one time outstanding exceed (a) the amount specified in the
Line Facility, or (b) the Borrowing Base, whichever is less. Company shall
provide a Borrowing Base Certificate to Bank monthly. In the absence of
reasonable evidence established by Company to the contrary, Bank's records as
to (a) the principal amount, the Maturity Date, and the Interest Rate
applicable to each Advance, and (b) each payment of principal and interest
received by Bank applicable to each Advance shall be conclusively deemed to be
accurate.
This note is being executed and delivered as an amendment to and
restatement of an existing Promissory Grid Note and dated June 2, 1986, and
the execution and delivery of this note shall not constitute a novation and
shall not terminate or otherwise affect the first lien and security interest
of the Bank in the Buckeye Division's property.
For each payment of principal or interest not received by Bank when due,
the Company agrees to pay Bank a late charge equal to the greater of ten
percent (10%) of the amount of the payment or twenty five dollars ($25.00).
Company waives presentment, demand, notice, protest, and all other
demands and notices in connection with delivery, acceptance, performance,
default, or enforcement of this note. Any request, demand, or notice by or on
behalf of Bank, when delivered or deposited for delivery, postage prepaid, by
certified United States mail to Company at Company's address set forth below
shall constitute, but shall not preclude other means of, an effective request,
demand, or notice. Any request, demand, or notice by or on behalf of Company
must be in writing and shall not be effective until delivered to Bank at Bank's
address set forth below.
At the option of Bank during any Event of Default, all Obligations shall
become immediately due and payable, Bank may terminate the Line Facility
(including, without limitation, any obligation of Bank to make any further
Advances), and Bank may apply or setoff any Cash Security against all
Obligations, all without any notice to or demand upon Company, in addition to
any other rights and remedies Bank may have pursuant to law, this note, or any
other instruments or agreements, which rights and remedies shall be
cumulative. If during any Event of Default any LIBOR Advance becomes due and
payable and is repaid prior to its Maturity Date, Company also promises to
reimburse Bank on demand for any resulting loss, cost, or expense incurred by
Bank as a result of Company's repayment of such Advance prior to its Maturity
Date including, without limitation, any loss incurred in obtaining,
liquidating, or employing deposits from third parties, but excluding loss of
margin for the period after any such payment. If, because of the introduction
of or any change in, or because of any judicial, administrative, or other
governmental interpretation of, any law or regulation, there shall be any
increase in the cost to Bank of making, funding, maintaining, or allocating
capital to any LIBOR Advance, then Company shall, from time to time upon
demand by Bank, pay to Bank additional amounts sufficient to compensate Bank
for such increased cost. If, because of the introduction of or any change in,
or because of any judicial, administrative, or other governmental
interpretation of, any law or regulation, it becomes unlawful for Bank to
make, fund, or maintain any LIBOR Advance, then Bank's obligation to make,
fund, or maintain any LIBOR Advance shall terminate and each affected
outstanding LIBOR Advance shall be converted to a Prime Advance on the earlier
of the applicable Maturity Date for each such Advance or the date the making,
funding, or maintaining of each such Advance becomes unlawful.
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<PAGE>
All provisions hereof shall be subject to, governed by, and construed in
accordance with Ohio law. Unenforceability of any provision hereof or any
application of any provision hereof shall not affect the enforceability of any
other provision or application of any provision. Any amendment or waiver
hereof or any waiver of any right or remedy otherwise available must be in
writing and signed by the party against whom enforcement of the amendment or
waiver is sought. After all Obligations evidenced by this note become due and
payable, any attorney-at-law is irrevocably authorized to (a) appear for
Company in any state or federal court of record, (b) waive the issuance and
service of process, all errors, and all rights of appeal and stay of
execution, and (c) confess judgment against Company in favor of Bank for the
principal balance of this note, the amount of all unpaid accrued interest, the
amount of all costs of suit, and the amount of a reasonable attorney's fee.
These authorizations shall survive any judgment(s) and any vacation of any
judgment(s). Company agrees that the Bank's attorney may confess judgment
pursuant to the foregoing warrant of attorney. Company further agrees that
the attorney confessing judgment pursuant to the foregoing warrant of attorney
may receive a legal fee or other compensation from the Bank.
For the purposes of this note:
"Advance" means any loan advance made by Bank to the Buckeye Division
pursuant to the Line Facility;
"Bank" means KEYBANK NATIONAL ASSOCIATION, a national banking
association with its main office located at 127 Public Square, Cleveland,
Ohio 44114, and its successors and assigns;
"Borrowing Base" means an amount not in excess of the sum of the
following:
(a) eighty-five percent (85%) of the amount due and owing on
Qualified Accounts Receivable, plus
(b) the lesser of (1) forty percent (40%) of the cost or market
value (whichever is lower) of Company's Qualified Inventory
or (2) One Million Dollars ($1,000,000), less
(c) balance of outstanding letters of credit, if any;
"Borrowing Base Certificate" shall mean a certificate, substantially in
the form of attached Exhibit A;
"Business Day" means a day of the year on which banks are not required or
authorized to close in Cleveland, Ohio and, if the applicable Business Day
relates to any LIBOR Advance, on which dealings are carried on in the
London interbank eurodollar market;
"Company" means the undersigned and its successors and assigns; provided,
however, that Company may not assign or otherwise transfer any of its rights
under this note without the express written consent of Bank;
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"Cash Security" means any present or future (a) money in the
possession of Bank in which the Buckeye Division has or may have any right,
title, or interest, (b) Deposit Account maintained with Bank in which the
Buckeye Division has or may have any right, title or interest, or (c)
Instrument or General Intangible issued or assumed by Bank in which the
Buckeye Division has or may have any right, title, or interest;
"Default Interest Rate" means that floating rate per annum (calculated on
the basis of a year of 360 days for the actual number of days elapsed)
equal to the greater of three percent (3%) in excess of the Prime Rate,
which rate shall be immediately adjusted to correspond with each change in
the Prime Rate, or sixteen percent (16%);
"Deposit Account" shall be defined as set forth in Article 9 of the UCC;
"Event of Default" means any of the following events or conditions: (a)
any Obligation evidenced by this note or the Line Facility is not paid
when such Obligation becomes due and payable; (b) any Obligation not
evidenced by this note or the Line Facility is not paid when (or within
any applicable grace period after) such Obligation becomes due and
payable; (c) any material representation, warranty, certification,
financial statement, loan application, information, or record made,
furnished, or made available to Bank by or on behalf of Company in
connection with any Obligation is inaccurate or misleading in any material
respect when made, furnished, or made available; (d) any material
provision of any documentation evidencing, securing, or otherwise relating
to any Obligation is breached; (e) Company (1) is adjudicated by any court
in any jurisdiction to be insolvent, (2) ceases, is unable, or admits in
writing the inability to generally pay its debts as they become due, (3)
makes any general assignment for the benefit of its creditors, (4) applies
for or consents to the appointment of or the taking of possession by any
receiver, custodian, trustee, liquidator, or similar representative of or
for it or of or for any material part of its property, or (5) commences or
consents to the commencement of any case or proceeding with respect to it
or any material amount of its property pursuant to any Insolvency Law; (f)
any case or proceeding pursuant to any Insolvency Law is commenced against
or with respect to Company or any material amount of its property without
its consent which is not dismissed or stayed within 30 days after its
commencement; (g) any judgment, attachment, execution, or similar process
aggregating in excess of $1,000,000 is rendered, issued, or levied against
Company or any material amount of its property and is not fully satisfied,
released, vacated, or bonded within 30 days after its rendering, issue, or
levy; and (h) Company ceases to maintain separate books and records,
including financial records, for the Buckeye Division.
"General Intangible" shall be defined as set forth in Article 9 of the
UCC;
"Insolvency Law" means any reorganization, arrangement, composition, or
readjustment of debts, bankruptcy, insolvency, dissolution, liquidation,
receivership, trusteeship, or similar law of any state or the United
States;
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"Instrument" shall be defined as set forth in Article 9 of the UCC;
"Interest Rate" means (a) as to any Prime Advance, that floating rate per
annum (calculated on the basis of a year of 360 days for the actual number
of days elapsed) equal to the Prime Rate, which rate shall be immediately
adjusted to correspond with each change in the Prime Rate, and (b) as to
any LIBOR Advance, that fixed rate per annum (calculated on the basis of a
year of 360 days for the actual number of days elapsed) equal to two
percent (2%) in excess of the Reserve Adjusted LIBOR Rate;
"Inventory" means:
(a) any of the Buckeye Division inventory;
(b) all goods of the Buckeye Division that are raw materials;
(c) all goods of the Buckeye Division that are work in process;
(d) all goods of the Buckeye Division that are materials used or
consumed in the ordinary course of the business of the
Buckeye Division;
(e) all goods of the Buckeye Division that are, in the ordinary
course of Company's business, held for sale or lease or
furnished or to be furnished under contracts of service; and
(f) all substitutes and replacements for, and parts,
accessories, additions, attachments, or accessions to (a) to
(e) above;
"LIBOR Advance" means any Advance that bears interest determined with
reference to the Reserve Adjusted LIBOR Rate;
"LIBOR Reserve Requirements" means, for any LIBOR Advance, the maximum
reserves (whether basic, supplemental, marginal, emergency, or otherwise)
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" (as defined in Regulation D of the
Board of Governors of the Federal Reserve System) having a term equal to
the term of such Advance;
"Line Facility" means the line of credit held available by Bank for
Company evidenced by this note, together with all extensions, renewals,
amendments, restatements, and substitutions thereof or therefor, the
provisions of which are hereby incorporated by reference as if fully
rewritten herein;
"Maturity Date" means the earlier of (a) the date all Obligations
evidenced by this note become due and payable or (b) (1) with respect to
any Prime Advance, June 30, 1997, and (2) with respect to any LIBOR
Advance, the earlier of (i) June 30, 1997 or (ii) the date selected by
Company that ends one, two or three months after the date of the making of
such Advance;
"Obligation" means any present or future obligation, indebtedness, or
liability of Company for the Buckeye Division owed to Bank of whatever
kind and however evidenced, together with all extensions, renewals,
amendments, restatements and substitutions thereof or therefor (including,
without limitation, any evidenced by this note or the Line Facility);
5
<PAGE>
"Prime Advance" means any Advance that bears interest determined with
reference to the Prime Rate;
"Prime Rate" means that interest rate established from time to time by
Bank as Bank's Prime Rate, whether or not such rate is publicly announced.
The Prime Rate may not be the lowest interest rate charged by Bank for
commercial or other extensions of credit;
"Qualified Account Receivable" means any account receivable generated by
the Buckeye Division which, at all times until it is collected in full,
continuously meets the following requirements:
(a) is not subject to any claim for credit, allowance, or adjustment by
the account debtor or any set off or counter claim,
(b) arose in the ordinary course of the business of the Buckeye Division
from the performance (fully completed) of services or bona fide sale
of goods which have been shipped to the account debtor, and not more
than ninety (90) days have elapsed since the performance (fully
completed) of services or the sale of goods for or to the account
debtor,
(c) no notice of the financial impairment of the account debtor has been
received by Company,
(d) is not subject to an assignment, pledge, claim, mortgage, lien, or
security interest of any type except that granted to or in favor of
Bank,
(e) account debtor has not rejected, returned, revoked acceptance of, or
refused to accept any of the goods which are the subject of the
account receivable,
(f) Company has not received any instrument or chattel paper with
respect to or in payment of the account receivable, and
(g) Bank has not determined that the account receivable is
unsatisfactory in any respect;
"Qualified Inventory" means all Inventory allocated to the Buckeye
Division, except Inventory which is:
(a) located outside the United States;
(b) in the possession of a bailee or a third party;
(c) work in process;
(d) damaged, defective, or obsolete;
(e) held by Company or a third party on consignment; or
(f) Bank has determined that the Inventory is unsatisfactory in
any respect;
"Reserve Adjusted LIBOR Rate" means, with respect to any LIBOR Advance,
the rate per annum (rounded upwards to the next higher whole multiple of
1/16% if such rate is not such a multiple) equal to the quotient of (a)
the rate per annum (rounded upwards to the next higher whole multiple of
1/16% if such rate is not such a multiple) at which deposits in United
States dollars are offered at 11:00 a.m. (London, England time) (or as
soon thereafter as is reasonably practicable) by prime banks in the London
interbank eurodollar market 2 Business Days prior to the day such Advance
is made in an amount and with a maturity comparable to the amount and
maturity of such Advance, divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date 2 Business
Days prior to the day such Advance is made;
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<PAGE>
"UCC" means the Ohio Uniform Commercial Code, as amended.
Company, to the extent permitted by law, waives any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise, between Bank and Company arising out of, in connection with, related
to, or incidental to the relationship established between Company and Bank in
connection with this note or any other agreement, instrument or document
executed or delivered in connection therewith or the transactions related
thereto. This waiver shall not in any way affect, waive, limit, amend or
modify Bank's ability to pursue remedies pursuant to any confession of judgment
or cognovit provision contained in this note, or any other agreement,
instrument or document related thereto.
WARNING: BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
COMPANY: PUBCO CORPORATION
By:________________________________
Title:_____________________________
And:_______________________________
Title:_____________________________
ADDRESS: 3830 Kelly Avenue
Cleveland, Ohio 44114
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AMENDED AND RESTATED SETURITY AGREEMENT
ACCOUNTS RECEIVABLE AND INVENTORY
WHEREAS, Ribbons, Inc. executed and delivered to Ameritrust Company
National Association ("Ameritrust") a Promissory Grid Note dated June 2, 1986,
in the maximum principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000) ("Original Note");
WHEREAS, as security for the indebtedness evidenced by the Original
Note, Ribbons, Inc. executed a certain Security Agreement in favor of
Ameritrust dated May 28, 1985, as amended by an Amendment to Security
Agreement dated June 2, 1986 and an Amendment to Security Agreement dated
August 5, 1993 (as amended, the "Original Security Agreement");
WHEREAS, Buckeye Business Products, Inc. is successor by a series of
mergers and name changes to Ribbons, Inc.;
WHEREAS, PUBCO CORPORATION ("Company") is successor by merger to Buckeye
Business Products, Inc. and KEYBANK NATIONAL ASSOCIATION (formerly known as
Society National Bank) ("Bank") is successor by merger to Ameritrust; and
WHEREAS, Company executed an Amended and Restated Master Promissory Note
on even date herewith in the maximum principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000) to reflect the changes agreed to by the
Company and Bank.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the Company and Bank hereby mutually agree that
the Original Security Agreement shall be restated in its entirety as follows:
On this ________ day of ______________, 1996, Borrower and Bank, in
consideration of the premises, and the covenants and agreements contained
herein, hereby mutually agree as follows:
1. DEFINITIONS
"Account", "Chattel Paper", "Consumer Goods", "Deposit Account", "Document",
"Farm Products", "General Intangible", "Goods", "Instrument", and "Proceeds,
have the meanings as set forth in Ohio Revised Code Sections 1309.01-1309.50
inclusive, including any amendments thereof and any substitutions therefor,
which definitions are hereby incorporated by reference as though fully
rewritten herein.
"Account Debtor" means the Person who is obligated on an Account Receivable.
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"Account Receivable" means:
(a) any account receivable, Account, Chattel Paper, General
Intangible, Document, or Instrument owned, acquired, or received
by Borrower's Buckeye Business Products, Inc. division (the
"Buckeye Division),
(b) any other indebtedness owed to or receivable owned, acquired, or
received by the Buckeye Division of whatever kind and however
evidenced, and
(c) any right, title, and interest in the Buckeye Division's Goods
which were sold, leased, or furnished by the Buckeye Division and
gave rise to either (a) or (b) above, or both of them. This
includes, without limitation,
(1) any rights of stoppage in transit of a Person's sold,
leased, or furnished Goods,
(2) any rights to reclaim a Person's sold, leased, or furnished
Goods, and
(3) any rights a Person has in such sold, leased, or furnished
Goods that have been returned to or repossessed by that
Person.
"Accounts Receivable Collection Account" means a commercial Deposit Account
maintained with Bank for the Buckeye Division by Borrower, without liability
by Bank to pay interest thereon, from which account Bank shall have the
exclusive right to withdraw funds until all Obligations are paid, performed,
and observed in full.
"Bank" means KEYBANK NATIONAL ASSOCIATION, a national banking association
whose principal office is located at 127 Public Square, Cleveland, Ohio 44114.
"Borrower" means PUBCO CORPORATION, a corporation incorporated under the laws
of the State of Delaware.
"Borrower's Location" means the location of:
(a) The Buckeye Division's place of business, if there is only one
such place of business, or
(b) if there is more than one place of business, the place (1) from
which the Buckeye Division manages the main part of its business
operations, and (2) where Persons dealing with the Buckeye
Division would normally look for credit information.
"Cash Security" means all cash, Instruments, Deposit Accounts, and other cash
equivalent, whether matured or unmatured, whether collected or in the process
of collection, upon which the Buckeye Division presently has or may hereafter
have any claim, that are presently or may hereafter be existing or maintained
with, issued by, drawn upon, or in the possession of Bank.
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"Collateral" means:
(a) all of the Accounts Receivable generated by the Buckeye Division,
whether now owned or hereafter acquired or received,
(b) all of the Inventory allocated to the Buckeye Division, whether
now owned or hereafter acquired,
(c) all of the Cash Security allocated to the Buckeye Division, and
(d) all of the Proceeds, products, profits, and rents of the
Collateral listed in paragraphs (a), (b) and (c) above.
"Event of Default" means the occurrence of any of the events set forth in
Section 7 of the Security Agreement.
"Financial Impairment" means the distressed economic condition of a Person
manifested by any one or more of the following events:
(a) bankruptcy or insolvency of the Person;
(b) the Person ceases, is unable, or admits in writing its inability,
to make timely payment upon the Person's debts, obligations, or
liabilities as they mature or come due;
(c) general assignment by the Person for the benefit of creditors;
(d) Person entering into any composition or arrangement with the
creditors;
(e) proceedings are instituted by or against a Person for the
appointment of any receiver, trustee, or liquidator (1) of or for
the Person or (2) of or for all or any substantial part of the
Person's property;
(f) proceedings are authorized or instituted by or against a Person
under any bankruptcy, reorganization, readjustment of debt,
insolvency, dissolution, liquidation, or other similar law of any
jurisdiction.
"Inventory" means:
(a) any inventory allocated to the Buckeye Division,
(b) all Goods allocated to the Buckeye Division that are raw
materials,
(c) all Goods allocated to the Buckeye Division that are work in
process,
(d) all Goods allocated to the Buckeye Division that are materials
used or consumed in the ordinary course of a Person's business,
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<PAGE>
(e) all Goods allocated to the Buckeye Division that are, in the
ordinary course of a Person's business, held for sale or lease or
furnished or to be furnished under contracts of service, and
(f) all substitutes and replacements for, and parts, accessories,
additions, attachments, or accessions to (a) to (e) above.
"Obligations" means any of the following obligations, whether direct or
indirect, absolute or contingent, secured or unsecured, matured or unmatured,
originally contracted with Bank or another Person, and now or hereafter owing
to or acquired in any manner partially or totally by Bank or in which Bank may
have acquired a participation, contracted by the Buckeye Division alone or
jointly or severally with another Person:
(a) any and all indebtedness, obligations, liabilities, contracts,
indentures, agreements, warranties, covenants, guaranties,
representations, provisions, terms, and conditions of whatever
kind, now existing or hereafter arising, and however evidenced,
that are now or hereafter owed, incurred, or executed by the
Buckeye Division to, in favor of, or with Bank (including, without
limitation, those as are set forth or contained in, referred to,
evidenced by, or executed with reference to, the Security
Agreement, the Promissory Note, any letter of credit agreements,
advance agreements, indemnity agreements, guaranties, lines of
credit, mortgage deeds, security agreements, assignments, pledge
agreements, hypothecation agreements, Instruments, and acceptance
financing agreements), and including any partial or total
extension, restatement, renewal, amendment, and substitution
thereof or therefor;
(b) any and all claims of whatever kind of Bank against the Buckeye
Division, now existing or hereafter arising, including, without
limitation, any arising out of or in any way connected with
warranties made by the Buckeye Division to Bank in connection with
any Instrument deposited with or purchased by Bank;
(c) any and all of Bank's Related Expenses.
"Organization" and "Person" have the meanings as set forth in Ohio Revised
Code Section 1301.01, including any amendments thereof and any substitutions
therefor, which definitions are hereby incorporated by reference as though
fully rewritten herein.
"Promissory Note" means the Amended and Restated Promissory Note of even date
herewith in the aggregate amount of Two Million Five Hundred Thousand Dollars
($2,500,000), and including any partial or total amendment, renewal,
restatement, extension, or substitution of or for such note.
"Related Expenses" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorney's fees, legal expenses, judgments, suits, and
disbursements) incurred by, imposed upon, or asserted against, Bank in any
attempt by Bank:
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(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) the Security Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument executed or
given by the Buckeye Division to or in favor of Bank,
(b) to obtain payment, performance, and observance of any and all of
the Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of
Default, repossess and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or
asserted until paid at the rate payable upon the Promissory Note,
but in no event greater than the highest rate permitted by law.
"Security Agreement", means this agreement between Borrower and Bank, and
including any partial or total amendment, renewal, restatement, extension, or
substitution of or for such agreement.
2. SECURITY INTEREST IN COLLATERAL
In consideration of and as security for the full and complete payment,
performance, and observance of all Obligations, Borrower does hereby (a) grant
to Bank a security interest in the Collateral, and (b) assign to Bank all of
its right, title, and interest (including, without limitation, all rights to
payment) arising under or with respect to all of the Accounts Receivable,
whether now owned or hereafter acquired or received by Borrower, but not
including any duty, obligation, or liability of Borrower with respect thereto.
3. WARRANTIES
Borrower represents and warrants to Bank (which representations and warranties
shall survive the execution and delivery of the Promissory Note, and the
extension of credit) that:
(a) The execution, delivery, and performance hereof are within
Borrower's corporate powers, have been duly authorized, and are
not in contravention of law or the terms of Borrower's charter,
by-laws, or regulations, or of any indenture, agreement, or
undertaking to which Borrower is party or by which it is or may be
bound;
(b) Except for any security interest granted to or in favor of Bank,
Borrower is, and as to Collateral to be acquired after the date
hereof will be, the owner of the Collateral free from any claim,
lien, encumbrance, or security interest of any type, and Borrower
agrees that it will defend, at its sole expense, the Collateral
against all claims and demands of all Persons at any time claiming
the same or any interest therein;
(c) Subject to any limitation stated herein or in connection herewith,
all information furnished to Bank concerning Borrower or the
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<PAGE>
Collateral, is or will be at the time such information is
furnished, accurate and correct in all material respects and
complete insofar as is necessary to give Bank true and accurate
knowledge of the subject matter;
(d) Borrower is the lawful owner of and has full and unqualified right
to transfer a security interest in all of the Collateral to Bank.
Such Collateral is not and will not, so long as Borrower has any
obligations to Bank, be subject to any financing statement,
encumbrance, claim, lien, or security interest of any type except
any granted to or in favor of Bank;
(e) Borrower's Location is 3830 Kelley Avenue, Cleveland, Ohio 44114.
4. COVENANTS
Borrower undertakes, covenants, and agrees that, until the full and complete
payment, performance, and observance of all Obligations, Borrower:
(a) shall promptly provide Bank with prior written notification of:
(1) any change in any location where the Buckeye Division's
Inventory is maintained, and any new locations where the
Buckeye Division's Inventory is to be maintained,
(2) the location of any new places of business and the changing
or closing of any of its existing places of business,
(3) any change in Borrower's name, and
(4) any change in the Buckeye Division's Location;
(b) shall at all reasonable times allow Bank by or through any of its
officers, agents, employees, attorneys, or accountants to:
(1) examine, inspect, and make extracts from Borrower's books
and other records,
(2) examine and inspect the Inventory wherever located, and
(3) arrange for verification of the Accounts Receivable, under
reasonable procedures, directly with Account Debtors or by
other methods;
(c) shall promptly furnish to Bank upon request:
(1) additional information and statements with respect to the
Collateral,
(2) Borrower's Instruments, Chattel Paper, Documents, and any
other writings relating to or evidencing any of the Accounts
Receivable (including, without limitation, computer
printouts or typewritten reports listing the current mailing
address of all present Account Debtors), and
(3) any other writings and information Bank may reasonably
request;
(d) shall upon request of Bank promptly take such action and promptly
make, execute, and deliver all such additional and further items,
deeds, assurances, and instruments as Bank may require, including,
without limitation, financing statements, so as to completely vest
in and ensure to Bank its rights hereunder and in and to the
Collateral;
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(e) if any of the Accounts Receivable arise out of contracts with or
orders from the United States or any of its departments, agencies,
or instrumentalities, shall immediately notify Bank in writing of
same and shall execute any writing or take any action required by
Bank with reference to the Federal Assignment of Claims Act;
(f) hereby authorizes Bank or Bank's designated agent (but without
obligation by Bank to do so) to incur Related Expenses (whether
prior to, upon, or subsequent to any Event of Default), and
Borrower shall promptly repay, reimburse, and indemnify Bank for
any and all Related Expenses;
(g) shall not, without the prior written consent of Bank grant any
consensual or permit to exist any material non-consensual
mortgage, encumbrance, security interest, or other lien upon any
Collateral except any granted to or in favor of Bank;
(h) shall not use any Collateral in violation of any applicable
statute, ordinance, or regulation.
5. COLLECTIONS AND RECEIPT OF PROCEEDS
(a) Upon the occurrence of any Event of Default, after written
notification thereof to Borrower, Bank, or Bank's designated
agent, shall have the right and power (as Borrower's hereby
constituted and appointed attorney-in-fact), which, being coupled
with an interest, shall remain irrevocable until all Obligations
are fully and completely paid, performed, and observed, at any
time to:
(1) notify the Account Debtors on any or all of the Accounts
Receivable of the Bank's security interest in and assignment
of those Accounts Receivable upon which the respective
Account Debtors are liable, and to request from such Account
Debtors, in Bank's name or in the Buckeye Division's or
Borrower's name, information concerning the Accounts
Receivable and amounts owing thereon,
(2) notify purchasers of any or all of the Inventory of Bank's
security interest therein, and to request from such Persons,
at any time, in Bank's name or in the Buckeye Division's or
Borrower's name, information concerning the Inventory and
the amounts owing thereon by such purchasers,
(3) notify and require the Account Debtors on any or all of the
Accounts Receivable to make payment upon such Accounts
Receivable directly to Bank,
(4) notify and require purchasers of the Inventory to make
payment of their indebtedness directly to Bank,
(5) receive, retain, acquire, take, endorse, assign, deliver,
accept, and deposit, in Bank's name, the Buckeye Division's
name or the Borrower's name, any and all of the Buckeye
Division's cash, Instruments, Chattel Paper, Documents,
Proceeds of Accounts Receivable, Proceeds of Inventory,
collections of Accounts Receivable, and any other writings
relating to any of the Collateral theretofore collected,
received or retained by Borrower pursuant to Subsection 5(b)
below or thereafter collected, received, or retained by
Borrower,
14
<PAGE>
(6) exercise any and all of the rights granted Bank in
Subsections 5(c) and 5(d) below, and
(7) take such other action with respect to any or all of the
Collateral, in such manner and at such times, as Bank may
deem advisable, including, without limitation, the
following: collection, legal proceedings, compromises,
settlements, adjustments, extensions, postponements,
exchanges, releases, and sales.
(b) Except as otherwise provided in Subsections 5(a), 5(c), or 5(d),
Borrower is authorized (1) to collect and enforce, by all lawful
means, all of the Accounts Receivable, and (2) to receive and
retain, by all lawful means, any and all Proceeds of all of the
Accounts Receivable and Inventory. Borrower shall hold, as trustee
upon an express trust for Bank as beneficiary thereof, all such
lawful collections of Accounts Receivable and all such lawful
Proceeds of Accounts Receivable and Inventory received by Borrower.
Any costs, liabilities, or expenses incurred by Borrower in the
collection or enforcement of such Accounts Receivable, and in the
receipt of Proceeds of Accounts Receivable and Inventory shall be
borne solely by Borrower. Borrower as trustee shall not commingle
such collections of Accounts Receivable and such Proceeds of
Accounts Receivable and Inventory with any other property not held
in trust for Bank; any property held or commingled with such
collections of Accounts Receivable and such Proceeds of Accounts
Receivable and Inventory is hereby conclusively established between
Borrower and Bank to be collections of Accounts Receivable and
Proceeds of Accounts Receivable and Inventory.
(c) With respect to the Buckeye Division's Instruments, Documents,
and Chattel Paper:
(1) Upon Bank's written request, Borrower shall immediately
deliver or cause to be delivered to Bank all of the Buckeye
Division's Instruments, Chattel Paper, and Documents,
appropriately endorsed either, at Bank's option, (i) to
Bank's order, without limitation or qualification, or (ii)
for deposit in the Accounts Receivable collection Account.
Bank, or Bank's designated agent, is hereby constituted and
appointed Borrower's attorney-in-fact with authority and
power to so endorse any and all Instruments, Documents, and
Chattel Paper upon Borrower's failure to do so. Such
authority and power, being coupled with an interest, shall
be (i) irrevocable until all Obligations are paid,
performed, and observed in full, (ii) exercisable by Bank at
any time and without any request upon Borrower by Bank to so
endorse, and (iii) exercisable in Bank's name or Borrower's
name;
(2) Borrower hereby waives presentment, demand, notice of
dishonor, protest, notice of protest, and any and all other
similar notices with respect thereto, regardless of the form
of any endorsement thereof;
(3) Bank shall not be bound or obligated to take any action to
preserve any rights therein against any prior parties
thereto.
15
<PAGE>
(d) Upon Bank's written request, the lawful collection and enforcement
of all of the Accounts Receivable and the lawful receipt and
retention by Borrower of all Proceeds of all of the Accounts
Receivable and Inventory shall be as Bank's agent. All such
collections and Proceeds shall be remitted daily by Borrower to
Bank in the form in which they are received by Borrower, either by
mailing or by delivering such collections and Proceeds to Bank,
appropriately endorsed for deposit in the Accounts Receivable
Collections Account. Bank may, in its sole discretion, at any
time and from time to time, apply all or any portion of the
collected balance in the Accounts Receivable Collections Account
(allowing one (1) day for collection and clearance of remittances)
as a credit against the Obligations. If any remittance shall be
dishonored, or if, upon final payment, any claim with respect
thereto shall be made against Bank on its warranties of
collection, Bank may charge the amount of such item against the
Accounts Receivable Collections Account or any other Deposit
Account maintained by Borrower with Bank, and, in any event,
retain same and Borrower's interest therein as additional security
for the Obligations. Bank may, in its sole discretion, at any
time and from time to time, release funds from the Accounts
Receivable Collections Account to Borrower for use in the Buckeye
Divsion's business. The balance in the Accounts Receivable
Collections Account may be withdrawn by Borrower upon termination
of the Security Agreement in accordance with Subsection 9(d). At
Bank's written request, Borrower will cause all remittances
representing all collections and all Proceeds of the Accounts
Receivable and Inventory to be mailed to a lock box in Cleveland,
Ohio, to which Bank shall have access for the processing of such
items in accordance with the provisions, terms, and conditions of
Bank's customary lock box agreement.
6. INSURANCE AND USE OF INVENTORY
(a) Until any Event of Default:
(1) Borrower may retain possession of and use the Inventory in
any lawful manner not inconsistent with any applicable
terms, conditions, and provisions of:
(i) the Security Agreement, and
(ii) any insurance policy thereon.
(2) Borrower may sell or lease the Inventory in the ordinary
course of business; provided, however, that a sale or lease
in the ordinary course of business does not include a
transfer in partial or total satisfaction of a debt, except
for transfers in satisfaction of partial or total purchase
money prepayments by a buyer in the ordinary course of
Borrower's business. Until any Event of Default, Borrower
may also use and consume any raw materials or supplies, the
use and consumption of which are necessary in order to carry
on the Buckeye Division's business.
(b) Borrower shall obtain, and at all times maintain, insurance upon
the Inventory in such form, written by such companies, in such
amounts, for such period, and against such risks as may be
16
<PAGE>
acceptable to Bank, with provisions satisfactory to Bank for
payment of all losses thereunder to Bank and Borrower as their
interests may appear (loss payable endorsement in favor of Bank),
and, if required by Bank, Borrower will deposit the policies with
Bank. Any such policies of insurance shall provide for no less
than ten (10) days prior written cancellation notice to Bank. Any
sums received by Bank in payment of insurance losses, returns, or
unearned premiums under the policies may, at the option of Bank, be
applied upon any Obligation whether or not the same is then due and
payable, or may be delivered to Borrower for the purpose of
replacing, repairing, or restoring its Inventory. Borrower hereby
assigns to Bank any return or unearned premium which may be due
upon cancellation of any such policies for any reason and directs
the insurers to pay Bank any amount so due. Bank, or Bank's
designated agent, is hereby constituted and appointed Borrower's
attorney-in-fact (either in the name of the Buckeye Division,
Borrower or in the name of the Bank) to make adjustments of all
insurance losses, sign all applications, receipts, releases, and
other papers necessary for the collection of any such loss, and any
return of unearned premium, execute proof of loss, make
settlements, and endorse and collect all Instruments payable to the
Buckeye Division, Borrower or issued in connection therewith.
Notwithstanding any action by Bank hereunder, any and all risk of
loss or damage to the Inventory to the extent of any and all
deficiencies in the effective insurance coverage thereof is hereby
expressly assumed by Borrower.
7. EVENTS OF DEFAULT
Upon the occurrence of any one or more of the following Events of Default, any
and all Obligations shall, at the option of Bank and notwithstanding any
period of time permitted or allowed by any writing evidencing an Obligation,
become immediately due and payable without notice, demand, protest, or
presentment, all of which are hereby expressly waived by Borrower:
(a) Failure of Borrower to promptly pay, perform, or observe when due,
whether upon demand, at maturity, by acceleration, or otherwise,
any of the Obligations;
(b) Failure of Borrower to promptly pay, perform, satisfy, or observe
when due, whether upon demand, at maturity, by acceleration, or
otherwise, or any event which either results in or would result in
(but for waiver by the holder(s) or trustee(s) thereof) the
acceleration of the maturity of, any or all of the indebtedness,
obligations, liabilities, contracts, indentures, and agreements
(including, without limitation, any and all warranties, covenants,
guaranties, provisions, terms, and conditions set forth or contained
therein) of whatever kind and however evidenced, owed, incurred, or
executed by Borrower, to, in favor of, or with any and all other
Persons, and including any partial or total extension, renewal,
amendment, restatement, and substitution thereof or therefor;
17
<PAGE>
(c) Any material warranty, representation, or statement made or
furnished to Bank in connection with the Security Agreement,
Promissory Note, or any other writing evidencing or given as
security for any of the Obligations by or on behalf of the
Borrower proves to have been false in any material respect when
made, furnished, or at any time thereafter;
(d) Bank shall deem itself insecure in good faith believing that the
prospect of payment, performance, or observance of any of the
Obligations herein secured is impaired;
(e) Loss, damage, theft, destruction, levy, seizure, or attachment to,
of, or upon any material amount of the Collateral, including any
attempt to accomplish the foregoing;
(f) Sale, lease, transfer, assignment, encumbrance, or other
disposition of any material amount of the Collateral other than in
the ordinary course of business, without Bank's prior written
authorization therefor, including any attempt to accomplish the
foregoing;
(g) Financial Impairment of Borrower;
(h) Financial Impairment of any endorser, guarantor, or surety upon or
for any of the Obligations.
8. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of any such Event of Default and at all times thereafter,
Bank shall have the rights and remedies of a secured party under the Ohio
Uniform Commercial Code in addition to the rights and remedies provided
elsewhere within the Security Agreement or in any other writing executed by
Borrower. Bank may require Borrower to assemble the Collateral and make it
available to Bank at a reasonably convenient place to be designated by Bank.
Unless the Collateral is perishable, threatens to decline speedily in value,
or is of a type customarily sold on a recognized market, Bank will give
Borrower reasonable notice of the time and place of any public sale of the
Collateral or of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall
be met if such notice is mailed (deposited for delivery, postage prepaid, by
U.S. mail) to either, at Bank's option, (1) Borrower's Location set forth in
Subsection 3(e) of the Security Agreement (as modified by any change therein
which Borrower has supplied in writing to Bank) or (2) Borrower's address at
which Bank customarily communicates with Borrower, at least ten (10) days
before the time of the public sale or the time after which any private sale or
other intended disposition thereof is to be made. At any such public or
private sale, Bank may purchase the Collateral. After deduction for Bank's
Related Expenses, the residue of any such sale shall be applied in
satisfaction of the obligations in such order of preference as Bank may
determine. Any excess, to the extent permitted by law, shall be paid to
Borrower, and Borrower shall remain liable for any deficiency.
18
<PAGE>
9. GENERAL
(a) If any provision, term, or portion, of the Security Agreement,
(including, without limitation, (1) any indebtedness, obligation,
liability, contract, agreement, indenture, warranty, covenant,
guaranty, representation, or condition of the Security Agreement
made, assumed, or entered into, (2) any act or action taken under
the Security Agreement, or (3) any application of the Security
Agreement) is for any reason held to be illegal or invalid, such
illegality or invalidity shall not affect any other such
provision, term, or portion of the Security Agreement, each of
which shall be construed and enforced as if such illegal or
invalid provision, term, or portion were not contained in the
Security Agreement. Any illegality or invalidity of any
application of the Security Agreement shall not affect any legal
and valid application of the Security Agreement, and each
provision, term, and portion of the Security Agreement shall be
deemed to be effective, operative, made, entered into, or taken in
the manner and to the full extent permitted by law.
(b) Bank shall not be deemed to have waived any of Bank's rights
hereunder or under any other writing executed by Borrower unless
such waiver be in writing and signed by Bank. No delay or
omission on part of Bank in exercising any right shall operate as
a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right
or remedy on any future occasion. All Bank's rights and remedies,
whether evidenced hereby or by any other writing shall be
cumulative and may be exercised singularly or concurrently. Any
written demands, written requests, or written notices to Borrower
that Bank may elect to give shall be effective when deposited for
delivery, postage prepaid, by U.S. mail, and addressed either, at
Bank's option, to (1) Borrower's Location set forth in Subsection
3(e) of the Security Agreement (as modified by any change therein
which Borrower has supplied in writing to Bank) or (2) Borrower's
address at which Bank customarily communicates with Borrower. If
at any time or times, by assignment or otherwise, Bank transfers
any of the Obligations or any part of the Collateral to another
person, such transfer shall carry with it Bank's powers and rights
under this Agreement with respect to the obligation or Collateral
so transferred and the transferee shall have said powers and
rights, whether or not they are specifically referred to in the
transfer. To the extent that Bank retains any other of the
Obligations or any part of the Collateral, Bank will continue to
have the rights and powers herein set forth with respect thereto.
19
<PAGE>
(c) The laws of the State of Ohio, without regard to principles of
conflict of laws, shall govern the construction of the Security
Agreement (including, without limitation, any terms not specifically
defined in the Security Agreement that may be so specifically defined
pursuant to Ohio Revised Code Sections 1309.01-1309.50 inclusive, and
including any amendments thereof or any substitution therefor) and
the rights and duties of the parties hereto. The Security Agreement
contains the entire agreement between the parties hereto and no oral
agreement shall be binding. Borrower agrees that Bank may make a
photocopy of the Security Agreement in the ordinary course of
business and such photocopy may be used in place of the original of
the Security Agreement. A carbon, photographic or other reproduction
of the Security Agreement may be used as a financing statement. The
Security Agreement shall be binding upon and inure to the benefit of
Borrower and Bank and their respective successors and assigns. The
rights and powers herein given to the Bank are in addition to those
otherwise created or existing in the same Collateral by virtue of
other agreements or writings.
(d) The term of the Security Agreement shall commence with the date
hereof and shall continue until terminated by either Borrower or
Bank. Borrower may terminate the Security Agreement by giving
Bank not less than thirty (30) days prior written notice thereof
and by paying, performing, and observing all of the Obligations in
full on or before such termination date.
(e) In the Security Agreement, unless the context otherwise requires,
words in the singular number include the plural and words in the
plural number include the singular.
(f) Borrower hereby releases Bank from and agrees to indemnify and
hold harmless Bank, and its officers, agents, and employees for
any and all claims of Borrower for damage or loss caused by any
act or acts hereunder or in furtherance hereof whether by omission
or commission, and whether based upon any error of judgment or
mistake of law or fact (except willful misconduct) on the part of
Bank, or its officers, agents, and employees.
(g) Bank has the right, in addition to all other rights and remedies
available to it, to set off at any time the unpaid balance of the
Promissory Note and any other obligations against any indebtedness
owing the Buckeye Division by Bank, including, without limitation,
all Cash Security.
(h) Bank is hereby authorized to fill in all blank spaces herein, to
correct patent errors herein, to complete or correct the
description of the Collateral, and to date the Security Agreement.
(i) Except as expressly authorized in the Security Agreement, Bank's
right to Proceeds specifically set forth herein or indicated in any
financing statement shall never constitute an express or implied
authorization on the part of Bank to Borrower's sale, exchange,
collection, or other disposition of any or all of the Collateral.
20
<PAGE>
BORROWER, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN BANK AND BORROWER ARISING OUT OF, IN CONNECTION WITH,
RELATING TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THE SECURITY AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE
TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE,
LIMIT, AMEND OR MODIFY BANK'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY
CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED AND DELIVERED BY BORROWER TO BANK."
IN WITNESS WHEREOF, the parties hereto have caused the security
agreement to be executed on the day and year first above written.
BORROWER: PUBCO CORPORATION
By:_________________________________
Title:_______________________________
And:_______________________________
Title:_______________________________
BANK: KEYBANK NATIONAL ASSOCIATION
By:_______________________________
Title:______________________________
21
<PAGE>
EXHIBIT 21
PUBCO CORPORATION
Subsidiaries of the Registrant
The Company directly or indirectly owns 100% of the capital stock of
the following significant subsidiaries:
Subsidiaries State of Incorporation
Buckeye Business Products, Inc., Division
Aspen Imaging International, Inc. Delaware
The Company owns an indirect 85% plus interest in Allied Construction
Products, Inc., a Delaware corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 12/31/96 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED 12/31/96 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,539
<SECURITIES> 24,877
<RECEIVABLES> 4,679
<ALLOWANCES> 269
<INVENTORY> 6,681
<CURRENT-ASSETS> 39,327
<PP&E> 16,227
<DEPRECIATION> 10,298
<TOTAL-ASSETS> 63,359
<CURRENT-LIABILITIES> 14,130
<BONDS> 0
0
1
<COMMON> 38
<OTHER-SE> 31,296
<TOTAL-LIABILITY-AND-EQUITY> 63,359
<SALES> 51,069
<TOTAL-REVENUES> 51,069
<CGS> 36,747
<TOTAL-COSTS> 36,747
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,828
<INCOME-TAX> (534)
<INCOME-CONTINUING> 6,362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,291
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.50
</TABLE>
