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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
--------------------------------
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 1-9603
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STEVENS INTERNATIONAL,INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2159407
------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5500 Airport Freeway, Fort Worth, Texas 76117
---------------------------------------------
(Address of principal executive offices) (Zip Code)
817/831-3911
------------
(Registrant's telephone number, including area code)
STEVENS GRAPHICS CORPORATION
----------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 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 XX No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Outstanding at August 3, 1995*
-------------------------------- --------------------------------
Series A Stock, $0.10 Par Value 7,170,518
Series B Stock, $0.10 Par Value 2,234,684
*Certificates of Common Stock representing 652 shares have not been tendered to
the Transfer Agent for certificates representing Series A and Series B Common
Stock.
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TABLE OF CONTENTS
<TABLE>
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PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
December 31, 1994 and June 30, 1995
(unaudited)
Consolidated Condensed Statements of Income 4
Three and Six months ended June 30, 1995
and 1994 (unaudited)
Consolidated Condensed Statements of 5
Stockholders' Equity December 31, 1994
and Six months ended June 30, 1995 (unaudited)
Consolidated Condensed Statements of Cash Flows 6
Six months ended June 30, 1995 and 1994
(unaudited)
Notes to Consolidated Condensed Financial 7
Statements (unaudited)
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 396 $ 230
Temporary investments 1,077 -
Trade accounts receivable, less
allowance for losses of $450 and
$502 in 1994 and 1995, respectively 13,050 21,661
Costs and estimated earnings in
excess of billings on long-term
contracts 12,478 11,273
Inventory (Note 3) 20,198 22,791
Other current assets 498 916
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Total current assets 47,697 56,871
Property, plant and equipment, net (Note 5) 29,734 31,353
Other assets, net 16,610 16,138
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$94,041 $104,362
LIABILITIES AND STOCKHOLDERS' EQUITY ======= ========
Current liabilities:
Trade accounts payable $11,372 $ 8,877
Billings in excess of costs and
estimated earnings on long-term
contracts 3,390 1,164
Other current liabilities 8,942 9,926
Income taxes payable 279 887
Customer deposits 5,929 4,021
Advances from affiliate (Note 4) 932 -
Current portion of long-term debt (Note 5) 161 3,714
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Total current liabilities 31,005 28,589
Long-term debt (Note 5) 15,308 24,507
Deferred income taxes 5,428 5,428
Deferred pension 1,335 1,335
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock, $.10 par value,
2,000,000 shares authorized, none
issued and outstanding - -
Series A Common Stock, $.10 par
value, 20,000,000 shares authorized,
7,130,000 and 7,171,000 shares
issued and outstanding at
December 31, 1994 and June 30, 1995,
respectively 713 717
Series B Common Stock, $.10 par value,
6,000,000 shares authorized, 2,236,000
shares issued and outstanding at
December 31, 1994 and June 30, 1995,
respectively 224 224
Additional paid-in capital 38,737 38,932
Foreign currency translation adjustment 68 407
Excess pension liability adjustment (438) (438)
Retained earnings 1,661 4,661
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Total stockholders' equity 40,965 44,503
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$94,041 $104,362
======= ========
</TABLE>
See notes to consolidated condensed financial statements.
3
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
1994 1995 1994 1995
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $21,281 $37,474 $42,211 $70,516
Cost of sales 16,067 28,907 31,436 53,800
------- ------- ------- -------
Gross Profit 5,214 8,567 10,775 16,716
Selling, general and
administrative expenses 3,911 4,919 8,110 9,774
------- ------- ------- -------
Operating income 1,303 3,648 2,665 6,942
Other income (expense):
Interest income 167 78 359 123
Interest expense (1,000) (803) (2,252) (1,631)
Other, net (166) (152) (337) (30)
------- ------- ------- -------
(999) (877) (2,230) (1,538)
------- ------- ------- -------
Income before income taxes 304 2,771 435 5,404
Income tax (expense) (141) (1,219) (200) (2,404)
------- ------- ------- -------
Net Income $ 163 $ 1,552 $ 235 $ 3,000
======= ======= ======= =======
Net income per common share
(Note 8) $0.02 $0.16 $0.03 $0.31
======= ======= ======= =======
Weighted average number of
shares of common and
common stock equivalents
outstanding during the
periods (Note 8) 9,114 9,564 9,134 9,584
======= ======= ======= =======
</TABLE>
See notes to consolidated condensed financial statements.
4
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Series A Stock Shares Amount
<S> <C> <C>
Balance, December 31, 1994 7,130 $ 713
Exercise of stock options 41 4
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Balance, June 30, 1995 7,171 $ 717
======= =======
Series B Stock
Balance, December 31, 1994 2,236 $ 224
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Balance, June 30, 1995 2,236 $ 224
======= =======
Additional Paid-In Capital $38,737
Balance, December 31, 1994 195
Exercise of stock options -------
$38,932
Balance, June 30, 1995 =======
Foreign Currency Adjustment $ 68
Balance, December 31, 1994 339
Translation adjustments -------
$ 407
Balance, June 30, 1995 =======
Pension Liability Adjustment $ (438)
Balance, December 31, 1994 -------
$ (438)
Balance, June 30, 1995 =======
Retained Earnings $ 1,661
Balance, December 31, 1994
Net income for six months ended 3,000
June 30, 1995 -------
$ 4,661
Balance, June 30, 1995 =======
$44,503
Stockholders' Equity at June 30, 1995 =======
</TABLE>
See notes to consolidated condensed financial statements.
5
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
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1994 1995
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<S> <C> <C>
Cash provided by operations:
Net income $ 235 $ 3,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,347 2,652
Deferred taxes 83 -
Other 168 339
Changes in operating assets and liabilities:
Trade accounts receivable 6,533 (8,612)
Contract costs in excess of billings 6,844 (1,021)
Inventory 4,180 (2,593)
Other assets 133 (647)
Trade accounts payable (6,788) (2,495)
Other liabilities (803) (1,291)
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Total cash provided by (used in) operating activities 12,932 (10,668)
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Cash provided by (used in) investing activities:
Additions to property, plant and equipment (699) (3,078)
Proceeds from sale of assets 4,631 55
Deposits and other (370) (179)
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Total cash provided by (used in) investing activities 3,562 (3,202)
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Cash provided by (used in) financing activities:
Net proceeds from long-term debt (18,957) 12,428
Exercise of stock options 45 199
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Total cash from financing activities (18,912) 12,627
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Increase (decrease) in cash and temporary
investments (2,418) (1,243)
Cash and temporary investments at beginning
of period 3,768 1,473
-------- --------
Cash and temporary investments at
end of period $ 1,350 $ 230
======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 2,273 $ 1,138
Income taxes 844 1,846
</TABLE>
See notes to consolidated condensed financial statements.
6
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Following approval by the Company's stockholders on May 18, 1995, the name
of the Company was changed from Stevens Graphics Corporation to Stevens
International, Inc. The consolidated condensed balance sheet as of June
30, 1995, the consolidated condensed statement of stockholders' equity for
the period ended June 30, 1995, the consolidated condensed statements of
operations for the three and six months ended June 30, 1995 and 1994, and
the consolidated condensed statements of cash flows for the six month
periods then ended have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position as of June
30, 1995 and the results of operations for the three and six months ended
June 30, 1995 and 1994 and the cash flows for the six months ended June 30,
1995 and 1994 have been made. The December 31, 1994 consolidated condensed
balance sheet is derived from the audited consolidated balance sheet as of
that date. Complete financial statements for December 31, 1994 and related
notes thereto are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 (the "1994 Form 10-K").
The above financial statements have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all information
included in the 1994 Form 10-K. The results of operations for the three
and six months ended June 30, 1995 and 1994 are not necessarily indicative
of the results to be expected for the full year.
2. The Company designs, manufactures, markets and services printing and
packaging press systems and related equipment for the global packaging,
banknotes and security documents, and specialty/commercial segments of the
printing industry. The Company manufactures equipment capable of
converting and printing, among other items, bottle and can beverage
container carriers, liquid container cartons, frozen and dry food cartons,
airline tickets, computer forms, direct mailings, banknotes, stamps and
lottery tickets. The Company's line of printing presses includes offset,
flexographic, rotogravure and intaglio presses. Complete press systems are
capable of multiple color and multiple size printing and perform such
related functions as numbering, punching, perforating, slitting, cutting,
creasing, folding and stacking. The presses can be custom engineered for
non-standard form size and special auxiliary functions.
7
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3. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995
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<S> <C> <C>
(Amounts in thousands)
Finished product $ 5,332 $ 5,388
Work in process 6,670 10,882
Raw materials 8,196 6,521
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$20,198 $22,791
======= =======
</TABLE>
4. In January and February 1994, Stevens Industries, Inc., one of the
principal shareholders of the Company, advanced an aggregate of $900,000 to
Stevens Security Systems, S.A. in exchange for a Stevens Security Systems,
S.A. 6% note due February 1995. The advance was repaid in February 1995.
5. For a description of the amendment and restatement of the bank credit
facility in May 1995, see "Liquidity and Capital Resources". Substantially
all assets of the Company continue to be pledged as collateral on the
Company's credit facilities. The long term debt is recorded net of
unamortized debt issue costs of $1.4 million at June 30, 1995.
6. The Company is a party to a number of legal actions arising in the ordinary
course of its business. In management's opinion, the Company has adequate
legal defenses and/or insurance coverage in respect to each of these
actions and does not believe that they will materially affect the Company's
operations, liquidity, or financial position. See "Legal Proceedings"
herein and in the 1994 Form 10-K.
7. The provision for income tax expense for the three and six months ended
June 30, 1995 was $1,219,000 and $2,404,000 respectively, which was
principally related to currently payable taxes.
8. Earnings per common share for 1995 and 1994 are based upon the weighted
average number of shares of common and common stock equivalents (stock
options, when dilutive) outstanding during the periods. Since the Series A
and Series B stock have identical dividend and participation rights in the
Company's earnings, they have been considered to be comparable in the
calculation.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Sales. The Company's sales for the six months ended June 30, 1995 increased by
------
$28.3 million compared to sales in the same period in 1994 due primarily to
sales increases in the packaging systems division ($23.7 million), the banknote
printing equipment division ($2.1 million), and specialty web products division
($2.5 million).
Gross Profit. The Company's gross profit for the six months ended June 30, 1995
-------------
increased by $5.9 million compared to gross profit in the same period in 1994
due primarily to the increased sales volume for packaging systems and specialty
web products. Gross profit margin for 1995 decreased to 23.7% of sales as
compared to 25.5% of sales for 1994. This decrease in gross profit margin in
1995 was due primarily to changes in product mix, primarily increased sales of
the new System 2000 packaging system, higher costs associated with the
installation component of sales, and lower average margins on its new line of
rotogravure equipment.
Selling, general and administrative expenses. The Company's selling, general,
---------------------------------------------
and administrative expenses increased by $1.7 million for the six months ended
June 30, 1995 compared to the same period in 1994 due to increases in
advertising, personnel and related costs at operating divisions, and certain
corporate administrative and legal costs. Selling, general and administrative
expenses for the six months ended June 30, 1995 were 13.9% of sales compared to
19.2% for the same period in 1994 due to the $28.3 million increase in sales
without corresponding expense increases.
Other Income (Expense). The Company's interest expense decreased by $0.6
-----------------------
million for the six months ended June 30, 1995 compared to the same period in
1994 due to reduced borrowing by the Company as a result of debt reductions in
1994 and the refinancing of existing debt, accomplished in part through the sale
of stock in September 1994. Interest income decreased by $0.2 million for the
six months ended June 30, 1995 as compared to interest income in the same period
in 1994 due to the use of cash to minimize the amount borrowed under the
Company's credit facilities.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1995 AND 1994
Sales. The Company's sales for the three months ended June 30, 1995 increased
------
by $16.2 million compared to sales in the same period in 1994 due primarily to
sales increases in the packaging systems division ($13.3 million), the banknote
printing equipment division ($0.8 million), and specialty web products division
($2.1 million).
9
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Gross Profit. The Company's gross profit for the three months ended June 30,
-------------
1995 increased by $3.4 million compared to gross profit in the same period in
1994 due primarily to the increased sales volume for packaging systems and
specialty web products. Gross profit margin for 1995 decreased to 22.9% of
sales as compared to 24.5% of sales for 1994. This decrease in gross profit
margin in 1995 was due primarily to changes in product mix, primarily increased
sales of the new System 2000 packaging system, and lower average margins on its
new line of rotogravure equipment.
Selling, general and administrative expenses. The Company's selling, general
---------------------------------------------
and administrative expenses increased by $1.0 million for the three months ended
June 30, 1995 compared to the same period in 1994 due to increases in
advertising, personnel and related costs at operating divisions, and certain
corporate administrative and legal costs. Selling, general and administrative
expenses for the three months ended June 30, 1995 were 13.1% of sales compared
to 18.4% for the same period in 1994 due to the $16.2 million increase in sales.
Other Income (Expense). The Company's interest expense decreased by $0.2
----------------------
million for the three months ended June 30, 1995 compared to the same period in
1994 due to reduced borrowing by the Company as a result of debt reductions in
1994 and the refinancing of existing debt, accomplished in part through the sale
of stock in September 1994. Interest income decreased by $0.1 million for the
three months ended June 30, 1995 as compared to interest income in the same
period in 1994 due to the use of cash to minimize the amount borrowed under the
Company's credit facilities.
LIQUIDITY AND CAPITAL RESOURCES
In May of 1995, the Company completed an amendment and restatement of its bank
credit facility pursuant to a credit agreement with Bank of America. Under the
terms of the credit agreement, the company's existing $20 million line of credit
was increased to a $22 million revolving facility provided by Bank of America
(the "Bank of America facility").
The Bank of America facility has a maturity of April 30, 1998; continues to be
secured by a first lien on substantially all the Company's assets, and is
available for both direct borrowings and letters of credit with no sublimit for
letter of credit usage. The interest rate on direct borrowings under the Bank
of America facility is prime, or at the Company's option, an offshore rate
(generally equivalent to LIBOR) plus 1.50%.
Loans under the Bank of America facility are subject to various restrictive
covenants related to financial ratios, limitations on capital expenditures,
dividends, additional indebtedness, and financial reporting. The Bank of
America facility does allow the Company to use up to $5 million of the line of
credit for acquisition purposes without lender
10
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consent. The most restrictive financial covenants are a cash flow coverage
ratio and a leverage test.
In addition to the Bank of America facility, the Company's indebtedness includes
$15.3 million under Senior Subordinated Notes, bearing interest at the rate of
10.5% per annum, with principal payments of $3.6 million being due on June 30,
1996 and each June 30 thereafter until a final payment of $0.86 million on June
30, 2000.
Borrowings under the Senior Subordinated Notes are secured by a subordinated
lien on substantially all of the Company's assets. The Senior Subordinated
Notes also contain various restrictive covenants similar to the Bank of America
facility. In addition, the Company may not have Senior Debt in excess of $22
million without the consent of the Senior Subordinated Noteholders.
In August 1995 the Company reached an agreement in principle with Bank of
America to increase the Bank of America facility to $27 million. The holders of
the Senior Subordinated Notes have agreed to permit such increase in exchange
for the subordinated lien remaining on substantially all of the Company's assets
through maturity.
The Company's primary sources of liquidity are its cash, internal cash
generation and the external financing described above. Management believes that
the Company has sufficient liquidity capacity to fund its anticipated needs for
working capital and debt repayment.
Backlog and Orders. The Company's backlog of unfilled orders at June 30, 1995
-------------------
was approximately $65 million compared to $66.7 million at June 30, 1994; a
decrease of 2.6%. The backlog included increases of $12 million of packaging,
and decreases of $8.9 million of banknote-related equipment and $4.7 million of
specialty web equipment orders as compared to 1994.
When sales are recorded under the completed contract method of accounting, the
Company normally experiences a six to nine month lag between the time new orders
are booked and the time they are reflected in sales and results of operations.
Larger orders, which are accounted for using the percentage of completion method
of accounting, are reflected in sales and results of operations as the project
progresses through the manufacturing cycle.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The lawsuit filed by Howard Lasker, as the representative of an alleged class
consisting of purchasers of the Company's common stock between October 18, 1989
and October 31, 1990, in the United States District Court for the Northern
District of Texas (Dallas Division), was set for trial for February 1995, but
was not reached on the docket. A new trial date
11
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has been set for January 2, 1996. The Company believes that the allegations in
this lawsuit are substantially without basis and intends to vigorously pursue
its defenses. See Note 6 of "Notes to Consolidated Condensed Financial
Statements".
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
3.1 Second Amended and Restated Certificate of Incorporation of the
Company.(1)
3.2 Bylaws of the Company, as amended.(2)
4.1 Specimen of Series A Common Stock Certificate.(3)
4.2 Specimen of Series B Common Stock Certificate.(4)
10.1 Form of Indemnity Agreement.(2)
10.3 Second Amended and Restated Stock Option Plan of the Company.(5)
10.4 Description of Stevens Graphics Incentive Plan.(3)
10.5 Description of Hamilton Life Insurance Payroll Deduction Plan.(2)
10.6 Labor Agreement, dated July 2, 1994, between Hamilton, Stevens Group,
Inc. and the International Union United Automobile, Aerospace and
Agricultural Implement Workers of America.(5)
10.9 Chem-Dyne Site Trust Fund Agreement, dated September 23, 1985.(2)
10.10 Lease Agreement between Space Unlimited Joint Venture #3 and Stevens
Corporation ("Stevens"), dated September 11, 1981, and related lease
addendum.(2)
10.11 First Extension Agreement dated January 19, 1987 between Stevens and
Space Unlimited Joint Venture #3.(3)
10.12 First Amended Joint Venture Agreement of Space Unlimited Joint Venture
#3, dated June 26, 1980, and related Assignment of Joint Interest and
Loan Modification, Assumption Agreement and Release.(2)
10.13 Second Extension Agreement between the Company and Space Unlimited
Joint Venture #3.(7)
10.14 Stevens Graphics Corporation Pension Plan and Trust.(7)
10.15 Stevens Graphics Corporation Profit Sharing and 401(k) Savings
Retirement Plan.(7)
10.17 Lease Agreement between Rochester Hills Executive Park and Zerand-
Bernal Group, Inc.(8)
10.18 Severance Agreement among the Company, Post, and Robert F. Hopkins.(7)
10.19 Restated and Amended Subordinated Debt Agreement dated March 27, 1992,
together with forms of Subordinated Notes and Subordinated
Guaranties.(7)
10.20 Amended and Restated Intercreditor and Subordination Agreement dated
April 26, 1994.(9)
12
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10.21 Contract of Sale between the Company and the Banque de France.(7)
10.23 Asset Purchase Agreement dated July 20, 1993 among Post Machinery
Company, Inc., the Company, and Bobst Group, Inc.(11)
10.24 Letter Agreement dated August 5, 1993 among the Company, Post
Machinery Company, Inc., Bobst Group, Inc., and Bobst, S.A.(11)
10.25 Intellectual Property Purchase Agreement dated August 5, 1993 among
the Company, Post Machinery Company, Inc., and Bobst S.A.(11)
10.26 First Amendment to Loan and Security Agreement, dated as of August 24,
1994, among the Company, Bank One, Milwaukee, NA, and certain
subsidiaries of the Company.(12)
10.27 Fourth Amendment to Amended and Restated Senior Subordinated Note
Agreement dated April 29, 1994. (9)
10.28 Form of Stock Purchase Agreement dated as of September 16, 1994
between the Company and certain investors.(12)
10.29 Credit Agreement, dated May 16, 1995, between the Company and Bank of
America, Texas, N.A. (6)
11.1 Computation of Net Income per Common Share. (6)
27.1 Financial Data Schedule.(6)
______________________________________
13
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(1) Previously filed as an exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated herein
by reference.
(2) Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-15279) and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-24486) and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Registrant's report on Form 8-A
filed August 19, 1988 and incorporated herein by reference.
(5) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1994 and incorporated herein
by reference.
(6) Filed herewith.
(7) Previously filed as an exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991 and incorporated herein
by reference.
(8) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended September 30, 1993 and incorporated
herein by reference.
(9) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1994 and incorporated herein
by reference.
(10) Previously filed as an exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992 and incorporated herein
by reference.
(11) Previously filed as an exhibit to the Company's Current Report on Form
8-K filed August 12, 1993 and incorporated herein by reference.
(12) Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-3 (No. 33-84246) and incorporated herein by
reference.
(b) Reports on Form 8-K.
None.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Stevens
International, Inc. has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
STEVENS INTERNATIONAL, INC.
Date: August 10, 1995 By:
Kenneth W. Reynolds
Senior Vice President -
Administration & Finance and
Chief Financial Officer
15
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EXHIBIT 10.29
CREDIT AGREEMENT
This Agreement dated as of May 16, 1995, is between BANK OF AMERICA TEXAS,
N.A. (the "Bank") and STEVENS GRAPHICS CORPORATION (the "Borrower").
---- --------
1. DEFINITIONS
-----------
In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:
1.1 "Event of Default" has the meaning given such term in Article 11 of
---------------- ----------
this Agreement.
1.2 "Intercreditor Agreement" means the Amended and Restated Subordination
-----------------------
and Intercreditor Agreement dated as of April 26, 1994 (as amended), entered
into among Borrower, various subsidiaries of Borrower, the Bank, and certain
other parties.
1.3 "Maximum Rate" means the maximum lawful rate of interest permitted
------------
under applicable usury laws now or hereafter enacted.
1.4 "Offshore Rate" means the interest rate determined by the following
-------------
formula, rounded upward to the nearest 1/100 of one percent. (All amounts in
the calculation will be determined by the Bank as of the first day of the
interest period.)
Offshore Rate = Grand Cayman Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate per annum (rounded
-----------------
upward to the nearest 1/16th of one percent) at which Bank of America
National Trust and Savings Association's Grand Cayman Branch, Grand
Cayman, British West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the offshore dollar
inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum reserve
------------------
percentages for determining the reserves to be maintained by member banks
of the Federal Reserve System for Eurocurrency Liabilities, as defined in
Federal Reserve Board Regulation D, rounded upward to the nearest 1/100
of one percent. The percentage will be expressed as a decimal, and will
include, but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
CREDIT AGREEMENT--Page 1
<PAGE>
1.5 "Permitted Liens" means:
---------------
(a) liens for real estate taxes, assessments or governmental charges
or construction lien claims not delinquent or being contested in good faith
by Borrower or any guarantor;
(b) liens or deposits in connection with worker's compensation or
other insurance or to secure the performance of bids, trade contracts,
leases, public or statutory obligations, surety or appeal bonds or other
obligations of like nature incurred in the ordinary course of business;
(c) easements, restrictions, minor title irregularities and similar
matters which have no material adverse effect as a practical matter upon
the ownership or use of its property by Borrower or any guarantor;
(d) liens identified on Exhibit A attached hereto;
---------
(e) liens for rentals not yet due and payable pursuant to capitalized
leases; and
(f) liens permitted by Section 8.4 hereof.
-----------
1.6 "Potential Event of Default" means any event that, with the giving
--------------------------
of notice or the passage of time, or both, would constitute an Event of Default
under this Agreement.
1.7 "Reference Rate" means the lower of (i) the rate of interest
--------------
publicly announced from time to time by the Bank in Irving, Texas, as its
Reference Rate or (ii) the rate of interest publicly announced from time to time
by Bank of America, N.T.S.A in San Francisco, California, as its Reference Rate.
The Reference Rate is set by the Bank based on various factors, including the
Bank's costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans. The Bank may price
loans to its customers at, above, or below the Reference Rate. Any change in the
Reference Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Reference Rate.
1.8 "Subordinated Debt" has the meaning given such term in the
-----------------
Intercreditor Agreement.
2. LINE OF CREDIT AND
------------------
LETTER OF CREDIT FACILITY AMOUNT AND TERMS
------------------------------------------
2.1 Line of Credit Amount.
---------------------
(a) During the availability period described below, the Bank will
provide a line of credit to the Borrower. The amount of
CREDIT AGREEMENT--Page 2
<PAGE>
the line of credit (the "Commitment") is equal to TWENTY-TWO MILLION
----------
Dollars ($22,000,000.00).
(b) This is a revolving line of credit for advances with a within line
facility for letters of credit. During the availability period, the
Borrower may repay principal amounts and re-borrow them.
(c) Each advance must be for at least One Hundred Thousand Dollars
($100,000), or for the amount of the remaining available line of credit, if
less.
(d) The Borrower agrees not to permit the outstanding principal
balance of the line of credit plus the outstanding amounts of any letters
of credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the Commitment. If such amounts outstanding exceed
the Commitment, the Borrower will immediately pay the excess to the Bank
upon the Bank's demand. The Bank may apply payments received from the
Borrower under this Paragraph to the obligations of the Borrower to the
Bank in the order and the manner as the Bank, in its discretion, may
determine.
2.2 Availability Period. The line of credit is available between the
-------------------
date of this Agreement and APRIL 30, 1998 (the "Expiration Date") unless a
---------------
Potential Event of Default or an Event of Default has occurred and is
continuing. If a material Potential Event of Default (as determined in the
Bank's sole discretion) or an Event of Default has occurred and is continuing,
then the Bank may terminate the availability period. If an Event of Default has
occurred and is continuing, then in addition to the Bank's other remedies, the
Bank may require the Borrower to repay any amounts outstanding under the line of
credit immediately or, at the Bank's option, begin repaying any amounts
outstanding under the line of credit in installments as described below.
2.3 Interest Rate. Unless the Borrower elects an optional interest rate
-------------
as described below, the interest rate is the lesser of (a) the Maximum Rate, or
(b) the rate that is equal to the Bank's Reference Rate. Notwithstanding the
foregoing, if at any time the Reference Rate shall exceed the Maximum Rate and
thereafter the Reference Rate shall become less than the Maximum Rate, the rate
of interest payable shall be the Maximum Rate until the Bank shall have received
the amount of interest it otherwise would have received if the interest payable
had not been limited by the Maximum Rate during the period of time the Reference
Rate exceeded the Maximum Rate.
2.4 Conditions to Each Extension of Credit. Before each extension of
--------------------------------------
credit under the line of credit, including the first, the Borrower will
deliver a borrowing certificate, in form and detail satisfactory to the Bank
and otherwise as set forth in Exhibit B attached to this Agreement, setting
---------
forth, among other
CREDIT AGREEMENT--Page 3
<PAGE>
matters, the amount requested, the interest option selected, the interest period
applicable to any requested Offshore Rate.
2.5 Repayment Terms.
---------------
(a) With respect to portions of the line of credit that bear interest
at the Reference Rate, the Borrower will pay interest quarterly, on each
June 30, September 30, December 31, and March 31 during the term hereof,
beginning June 30, 1995 and continuing thereafter until payment in full of
any principal outstanding under this line of credit.
(b) The Borrower will repay in full all principal and any unpaid
interest or other charges outstanding under this line of credit no later
than the Expiration Date. Any amount bearing interest at the Offshore Rate
(as described below) may be repaid at the end of the applicable interest
period, which shall be no later than the Expiration Date.
2.6 Optional Interest Rate. Instead of the interest rate based on the
----------------------
Bank's Reference Rate, the Borrower may elect to have all or portions of the
line of credit (during the availability period) bear interest at the Offshore
Rate (as described below) plus one and one-half percentage points (1-1/2%)
during an interest period described below and requested by the Borrower;
provided, however, that the Borrower shall not have the option or right to
-------- -------
elect to have all or any portion of the loan bear interest at the rate described
below when such rate exceeds the Maximum Rate. Each interest rate is a rate per
year. Interest will be paid, to the extent applicable, on the 90th, 180th, and
270th day of every interest period and on the last day of each interest period.
At the end of any interest period, the interest rate will revert to the rate
based on the Reference Rate, unless the Borrower has designated another optional
interest rate for the portion.
2.7 Offshore Rate. The Borrower may elect to have all or portions of
-------------
the principal balance of the line of credit bear interest at the rate equal to
the lesser of (a) the Maximum Rate, or (b) the Offshore Rate plus ONE AND ONE-
HALF percentage points (1-1/2%).
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in
effect will be 30, 60, 90, 120, 150, 180, 210, 240, 270, 300 or 360 days
long. The last day of the interest period will be determined by the Bank
using the practices of the offshore dollar inter-bank market; provided that
any interest period which would otherwise end on a day which is not a
business day shall be extended to the next succeeding banking day.
CREDIT AGREEMENT--Page 4
<PAGE>
(b) Each Offshore Rate portion will be for an amount not less than
TWENTY-FIVE THOUSAND Dollars ($25,000).
(c) The Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the line of credit which is scheduled
to be repaid before the last day of the applicable interest period.
(d) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a different
rate during its interest period.
(e) Each prepayment of an Offshore Rate portion will be accompanied by
the amount of accrued interest on the amount prepaid, and a prepayment fee
equal to the amount (if any) by which:
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the offshore dollar market
for a period starting on the date on which it was prepaid and ending
on the last day of the interest period for such portion.
(f) The Bank will have no obligation to accept an election for an
Offshore Rate portion if dollar deposits in the principal amount, and for
periods equal to the interest period, of an Offshore Rate portion are not
available in the offshore dollar inter-bank market.
(g) If at any time during any applicable interest period the Offshore
Rate shall exceed the Maximum Rate and thereafter the Offshore Rate shall
become less than the Maximum Rate, the rate of interest payable shall be
the Maximum Rate until the Bank shall have received the amount of interest
it otherwise would have received if the interest payable had not been
limited by the Maximum Rate during the period of time the Offshore Rate
exceeded the Maximum Rate.
2.8 Letters of Credit. This line of credit may be used for financing
-----------------
standby letters of credit with a maximum maturity of EIGHTEEN (18) months,
unless otherwise agreed to by the Bank, which consent will not be unreasonably
withheld. No letters of credit may be issued after the Expiration Date.
The letters of credit listed on Exhibit I attached to this Agreement
---------
presently are outstanding from Bank One, Milwaukee, National Association for
the account of the Borrower. As of the date of this Agreement, these letters
of credit shall be deemed to
CREDIT AGREEMENT--Page 5
<PAGE>
be outstanding under this Agreement, and shall be subject to all the terms and
conditions stated in this Agreement.
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under this Agreement,
which amount will bear interest and be due as described elsewhere in this
Agreement;
(b) the issuance of any letter of credit and any amendment to a letter
of credit is subject to the Bank's written approval and must be in form and
content reasonably satisfactory to the Bank;
(c) to sign the Bank's form Application and Agreement for Standby
Letter of Credit, a copy of which is attached to this Agreement as
Exhibit C;
---------
(d) to pay the Bank's standard amendment and negotiation fees, as
applicable (which fees, as of the date hereof, are set forth on Exhibit D
---------
attached to this Agreement), and the issuance fees set forth in Section 3.1
-----------
below; and
(e) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
3. FEES AND EXPENSES
-----------------
3.1 Fees
----
(a) Loan Fee. Subject to the provisions of Section 12.14 hereof, the
-------- -------------
Borrower agrees to pay a loan fee in the amount of SEVENTY-FIVE THOUSAND
Dollars ($75,000.00). This fee is due on or before the date of execution of
this Agreement.
(b) Unused Commitment Fee. Subject to the provisions of
---------------------
Section 12.14 hereof, the Borrower agrees to pay a fee on any difference
-------------
between the Commitment and the sum of the amount of credit it actually uses
plus the undrawn amount of outstanding letters of credit, determined by the
weighted average loan balance maintained during the specified period. The
fee will be calculated at ONE-QUARTER percent (1/4%) per year.
This fee is payable quarterly and is due on the 30th day following the end
of each quarter ending on June 30, September 30, December 31 and March 31,
beginning with the quarter ending June 30, 1995, and continuing until the
expiration of the availability period.
(c) Letter of Credit Fees. Subject to the provisions of Section 12.14
--------------------- -------------
hereof, the Borrower agrees to pay the Bank a
CREDIT AGREEMENT--Page 6
<PAGE>
non-refundable fee in the amount of SEVEN-EIGHTHS of one percent (7/8%) per
annum (based on the stated expiration date of the standby letter of
credit), calculated on the basis of the face amount outstanding on the day
the standby letter of credit is issued, for issuing and processing letters
of credit, payable in advance.
(d) Waiver Fee. Subject to the provisions of Section 12.14 hereof,
---------- -------------
if the Bank, at its discretion, agrees to waive or amend any terms of this
Agreement, then the Borrower will pay the Bank a Two Thousand Five Hundred
Dollar ($2,500) fee for each waiver or amendment. Nothing in this paragraph
shall imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional requirements as a
condition to any waiver or amendment.
3.2 Expenses.
--------
(a) The Borrower agrees to immediately repay the Bank for expenses
that include, but are not limited to, filing, search, escrow, and recording
fees, asset value appraisal fees and other costs.
(b) The Borrower agrees to reimburse the Bank for any expenses it
incurs in the preparation of this Agreement and any agreement or instrument
required by this Agreement up to a maximum of Thirteen Thousand Dollars
($13,000.00), in excess of those fees and costs listed above. Expenses
include, but are not limited to, reasonable attorneys' fees.
(c) The Borrower agrees to supply the Bank asset value appraisals on
all fixed assets in substance and form reasonably satisfactory to the Bank,
should they be deemed necessary by the Bank; provided, however, that so
long as no Event of Default has occurred and is continuing, such appraisals
shall not be required to be supplied at Borrower's cost and expense more
than once per year. The Borrower also agrees to reimburse the Bank for the
cost of periodic inspections and appraisals of the real and personal
property collateral securing this Agreement, at such intervals as the Bank
may reasonably require; provided, however, that so long as no Event of
Default has occurred and is continuing, such appraisals and inspections
shall not be required to be supplied at Borrower's cost and expense more
than once per year. The audits and appraisals may be performed by employees
of the Bank or by independent appraisers; provided, however, that such
audits and appraisal shall be performed in a manner so as to not interfere
unreasonably with the business and operations of Borrower.
3.3 Deposits. The Borrower shall not be required to maintain any
--------
compensating balances as a condition to the loan facilities provided herein.
CREDIT AGREEMENT--Page 7
<PAGE>
3.4 No Excess Fees. Notwithstanding anything to the contrary in this
--------------
Article 3, in no event shall any sums payable under this Article 3 (to the
--------- ---------
extent, if any, constituting interest under any applicable laws), together
with all amounts constituting interest under applicable laws and payable in
connection with the credit evidenced hereby, exceed the Maximum Rate or the
maximum amount of interest permitted to be charged, taken, reserved, received
or contracted for under applicable usury laws.
4. COLLATERAL
----------
4.1 Real Property. The Borrower's obligations to the Bank under this
-------------
Agreement will be secured by deeds of trust or mortgages covering Borrower's
or guarantor's manufacturing plants located in Ohio, Wisconsin, and Fort
Worth, Texas, which are more particularly described in Exhibit E attached to
---------
this Agreement.
4.2 Personal Property. The Borrower's obligations to the Bank under
-----------------
this Agreement will be secured by personal property the Borrower now owns or
will own in the future as listed below:
(a) Accounts and Accounts Receivables;
(b) Machinery, equipment, and fixtures;
(c) Inventory;
(d) Patents, trademarks and other general intangibles; and
(e) Stock and other securities as follows:
100% of stock in Borrower's domestic subsidiaries, and 66% of Borrower's
stock of foreign subsidiaries.
Regulation U of the Board of Governors of the Federal Reserve System
places certain restrictions on loans secured by margin stock (as defined
in the Regulation). The Bank and the Borrower shall comply with
Regulation U. If any of the collateral is margin stock, the Borrower
shall provide to the Bank a Form U-1 Purpose Statement, confirming that
none of the proceeds of the loan will be used to buy or carry any margin
stock. If the Borrower has any other loan made for the purpose of buying
or carrying margin stock (purpose loan), then the collateral securing
this loan shall not secure the purpose loan, and the collateral securing
the purpose loan shall not secure this loan.
The collateral is further defined in security agreement(s) executed by the
Borrower. In addition, all personal property collateral securing the obligations
evidenced by this Agreement shall also secure all other present and future
obligations of the Borrower to the Bank. All personal property collateral
securing any other present or future obligations of the Borrower to the
CREDIT AGREEMENT--Page 8
<PAGE>
Bank shall also secure the obligations evidenced by this Agreement.
4.3 Personal Property Supporting Guaranty. The obligations of the
-------------------------------------
guarantors to the Bank will be secured by personal property the guarantors now
own or will own in the future as listed below. The collateral is further
defined in security agreement(s) executed by the guarantors.
(a) Accounts and Accounts Receivables;
(b) Machinery, equipment, and fixtures;
(c) Inventory; and
(d) Patents, trademarks and other general intangibles.
In addition, all personal property collateral securing the guaranties shall also
secure all other present and future obligations of the Borrower to the Bank.
5. DISBURSEMENTS, PAYMENTS AND COSTS
---------------------------------
5.1 Requests for Credit. Each request for an extension of credit will
-------------------
be made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
5.2 Disbursements and Payments. Each disbursement by the Bank and each
--------------------------
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(b) made for the account of the Bank's branch selected by the Bank
from time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank; and
(d) evidenced by records kept by the Bank.
Requests for disbursements by the Bank that accrue interest based on the
Reference Rate must be received prior to 2:00 p.m., Dallas, Texas time, on the
day of the requested disbursement; and requests for disbursements by the Bank
that accrue interest based on the Offshore Rate must be received at least two
(2) business days prior to the day of the requested disbursement.
5.3 Telephone Authorization.
-----------------------
(a) The Bank may honor telephone instructions for advances or
repayments or for the designation of optional interest rates
CREDIT AGREEMENT--Page 9
<PAGE>
given by any one of the individuals authorized to sign loan agreements on
behalf of the Borrower, or any other individual designated by any one of
such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn
from the Borrower's account, as designated in writing to the Bank, or such
other of the Borrower's accounts with the Bank as designated in writing by
the Borrower.
(c) The Borrower will provide written confirmation to the Bank of any
telephone instructions within three (3) days. If there is a discrepancy and
the Bank has already acted on the telephone instructions, the telephone
instructions will prevail over the written confirmation.
(d) The Borrower indemnifies and excuses the Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it reasonably
believes are made by any individual authorized by the Borrower to give such
instructions.
5.4 Direct Debit (Line of Credit).
-----------------------------
(a) The Borrower agrees that the Bank may create advances under the
line of credit to pay interest and any fees that are due under this
Agreement.
(b) The Bank will create such advances on the dates the payments
become due. If a due date does not fall on a banking day, the Bank will
create the advance on the first banking day following the due date.
(c) If the creation of an advance under the line of credit causes the
total amount of credit outstanding under the line to exceed the limitations
set forth in this Agreement, the Borrower will immediately pay the excess
to the Bank upon the Bank's demand.
5.5 Banking Days. Unless otherwise provided in this Agreement, a
------------
banking day is a day other than a Saturday or a Sunday on which the Bank is open
for business in Texas. For amounts bearing interest at an Offshore Rate (if
any), a banking day is a day other than a Saturday or a Sunday on which the Bank
is open for business in Texas and California and dealing in offshore dollars.
All payments and disbursements which would be due on a day which is not a
banking day will be due on the next banking day. All payments received on a day
which is not a banking day will be applied to the credit on the next banking
day.
5.6 Additional Costs. Subject to the provisions of Section 12.14
---------------- -------------
hereof, the Borrower will pay the Bank, on demand, for the Bank's costs or
losses arising from any statute or regulation, or any request or requirement of
a regulatory agency which is
CREDIT AGREEMENT--Page 10
<PAGE>
applicable to all national banks or a class of all national banks on the basis
of assets and commitments for credit to borrowers similarly situated to
Borrower. The costs and losses will be allocated to the loan in a manner
determined by the Bank, using any reasonable method; provided, however, that
Borrower will not be liable for costs and losses occurring more than ninety (90)
days prior to Borrower's receipt of demand for payment thereof. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
Notwithstanding the foregoing, in no event shall any sum payable under
this Section 5.6 (to the extent, if any, constituting interest under
-----------
applicable laws), together with all amounts constituting interest under
applicable laws and payable in connection with the credit evidenced hereby,
exceed the Maximum Rate or the maximum amount permitted to be charged, taken,
reserved, received or contracted for by any applicable usury laws.
5.7 Interest Calculation. Except as otherwise stated in this Agreement,
--------------------
all interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a higher
fee than if a 365-day year is used.
5.8 Default Rate. Upon the occurrence and during the continuation of
------------
any Event of Default under this Agreement, advances under this Agreement will at
the option of the Bank bear interest at the lesser of (a) the Maximum Rate and
(b) a rate per annum which is three (3.0) percentage points higher than the rate
of interest otherwise provided under this Agreement. This will not constitute a
waiver of any default.
5.9 Overdrafts. At the Bank's sole option in each instance, the Bank
----------
may make advances under this Agreement to prevent or cover an overdraft on any
account of the Borrower with the Bank. Each such advance will accrue interest
from the date of the advance or the date on which the account is overdrawn,
whichever occurs first, at the interest rate described in this Agreement.
5.10 Payments in Kind. The proceeds of collections of the Borrower's
----------------
accounts receivable, when received by the Bank in kind, shall be credited to
interest, principal, and other sums owed to the Bank under this Agreement
following an Event of Default in the order and proportion determined by the Bank
in its sole discretion. Prior to an Event of Default, the proceeds of
collections the Borrower's accounts receivable, when received by the Bank in
kind, shall be credited first to fees, then to interest, principal, and other
sums owed to the Bank under this
CREDIT AGREEMENT--Page 11
<PAGE>
Agreement. All such credits will be conditioned upon collection and any returned
items may, at the Bank's option, be charged to the Borrower.
6. CONDITIONS
----------
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend the first advance to the Borrower
under this Agreement:
6.1 Authorizations. Evidence that the execution, delivery and
--------------
performance by the Borrower (and any guarantor or subordinating creditor) of
this Agreement and any instrument or agreement required under this Agreement
have been duly authorized.
6.2 Security Agreements. Signed original assignments of security
-------------------
agreements, assignments, financing statements and fixture filings (together with
collateral in which the Bank requires a possessory security interest), and deeds
of trust, all from Bank One, Milwaukee, National Association, which the Bank
requires.
6.3 Assignments of Deeds of Trust and Mortgages. Signed original
-------------------------------------------
assignments of deeds of trust and mortgages, as applicable, and corresponding
endorsements to mortgagee policies of title insurance, together with the
endorsed, original promissory notes secured by such deeds of trust and
mortgages, as applicable, from Bank One, Milwaukee, National Association,
covering the Real Property referenced in Section 4.1 above.
-----------
6.4 Evidence of Priority. Evidence that security interests and liens in
--------------------
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing and Permitted Liens. The
Bank must receive acceptable beneficiary's statements from the holders of any
prior liens on the real property collateral.
6.5 Consent to Removal. For any personal property collateral located on
------------------
real property which is subject to a mortgage or deed of trust or which is not
owned by the Borrower, a Consent to Removal from the owner of the real property.
6.6 Insurance. Evidence of insurance coverage, as required in the
---------
"Covenants" section of this Agreement.
6.7 Environmental Questionnaire. A completed Bank form Environmental
---------------------------
Questionnaire and Disclosure Statement.
6.8 Guaranties. Guaranties signed by each domestic subsidiary of
----------
Borrower, which domestic subsidiaries are identified as such on Exhibit F
---------
attached to this Agreement.
6.9 Stock Pledges. Pledges of sixty-six percent (66%) of the capital
-------------
stock of each foreign subsidiary of Borrower, which
CREDIT AGREEMENT--Page 12
<PAGE>
foreign subsidiaries are identified as such on Exhibit F attached to this
---------
Agreement.
6.10 Intercreditor Agreement. An acknowledgment letter in favor of the
-----------------------
Bank from the holders of subordinated debt under the Intercreditor Agreement,
acknowledging the assignment to the Bank of the Senior Documents (as such term
is defined in the Intercreditor Agreement) by Bank One, Milwaukee, National
Association, and consenting to the increase in the Senior Debt from $20,000,000
to $22,000,000 and to corresponding amendments to the Senior Collateral
Documents so as to give effect to such increase in Senior Debt for purposes of
securing such Senior Debt under the Senior Collateral Documents.
6.11 Legal Opinion. A written opinion from the Borrower's legal counsel,
-------------
covering such matters as the Bank may reasonably require. The legal counsel and
the terms of the opinion must be acceptable to the Bank.
6.12 Good Standing. Certificates of good standing for the Borrower from
-------------
its state of incorporation and from any other state in which the Borrower is
required to qualify to conduct its business.
6.13 Envirnomental Review. Evidence satisfactory to the Bank that the
--------------------
Real Property (as hereinafter defined) complies, in all material respects,
with all laws, regulations and ordinances governing or applicable to hazardous
substances which apply or pertain to the Real Property or the operations of
the Borrower and the guarantors, as applicable.
6.14 Other Items. Any other items that the Bank reasonably requires.
-----------
7. REPRESENTATIONS AND WARRANTIES
------------------------------
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation:
7.1 Organization of Borrower. The Borrower is a corporation duly formed
------------------------
and existing under the laws of the state where organized.
7.2 Authorization. This Agreement, and any instrument or agreement
-------------
required hereunder, are within the Borrower's powers, have been duly authorized,
and do not conflict with any of its organizational papers.
7.3 Enforceable Agreement. This Agreement is a legal, valid and binding
---------------------
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, except as (a) the
CREDIT AGREEMENT--Page 13
<PAGE>
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer or similar laws affecting creditors' rights generally, and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability. Any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and enforceable,
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer or similar laws affecting creditors' rights
generally, and (b) the availability of equitable remedies may be limited by
equitable principles of general applicability.
7.4 Good Standing. The Borrower is a corporation, duly organized,
-------------
validly existing and in good standing under the laws of the state of Delaware,
and is in good standing and duly qualified as a foreign corporation to carry on
its business in each jurisdiction where a failure to be in good standing or so
qualified would have a material adverse effect on the business of the Borrower.
7.5 No Conflicts. This Agreement does not conflict with any law,
------------
agreement, or obligation by which the Borrower is bound and that would have a
material adverse effect on the business of the Borrower.
7.6 Financial Information. All financial and other information that has
---------------------
been supplied to the Bank, including the Borrower's financial statement dated as
of December 31, 1994, fairly represents the financial condition of the Borrower
as of and for the periods specified therein. Since the date of the financial
statement specified above, there has been no material adverse change in the
assets or the financial condition of the Borrower (or any guarantor, taken as a
whole with the Borrower). All financial and other information that subsequently
will be supplied to the Bank, will fairly represent the financial condition of
the Borrower as of and for the periods specified therein.
7.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending
--------
or, to the Borrower's knowledge, threatened against the Borrower which, if lost,
would materially and adversely impair the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the Bank
and except as set forth on Exhibit G to this Agreement.
---------
7.8 Collateral. All collateral required in this Agreement is owned by
----------
the grantor of the security interest free of any title defects or any liens or
interests of others, except for Permitted Liens.
7.9 Permits, Franchises. The Borrower possesses all permits, memberships,
-------------------
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in
CREDIT AGREEMENT--Page 14
<PAGE>
which it is now engaged if a failure to so possess such would have a material
adverse effect on the business of the Borrower.
7.10 Other Obligations. The Borrower is not in default on any
-----------------
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation, if such default
would have a material adverse effect on the business of Borrower, except as have
been disclosed in writing to the Bank.
7.11 Income Tax Returns. The Borrower has no knowledge of any pending
------------------
assessments or adjustments of its income tax for any year, except as have been
disclosed in writing to the Bank.
7.12 No Event of Default. There is no Event of Default or Potential
-------------------
Event of Default under this Agreement.
7.13 ERISA Plans.
-----------
(a) The Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability (other
than current contributions which will be paid in a timely manner, as
legally permitted) with respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists which
might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of
this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
-----
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation
----
established pursuant to Subtitle A of Title IV of ERISA.
CREDIT AGREEMENT--Page 15
<PAGE>
(iv) "Plan" means any employee pension benefit plan maintained or
----
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
7.14 Location of Borrower. The Borrower's place of business (or, if the
--------------------
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
8. COVENANTS
---------
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
8.1 Use of Proceeds. To use the proceeds of the credit only for (a)
---------------
advances to support Borrower's on-going investment in accounts receivable and
inventory, along with general working capital funding requirements, including
capital expenditures up to amounts as provided in Section 9.4 below, (b)
-----------
issuance of stand-by letters of credit, (c) acquisitions permitted by this
Agreement, and (d) for all other purposes not otherwise prohibited by this
Agreement.
8.2 Financial Information. To provide the following financial
---------------------
information and statements and such additional information as reasonably
requested by the Bank from time to time:
(a) Within ninety (90) days of the Borrower's fiscal year end, the
Borrower's Annual Report on Form 10-K (containing the Borrower's annual
financial statements). These financial statements must be audited (with an
unqualified opinion) by a Certified Public Accountant acceptable to the
Bank. The statements shall be prepared on a consolidated basis. If
requested by the Bank, Borrower will provide the Bank with consolidating
statements with respect to the consolidated statements.
(b) Within forty-five (45) days of the period's end, the Borrower's
Quarterly Report on Form 10-Q (containing the Borrower's quarterly
financial statements) and a Compliance Certificate in the form of Exhibit H
---------
attached to this Agreement. These financial statements may be Borrower
prepared. The statements shall be prepared on a consolidated basis. If
requested by the Bank, Borrower will provide the Bank with consolidating
statements with respect to the consolidated statements.
(c) If requested by the Bank, copies of the Borrower's federal income
tax return, within 30 days of such request, and, if requested by the Bank,
copies of any extensions of the filing date.
CREDIT AGREEMENT--Page 16
<PAGE>
(d) Statements showing an aging and reconciliation of the Borrower's
receivables within forty-five (45) days after the end of each calendar
quarter.
(e) A statement showing an aging of accounts payable within forty-five
(45) days after the end of each calendar quarter.
(f) An inventory listing and segment backlog schedules, by company,
within forty-five (45) days after the end of calendar quarter; the listing
must include a description of the inventory, its location and cost, and
such other information as the Bank may reasonably require.
(g) A listing of the names and addresses of all debtors obligated upon
the Borrower's accounts receivable within forty-five (45) days after the
end of each fiscal year.
(h) Prior to the beginning of each new fiscal year of the Borrower,
the Borrower's annual operating forecast for such new fiscal year, in form,
substance and detail reasonably satisfactory to the Bank.
(i) Promptly upon the Bank's request, such other statements, lists of
property and accounts, budgets, forecasts or reports as to the Borrower and
as to each guarantor of the Borrower's obligations to the Bank as the Bank
may reasonably request.
8.3 Other Debts. Not to have outstanding or incur any direct or
-----------
contingent debts or lease obligations (other than those to the Bank), or become
liable for the debts of others without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit;
(b) Endorsing negotiable instruments received in the usual course of
business;
(c) Debts, lines of credit and leases in existence on the date of this
Agreement disclosed in writing to the Bank in the Borrower's financial
statement dated December 31, 1994 and, if applicable, at the closing of
this Agreement;
(d) Purchase money equipment financings not to exceed $2,000,000 in
the aggregate at any time;
(e) indirect vendor finance contingent liability not to exceed
$5,000,000 at any time;
(f) rentals under new leases of real or personal property whether or
not in existence on the date of this Agreement;
CREDIT AGREEMENT--Page 17
<PAGE>
(g) wages or other compensation due to employees or agents of the
Borrower or its subsidiaries for services actually performed;
(h) indebtedness in the form of capitalized leases or for capital
expenditures subject to the limitations contained in this Agreement; and
(i) loans from the Borrower to domestic subsidiaries.
8.4 Other Liens. Not to create, assume, or allow any security interest
-----------
or lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank;
(b) Liens outstanding on the date of this Agreement disclosed in
writing to the Bank;
(c) Additional purchase money security interests in equipment acquired
after the date of this Agreement, if the total principal amount of debts
secured by such liens does not exceed TWO MILLION Dollars ($2,000,000) at
any one time;
(d) specific customer work-in-process liens; and
(e) Permitted Liens.
8.5 Investments. Other than as permitted in Section 8.6, not to make any
----------- -----------
investments in any other person or entity, except the following:
(a) investments in direct obligations of the United States of America,
or any agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the
date of acquisition thereof;
(b) investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized
under the laws of the United States or any state thereof having capital
surplus and undivided profits aggregating at least $100,000,000; and
(c) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the
date of creation thereof.
8.6 Loans and Advances. Not to make any loans, advances or other
------------------
extensions of credit to any third party or affiliate (including without
limitation, any loans, advances or other extensions of credit to any of the
Borrower's executives,
CREDIT AGREEMENT--Page 18
<PAGE>
officers, or directors or shareholders or any relatives of any of the foregoing)
except:
(a) advances to third parties or non-consolidated affiliates that do
not exceed in the aggregate TWO HUNDRED FIFTY THOUSAND Dollars ($250,000)
at any one time;
(b) loans and advances to employees and agents in the ordinary course
of business for travel and entertainment expenses and similar items;
(c) investments in domestic subsidiaries;
(d) commissions payable to Stevens Graphics International, Inc.,
consistent with past practice; and
(e) expenditures in an amount up to TWO MILLION Dollars ($2,000,000)
in each fiscal year for developing foreign markets, whether by investment
in a foreign subsidiary, joint venture or otherwise.
8.7 Dividends. Not to declare or pay any dividends or other
---------
distributions on any of its shares, and not to purchase, redeem or otherwise
acquire for value any of its shares, or create any sinking fund in relation
thereto.
8.8 Change of Control. Not to cause, permit, or suffer any change, direct
-----------------
or indirect, in the control of Borrower. For purposes of this provision,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of the Borrower.
8.9 Notices to Bank. To promptly notify the Bank in writing of:
---------------
(a) any lawsuit over Five Hundred Thousand Dollars ($500,000) against
the Borrower (or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor)
and any government authority.
(c) any Event of Default or Potential Event of Default.
(d) any material adverse change in the Borrower's (or any guarantor's)
financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of
business, or chief executive office if the Borrower has more than one place
of business, except for the contemplated name change of Borrower to
"Stevens International, Inc."
CREDIT AGREEMENT--Page 19
<PAGE>
8.10 Books and Records. To maintain adequate books and records.
-----------------
8.11 Inspections. To allow the Bank and its agents to inspect the
-----------
Borrower's properties and examine and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections and, with
the Borrower's consent, to respond to the Bank's requests for information
concerning such properties, books and records.
8.12 Compliance with Laws. To comply with the laws (including any
--------------------
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business, if such failure to comply would have a
material adverse effect on the business of Borrower.
8.13 Preservation of Rights. To maintain and preserve all rights,
----------------------
privileges, and franchises the Borrower now has, if such failure to maintain and
preserve such right, privileges and franchises would have a material adverse
effect on the business of the Borrower.
8.14 Maintenance of Properties. To make any repairs, renewals, or
-------------------------
replacements to keep the Borrower's properties in good working condition, if
such failure would have a material adverse effect on the business of the
Borrower.
8.15 Perfection of Liens. To help the Bank perfect and protect its
-------------------
security interests and liens, and reimburse it for related costs it incurs to
protect its security interests and liens.
8.16 Cooperation. To take any action reasonably requested by the Bank to
-----------
carry out the intent of this Agreement.
8.17 Insurance.
---------
(a) Insurance Covering Collateral. To maintain all risk property
-----------------------------
damage insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be for the full replacement cost of
the collateral and include a replacement cost endorsement or otherwise be
in an amount acceptable to the Bank. The insurance must be issued by an
insurance company acceptable to the Bank and must include a lender's loss
payable endorsement in favor of the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance reasonably
--------------------------
satisfactory to the Bank as to amount, nature and carrier covering property
damage (including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for contractual
CREDIT AGREEMENT--Page 20
<PAGE>
liability, business interruption, flood insurance, product liability and
workers' compensation, and any other insurance which is usual for the
Borrower's business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver
---------------------
to the Bank a copy of each insurance policy, or, if permitted by the Bank,
a certificate of insurance listing all insurance in force.
(d) Casualty. If the Collateral or any part thereof, or any other
--------
asset of Borrower covered by insurance, is damaged or destroyed by fire or
other casualty, all net proceeds of insurance resulting from claims for
losses under the policies of insurance required to be carried by Borrower
herein shall be disbursed to Borrower to pay for the repair, replacement,
rebuilding or restoration of the Collateral or other asset. Any balance of
such net proceeds remaining after payment of all the costs of repair,
replacement, rebuilding or restoration under this Section shall be applied
to the payment of the obligations evidenced by this Agreement.
8.18 Additional Negative Covenants. Not to, without the Bank's written
-----------------------------
consent:
(a) engage in any business activities substantially different from the
Borrower's present business;
(b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination, other than (i) as permitted pursuant to
Section 8.6 hereof, (ii) as permitted pursuant to Section 8.18(e) hereof,
----------- ---------------
(iii) mergers or consolidations of any subsidiaries of Borrower into
Borrower or any subsidiary of Borrower, (iv) mergers, consolidations or
other combinations pursuant to which Borrower is the surviving corporation;
(d) lease, or dispose of all or a substantial part of the Borrower's
business or assets, except for leases or dispositions of assets having a
fair market value in an aggregate amount not exceeding Five Hundred
Thousand Dollars ($500,000) in any fiscal year (in which event the Bank
will agree to release its lien on such assets and the Borrower may retain
the proceeds of such lease or disposition, so long as no Event of Default
has occurred and is continuing);
(e) borrow in excess of $5,000,000, cumulatively and in the aggregate,
in connection with any acquisition or purchase of, merger with, any
business or its assets;
(f) amend, modify or terminate any document governing, evidencing or
otherwise related to the Subordinated Debt in any
CREDIT AGREEMENT--Page 21
<PAGE>
way that creates any change that conflicts with the Intercreditor Agreement
or this Agreement, or that otherwise materially impairs the rights of the
Bank; this prohibition including by way of illustration but not by way of
limitation, any increase in the amortization schedule of the Subordinated
Debt, and any increase in the rate of interest that accrues on the
Subordinated Debt;
(g) make any payment under the Subordinated Debt at any time any
Potential Event of Default exists hereunder or if such payment would cause
an Event of Default hereunder or make any payment under the Subordinated
Debt unless all accrued interest under the Note has been paid in accordance
with its terms and unless after such payment on the Subordinated Debt all
covenants of the Borrower, including without limitation the Financial
Covenants, will be observed and satisfied.
8.19 ERISA Plans. To give prompt written notice to the Bank of:
-----------
(a) The occurrence of any reportable event under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or
the filing of any notice of intent to terminate under Section 4041 of
ERISA.
(c) Any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
8.20 Payment of Taxes and Debt. To (a) pay and timely file all required
-------------------------
tax returns, unless contested in good faith; (b) timely pay all taxes,
assessments, and other government charges or levies imposed upon it or upon its
income, profits or property, unless contested in good faith; (c) within thirty
(30) days after the same becomes due, pay all Debt owed by it on ordinary trade
terms to vendors, suppliers and other Persons providing goods and services used
by it in the ordinary course of its business, unless contested in good faith;
(d) pay and discharge when due all other Debt now or hereafter owed by it; and
(e) maintain appropriate accruals and reserves for all of the foregoing Debt in
accordance with GAAP.
8.21 Sale of Fixed Assets. Borrower shall not sell or otherwise dispose
--------------------
of any assets for less than fair market value or enter into any sale and
lease-back agreement covering any of its fixed or capital assets, except that
Borrower (i) may sell assets in accordance with Section 8.18(d), and (ii) may
---------------
sell fixed assets having a book value of $2,000,000 in the aggregate in any
fiscal year, so long as all of the following conditions are met:
CREDIT AGREEMENT--Page 22
<PAGE>
(a) the proceeds received are greater than eighty percent of the fair
market value of the fixed assets sold;
(b) all of the proceeds received are used to reduce the outstanding
advances under this Agreement; and
(c) no Event of Default exists or would be caused by the sale of the
fixed assets.
8.22 Additional Stock Pledge. Within thirty (30) days of the date of this
-----------------------
Agreement, Borrower will deliver to the Bank a pledge of sixty-six percent (66%)
of the capital stock of Stevens Security Systems, SA.
8.23 Stock of SSMI. Borrower will cause its subsidiary, Stevens Security
-------------
Systems, SA to continue to own one hundred percent (100%) of the capital stock
of Societe Specialisee dans le Materiel d'Impreimerie.
9. FINANCIAL COVENANTS
-------------------
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
9.1 Debt to Tangible Net Worth. To maintain, as of the end of each
--------------------------
fiscal quarter, on a consolidated basis a ratio of total liabilities not
subordinated to tangible net worth not exceeding 1.5:1.0.
"Total liabilities not subordinated" means the sum of current
----------------------------------
liabilities plus long term liabilities, excluding (i) the Subordinated
Debt, and (ii) debt subordinated to the Borrower's obligations to the Bank
in a manner acceptable to the Bank, using the Bank's standard form.
"Tangible net worth" means the gross book value of the Borrower's
------------------
assets (excluding goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense, deferred
research and development costs, deferred marketing expenses, and other like
intangibles), plus (i) the Subordinated Debt, and (ii) liabilities
subordinated to the Bank in a manner acceptable to the Bank (using the
Bank's standard form) less total liabilities, including but not limited to
accrued and deferred income taxes, and any reserves against assets.
9.2 Quick Ratio. To maintain, as of the end of each fiscal quarter, on
-----------
a consolidated basis a ratio of current assets, minus inventory, to current
liabilities of at least 0.33:1.0.
9.3 Debt Coverage Ratio. To maintain on a consolidated basis a Debt
-------------------
Coverage Ratio of at least 1.75:1.0.
CREDIT AGREEMENT--Page 23
<PAGE>
"Debt Coverage Ratio" means the ratio of (a) the sum of net income,
-------------------
plus depreciation and amortization expense, plus interest expense, to (b)
the sum of the current portion of long-term debt and interest expense. If
the actual current portion of long-term debt at the time of calculation of
the Debt Coverage Ratio is less than $3,600,000, then, notwithstanding the
actual current portion of long-term debt, a minimum figure for the current
portion of long-term debt equal to $3,600,000 will be used for purposes of
calculating the Debt Coverage Ratio.
This ratio will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters. The
current portion of long term debt will be measured as of the last day of the
preceding fiscal year.
9.4 Capital Expenditures. Not to spend or incur obligations (including
--------------------
the total amount of any capital leases) for more than FIVE MILLION Dollars
($5,000,000.00) in any single fiscal year to acquire fixed or capital assets.
10. HAZARDOUS WASTE
---------------
10.1 Indemnity Regarding Hazardous Substances. The Borrower, Hamilton-
----------------------------------------
Stevens Group, Inc. and Zerand-Bernal Group, Inc. (the "Indemnitors") agree to
indemnify and hold the Bank harmless from and against all liabilities, claims,
actions, costs and expenses (including sums paid in settlement of claims and
reasonable consultant, expert and legal fees and expenses of the Bank's counsel)
or loss directly or indirectly arising out of or resulting from any of the
following:
(a) Any hazardous substance being present in or around any part of the
real property collateral securing this Agreement (the "Real Property") as a
-------------
result of any Indemnitor's operations, or in the soil, groundwater or soil
vapor on or under the Real Property, including those incurred in connection
with any investigation of site conditions or any clean-up, remedial,
removal or restoration work by any Indemnitor, or any resulting damages or
injuries to the person or property of any third parties or to any natural
resources.
(b) Any use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous
substance which creates a violation of law or a remedial obligation. This
indemnity will apply whether the hazardous substance is on, under or about
any of Indemnitors' property or operations or property leased to any of the
Indemnitors, unless the property has been taken by the Bank as collateral.
CREDIT AGREEMENT--Page 24
<PAGE>
During the term of this Agreement, upon demand by the Bank, the Indemnitors will
defend any investigation, action or proceeding alleging the presence of any
hazardous substance in any such location, which affects the Real Property or
which is brought or commenced against the Bank, whether alone or together with
the Indemnitors or any other person, all at the Indemnitors' own cost and by
counsel to be approved by the Bank in the exercise of its reasonable judgment.
In the alternative, the Bank may elect to conduct its own defense at the expense
of the Indemnitors with counsel reasonably acceptable to Indemnitors.
10.2 Representation and Warranty Regarding Hazardous Substances. Before
----------------------------------------------- ----------
signing this Agreement, the Indemnitors researched and inquired into the
previous uses and ownership of the Real Property. Based on that due diligence,
each of the Indemnitors represents and warrants that to the best of its
knowledge, no hazardous substance has been disposed of or released or otherwise
exists in, on, under or onto the Real Property, except in amount which would not
result in a material adverse effect on the business of Indemnitors or the
guarantors, taken as a whole, or as the Indemnitors have disclosed to the Bank
in writing.
10.3 Compliance Regarding Hazardous Substances. Each Indemnitor has
-----------------------------------------
complied, and will comply and take commercially reasonable steps to cause all
occupants of the Real Property to comply, in all material respects, with all
laws, regulations and ordinances governing or applicable to hazardous substances
which apply or pertain to the Real Property or the operations of the
Indemnitors.
10.4 Notices Regarding Hazardous Substances. Until full repayment of the
--------------------------------------
loan, the Indemnitors will promptly notify the Bank if it knows, suspects or
believes there may be any hazardous substance in or around the Real Property, or
in the soil, groundwater or soil vapor on or under the Real Property, or that
any of the Indemnitors or the Real Property may be subject to any threatened or
pending investigation by any governmental agency under any law, regulation or
ordinance pertaining to any hazardous substance which would have a material
adverse effect on the Indemnitors and the guarantors, taken as a whole.
10.5 Continuation of Indemnity. The Indemnitors' obligations to the
-------------------------
Bank under this Article, except the obligation to give notices to the Bank,
shall survive termination of this Agreement and repayment of the Indemnitors'
obligations to the Bank under this Agreement for a period of two years, and
shall also survive as unsecured obligations after any acquisition by the Bank of
the collateral securing this Agreement, including the Real Property or any part
of it, except upon foreclosure.
10.6 Definition of Hazardous Substance. For purposes of this Agreement,
---------------------------------
the term "hazardous substances" means any substance which is or becomes
--------------------
designated as "hazardous" or "toxic" under any
CREDIT AGREEMENT--Page 25
<PAGE>
federal, state or local law pertaining to protection or conservation of the
environment.
11. DEFAULT
-------
If any of the following events occur (each an "Event of Default"), the Bank
may do one or more of the following: (i) declare the Borrower in default, (ii)
stop making any additional credit available to the Borrower, (iii) exercise any
and all rights and remedies as may be available to the Bank under the terms of
any collateral documents, security instruments, debt instruments or any other
document or instrument executed in connection herewith or in any way related
hereto, (iv) exercise any and all rights and remedies as may be available to the
Bank at law or in equity, and (v) declare the entire debt created and evidenced
hereby to be immediately due and payable in full, whereupon the entire unpaid
principal indebtedness evidenced hereby, and all accrued unpaid interest
thereon, shall at once mature and become due and payable without presentment,
demand, protest, grace or notice of any kind (including, without limitation,
notice of intent to accelerate, notice of acceleration or notice of protest),
all of which are hereby severally waived by the Borrower. If a bankruptcy
petition is filed against the Borrower, the entire debt outstanding under this
Agreement will automatically be due immediately.
11.1 Failure to Pay. The Borrower fails to make a payment under this
--------------
Agreement within ten (10) days of the date due.
11.2 Lien Priority. The Bank fails to have an enforceable first lien
-------------
(except for any prior liens to which the Bank has consented in writing) on or
security interest in any property given as security for this loan, and such
failure continues for a period of thirty (30) days following notice thereof to
the Borrower.
11.3 False Information. The Borrower has given the Bank materially
-----------------
false or materially misleading information or representations.
11.4 Bankruptcy. The Borrower (or any guarantor) files a bankruptcy
----------
petition, a bankruptcy petition is filed against the Borrower (or any
guarantor), or the Borrower (or any guarantor) makes a general assignment for
the benefit of creditors. The default will be deemed cured if any involuntary
bankruptcy petition filed against the Borrower (or any guarantor) is dismissed
within a period of 60 days after the filing; provided, however, that the Bank
will not be obligated to extend any additional credit to the Borrower during
that period.
CREDIT AGREEMENT--Page 26
<PAGE>
11.5 Receivers. A receiver or similar official is appointed for the
---------
Borrower's (or any guarantor's) business, or the business is terminated.
11.6 Judgments. Any judgments or arbitration awards are entered against
---------
the Borrower (or any guarantor), or the Borrower (or any guarantor) enters into
any settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Five Hundred Thousand Dollars ($500,000) or more in excess
of any insurance coverage, and such judgment or settlement is not paid, stayed
or released within thirty (30) days of becoming final.
11.7 Material Adverse Change. A material adverse change occurs in the
-----------------------
Borrower's (or any guarantor's) financial condition, properties or prospects,
or ability to repay the loan.
11.8 Cross-default. Any default occurs and continues beyond any
-------------
applicable cure period under any agreement in connection with any credit
(including without limitation, the Subordinated Debt) the Borrower (or any
guarantor) has obtained from anyone else or which the Borrower (or any
guarantor) has guaranteed (in each case) in the amount of Five Hundred
Thousand Dollars ($500,000).
11.9 Default under Guaranty or Subordination Agreement. Any guaranty,
-------------------------------------------------
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is violated or no longer in effect, and such
violation or ineffectiveness is not cured within thirty (30) days following
notice thereof from the Bank.
11.10 Other Bank Agreements. The Borrower (or any guarantor) fails to
---------------------
meet the conditions of, or fails to perform any obligation under any other
agreement the Borrower (or any guarantor) has with the Bank or any affiliate of
the Bank, and such failure is not cured within thirty (30) days following notice
thereof from the Bank.
11.11 ERISA Plans. The occurrence of any one or more of the following
-----------
events with respect to the Borrower, provided such event or events could
reasonably be expected, in the judgment of the Bank, to subject the Borrower to
any tax, penalty or liability (or any combination of the foregoing) which, in
the aggregate, could have a material adverse effect on the financial condition
of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is, in
the reasonable judgment of the Bank likely to result in the termination of
such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate
a Plan) or the Borrower's full or partial withdrawal from a Plan.
CREDIT AGREEMENT--Page 27
<PAGE>
11.12 Financial Covenants. The Borrower fails to meet the conditions
-------------------
of, or fails to perform any obligation under, or allows to exist any breach
of, any term, representation, warranty, or covenant contained in Article 9 of
this Agreement.
11.13 Other Breach Under Agreement. The Borrower fails to meet the
----------------------------
conditions of, or fails to perform any obligation under, or allows to exist
any breach of, any term, representation, warranty, or covenant of this
Agreement not specifically referred to in this Article, and such failure or
allowance continues for a period of thirty (30) days following notice thereof
to the Borrower.
12. ENFORCING THIS AGREEMENT; MISCELLANEOUS
---------------------------------------
12.1 GAAP. Except as otherwise stated in this Agreement, all financial
----
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
12.2 Governing Law. This Agreement is governed by Texas law.
-------------
12.3 Successors and Assigns. This Agreement is binding on the
----------------------
Borrower's and the Bank's successors and assignees. The Borrower agrees that it
may not assign this Agreement without the Bank's prior consent. The Bank may
sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees, provided that such potential participants and assignees agree to keep
non-public information regarding Borrower confidential. If a participation is
sold or the loan is assigned, the purchaser will have the right of set-off
against the Borrower.
12.4 Arbitration.
-----------
(a) This paragraph concerns the resolution of any controversies or
claims between the Borrower and the Bank, including but not limited to
those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered
in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
CREDIT AGREEMENT--Page 28
<PAGE>
(b) At the request of the Borrower or the Bank, any such controversies
or claims will be settled by arbitration in accordance with the United
States Arbitration Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN
THOUGH THIS AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration. The arbitration will be conducted within Dallas County, Texas.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether any
such claim or controversy is barred by the statute of limitations and, if
so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the
Bank to:
(i) exercise self-help remedies such as set-off;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(h) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including the
suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
12.5 Severability; Waivers. If any part of this Agreement is not
---------------------
enforceable, the rest of the Agreement may be enforced. The
CREDIT AGREEMENT--Page 29
<PAGE>
Bank retains all rights, even if it makes a loan after default. If the Bank
waives a default, it may enforce a later default. Any consent or waiver under
this Agreement must be in writing.
12.6 Costs. If the Bank incurs any expenses in connection with
-----
administering or enforcing this Agreement, or if the Bank takes collection
action under this Agreement, it is entitled to costs and reasonable attorneys'
fees, including any allocated costs of in-house counsel.
12.7 Attorneys' Fees. In the event of a lawsuit or arbitration
---------------
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees (including any allocated costs of in-house counsel) incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.
12.8 Multiple Borrowers. If two or more borrowers sign this Agreement,
------------------
each will be individually obligated to repay the Bank in full, and all will be
obligated together.
12.9 Verification of Receivables. After the occurrence of an Event of
---------------------------
Default, the Bank may at any time, either orally or in writing, request
confirmation from any debtor of the current amount and status of the accounts
receivable upon which such debtor is obligated.
12.10 Indemnification. The Borrower agrees to indemnify the Bank
---------------
against, and hold the Bank harmless from, all claims, actions, losses, costs
and expenses (including reasonable attorneys' fees and allocated costs for in-
house legal services) incurred by the Bank and arising from any contention,
whether well-founded or otherwise, that there has been a failure to comply
with any law regulating the Borrower's sales or leases to or performance of
services for debtors obligated upon the Borrower's accounts receivable and
disclosures in connection therewith. This indemnity will survive repayment of
the Borrower's obligations to the Bank and termination of this Agreement.
12.11 Notices. All notices required under this Agreement shall be
-------
personally delivered by overnight carrier or sent by first class mail, postage
prepaid, to the addresses on the signature page of this Agreement, or to such
other addresses as the Bank and the Borrower may specify from time to time in
writing. Notices sent by first class mail shall be deemed received three (3)
days after deposit in the mail.
12.12 Headings. Article and paragraph headings are for reference only
--------
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
12.13 Counterparts. This Agreement may be executed in as many
------------
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed,
CREDIT AGREEMENT--Page 30
<PAGE>
shall be deemed an original but all such counterparts shall constitute but one
and the same agreement.
12.14 Usury Laws. It is the intention of the parties hereto to comply
----------
with applicable usury laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Agreement or in any of the documents
evidencing or securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such instruments or documents require or permit the
payment, charging, taking, reserving or receiving of any sums constituting
interest, as defined under applicable usury laws, in excess of the maximum
amount permitted by such laws. If any such excess of interest is contracted for,
paid, charged, taken, reserved or received under this Agreement or under the
terms of any of the documents evidencing or securing payment hereof or otherwise
relating hereto, or in any communication by Bank or any other person to Borrower
or any other party liable for the payment of the indebtedness evidenced hereby,
or if the maturity of the indebtedness is accelerated in whole or in part, or in
the event that all or part of the principal or interest shall be prepaid, so
that under any of such circumstances or under any other circumstances
whatsoever, the amount of interest contracted for, paid, charged, taken,
reserved or received under this Agreement or under any of the documents securing
payment hereof or otherwise relating hereto, on the amount of principal actually
outstanding from time to time shall exceed the maximum amount of interest
permitted by applicable usury laws, then in any such event (i) the provisions of
this Section shall govern and control, (ii) any such excess shall be canceled
automatically to the extent of such excess, and shall not be collected or
collectible, (iii) any such excess which is or has been received shall be
credited against the then unpaid principal balance hereof or refunded to
Borrower, at the Bank's option, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable laws
as construed by courts having jurisdiction hereof or thereof. It is further
agreed that, without limitation of the foregoing, all calculations of the rate
of interest contracted for, paid charged, taken, reserved or received under this
Agreement or under such other documents or instruments that are made for the
purpose of determining whether such rate exceeds the maximum lawful rate of
interest, shall be made, to the extent permitted by applicable usury laws, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of the indebtedness, all interest at any time contracted
for, paid, charged, taken, reserved or received from the Borrower or otherwise
by the holder or holders thereof. The terms of this Section shall be deemed to
be incorporated in every loan document, security instrument, debt instrument and
communication relating to this Agreement and the loan evidenced hereby. The
term "applicable usury laws" shall mean such laws of the State of Texas or the
---------------------
laws of the United States, whichever laws allow the higher rate of interest, as
such laws now exist; provided, however, that if such laws shall hereafter allow
-------- -------
higher
CREDIT AGREEMENT--Page 31
<PAGE>
rates of interest,then the applicable usury laws shall be the laws allowing the
higher rates, to be effective as of the effective date of such laws.
12.15 Restatement. This Agreement is a renewal, amendment,
-----------
modification, and restatement of that certain Loan and Security Agreement dated
April 26, 1994 executed by Borrower payable to the order of Bank One, Milwaukee,
National Association ("Bank One"), which is to be assigned to Bank pursuant to
that certain Master Assignment of Note and Security Documents executed by Bank
One in favor of Bank, to be dated on or about May 22, 1995.
12.16 NO ORAL AGREEMENTS. This Agreement and any related security or other
------------------
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the
Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and
the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete
and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[This space intentionally left blank.]
CREDIT AGREEMENT--Page 32
<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA TEXAS, N.A. STEVENS GRAPHICS CORPORATION
By ________________________ By ________________________
Donald P. Hellman Paul I. Stevens
Vice President Chief Executive Officer
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
1925 W. John Carpenter Freeway 5500 Airport Freeway
Irving, Texas 75063-3224 Fort Worth, Texas 76117
_______________
>INITIAL HERE>
>> Acknowledgment of Prepayment Fees. The Borrower acknowledges that
---------------------------------
prepayment of all or any portion of the loan bearing interest at an optional
interest rate may result in the Bank incurring additional costs, expenses and/or
liabilities. The Borrower therefore agrees to pay the prepayment fee described
in the "Optional Interest Rates" section of this Agreement if all or any portion
of the optional interest rate loan(s) is prepaid. The Borrower agrees that the
fee represents a reasonable estimate of the prepayment costs, expenses and/or
liabilities of the Bank. The Borrower further acknowledges that the Bank's
willingness to offer an optional interest rate to the Borrower is sufficient and
independent consideration for this agreement to pay the fee.
CREDIT AGREEMENT--Page 33
<PAGE>
Joinder of Indemnitors.
----------------------
Hamilton-Stevens Group, Inc. and Zerand-Bernal Group, Inc. join in this
Agreement solely for the purpose of the indemnifications and other agreements
set forth in Article 10 of this Agreement.
Hamilton-Stevens Group, Inc.
By: _______________________________
George A. Wiederaenders
Treasurer
Zerand-Bernal Group, Inc.
By: _______________________________
George A. Wiederaenders
Treasurer
Exhibits:
-----------
A - Permitted Liens
B - Borrowing Certificate
C - Agreement for Standby Letter of Credit
D - Letter of Credit Fees
E - Real Property
F - Subsidiaries
G - Lawsuits
H - Compliance Certificate
I - Letters of Credit
CREDIT AGREEMENT--Page 34
<PAGE>
EXHIBIT 11.1
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATIONS OF NET INCOME PER COMMON SHARE
(UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
1994 1995 1994 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Primary and fully diluted:
Weighted average shares outstanding 9,028 9,388 9,028 9,388
Assumed exercise of Series A and B stock
options (Treasury stock method) 86 176 106 196
------ ------ ------ ------
Total common share equivalents 9,114 9,564 9,134 9,584
====== ====== ====== ======
Net income $ 163 $1,552 $ 235 $3,000
====== ====== ====== ======
Per share amounts - primary and fully diluted:
Net income $ 0.02 $ 0.16 $ 0.03 $ 0.31
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF STEVENS INTERNATIONAL, INC. AND
SUBSIDIARIES AS OF JUNE 30, 1995 AND FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 230
<SECURITIES> 0
<RECEIVABLES> 22,163
<ALLOWANCES> 502
<INVENTORY> 22,791
<CURRENT-ASSETS> 56,871
<PP&E> 53,432
<DEPRECIATION> 22,079
<TOTAL-ASSETS> 104,362
<CURRENT-LIABILITIES> 28,589
<BONDS> 24,507
<COMMON> 941
0
0
<OTHER-SE> 43,562
<TOTAL-LIABILITY-AND-EQUITY> 104,362
<SALES> 70,516
<TOTAL-REVENUES> 70,516
<CGS> 53,800
<TOTAL-COSTS> 53,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,631
<INCOME-PRETAX> 5,404
<INCOME-TAX> 3,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,000
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
