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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, 1997
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or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 1-9603
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STEVENS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-2159407
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5500 Airport Freeway, Fort Worth, Texas 76117
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(Address of principal executive offices) (zip code)
817/831-3911
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(Registrant's telephone number, including area code)
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(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 8,1997
- ------------------------------- -----------------------------
Series A Stock, $0.10 Par Value 7,339,468
Series B Stock, $0.10 Par Value 2,110,634
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
December 31, 1996 and June 30, 1997
(unaudited)
Consolidated Condensed Statements of Operations 4
Three and Six months ended June 30, 1997 and 1996
(unaudited)
Consolidated Condensed Statements of 5
Stockholders' Equity December 31, 1996 and Six
months ended June 30, 1997 (unaudited)
Consolidated Condensed Statements of Cash Flows 6
Six months ended June 30, 1997 and 1996 (unaudited)
Notes to Consolidated Condensed Financial Statements 7
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security 14
Holders
Item 6. Exhibits and Reports on Form 8-K 14
2
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
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(unaudited)
<S> <C> C>
ASSETS
Current assets:
Cash........................................................... $ 3,338 $ 183
Temporary investments.......................................... -- 1,360
Trade accounts receivable, less allowance for losses of
$4,225 and $3,496 in 1996 and 1997, respectively.............. 11,777 7,025
Costs and estimated earnings in excess of billings on
long-term contracts........................................... 4,263 2,547
Inventory (Note 3)............................................. 14,169 14,197
Refundable income taxes........................................ 2,464 68
Other current assets........................................... 2,095 485
Assets held for sale (Note 6)................................. 14,250 --
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Total current assets............................... 52,356 25,865
Property, plant and equipment.................................... 17,957 16,618
Other assets, net................................................ 7,104 6,842
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$ 77,417 $ 49,325
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable......................................... $ 9,834 $ 4,502
Billings in excess of costs and estimated earnings on
long-term contracts........................................... 1,544 203
Other current liabilities...................................... 11,697 9,531
Customer deposits.............................................. 2,064 1,470
Advances from affiliates....................................... 950 950
Current portion of long-term debt (Note 4).................... 37,743 25,700
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Total current liabilities.......................... 63,832 42,356
Long-term debt................................................... 113 58
Deferred pension costs........................................... 2,576 2,576
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.10 par value, 2,000,000 shares
authorized, none issued and outstanding
Series A common stock, $0.10 par value, 20,000,000
shares authorized, 7,340,000 shares
issued and outstanding at December 31, 1996 and
June 30, 1997................................................. 734 734
Series B common stock, $0.10 par value, 6,000,000
shares authorized, 2,111,000 shares
issued and outstanding at December 31, 1996 and
June 30, 1997................................................. 211 211
Additional paid-in-capital..................................... 39,844 39,844
Foreign currency translation adjustment........................ (167) (324)
Excess pension liability adjustment............................ (1,466) (1,466)
Retained earnings (deficit).................................... (28,260) (34,664)
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Total stockholders' equity..................................... 10,896 4,335
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$ 77,417 $ 49,325
========= ========
</TABLE>
See notes to consolidated condensed financial statements.
3
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1997 1996 1997
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Net sales............................ $18,732 $ 7,311 $41,345 $ 16,091
Cost of sales........................ 16,680 7,883 35,474 15,712
------- ------- -------- -----------
Gross profit (loss).................. 2,052 (572) 5,871 379
Selling, general and administrative
expenses............................ 4,446 1,846 9,291 4,753
Restructuring charge................. 1,000 -- 1,000 --
------- ------- -------- -----------
Operating income (loss).............. (3,394) (2,418) (4,420) (4,374)
Other income (expense):
Interest income...................... 24 3 38 15
Interest expense..................... (1,026) (805) (1,957) (1,869)
Lawsuit settlement expense (Note 5).. (700) -- (700) --
Other, net........................... (198) (185) (315) (176)
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(1,900) (987) (2,934) (2,030)
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Income (loss) before income taxes.... (5,294) (3,405) (7,354) (6,404)
Income tax (expense) benefit......... 1,553 -- 2,528 --
------- ------- -------- -----------
Net income (loss).................... $(3,741) $(3,405) $(4,826) $ (6,404)
======= ======= ======= ========
Net income (loss) per common share
(Note 7)............................ $(0.40) $(0.36) $(0.51) $(0.68)
======= ======= ======= ========
Weighted average number of shares of
common and common stock equivalents
outstanding during the periods
(Note 7)............................ 9,451 9,451 9,451 9,451
======= ======= ======= ========
</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, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES AMOUNT
-------- ----------
<S> <C> <C>
Series A Stock
Balance, December 31, 1996............................ 7,340 $ 734
Conversion of Series B stock to Series A stock........ -- --
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Balance, June 30, 1997................................ 7,340 $ 734
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Series B Stock
Balance, December 31, 1996............................ 2,111 $ 211
Conversion of Series B stock to Series A Stock........ -- --
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Balance, June 30, 1997................................ 2,111 $ 211
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Additional Paid-In Capital
Balance, December 31, 1996............................ $ 39,844
--------
Balance, June 30, 1997................................ $ 39,844
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Foreign Currency Adjustment
Balance, December 31, 1996............................ $ (167)
Translation Adjustments............................... (157)
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Balance, June 30, 1997................................ $ (324)
========
Pension Liability Adjustment
Balance, December 31, 1996............................ $ (1,466)
--------
Balance, June 30, 1997................................ $ (1,466)
========
Retained Earnings (Deficit)
Balance, December 31, 1996............................ $(28,260)
Net (loss) for six months ended June 30, 1997......... (6,404)
--------
Balance, June 30, 1997................................ $(34,664)
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Stockholders' Equity at June 30, 1997................... $ 4,335
========
</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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1996 1997
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<S> <C> <C>
Cash provided by operations:
Net (loss)............................................... $(4,826) $ (6,404)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization............................ 2,761 1,588
Deferred and refundable taxes............................ (2,661) --
Lawsuit settlement expense............................... 700 --
Other.................................................... (327) (157)
Changes in operating assets and liabilities:
Trade accounts receivable................................ 4,339 4,752
Contract costs in excess of billings..................... 5,608 375
Inventory................................................ (2,530) (28)
Refundable income taxes.................................. -- 2,396
Other assets............................................. (838) 1,746
Trade accounts payable................................... (720) (5,332)
Other liabilities........................................ (1,116) (2,760)
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Total cash provided by (used in ) operating activities..... 390 (3,824)
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Cash provided by (used in ) investing activities:
Additions to property, plant and equipment............... (679) (27)
Deposits and other....................................... 113 --
Disposal of Bernal Division.............................. -- 14,298
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Total cash provided by (used in) investing activities...... (566) 14,271
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Cash provided by (used in) financing activities:
Net proceeds from (repayments of) long-term debt......... (3,489) (12,242)
Increase in current portion of long-term debt............ 3,568 --
------- --------
Total cash provided by (used in) financing activities...... 79 (12,242)
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Decrease in cash and temporary investments................. (97) (1,795)
Cash and temporary investments at beginning of period...... 814 3,338
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Cash and temporary investments at end of period............ $ 717 $ 1,543
======= ========
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest............................................... $ 1,525 $ 532
Income taxes........................................... 90 (2,311)
</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. The consolidated condensed balance sheet as of June 30, 1997, the
consolidated condensed statement of stockholders' equity for the period
ended June 30, 1997, the consolidated condensed statements of operations for
the three and six months ended June 30, 1997 and 1996, 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, 1997 and the results
of operations for the three and six months ended June 30, 1997 and 1996 and
the cash flows for the six months ended June 30, 1997 and 1996 have been
made. The December 31, 1996 consolidated condensed balance sheet is derived
from the audited consolidated balance sheet as of that date. Complete
financial statements for December 31, 1996 and related notes thereto are
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 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 1996 Form 10-K. The results of operations for the three and
six months ended June 30, 1997 and 1996 are not necessarily indicative of
the results to be expected for the full year.
2. The Company designs, manufactures, markets and services web-fed packaging
and printing systems and related equipment for its customers in the
packaging industry and in the specialty/commercial and banknote and security
segments of the printing industry. The Company also markets and manufactures
high-speed image processing systems primarily for use in the banknote and
security printing industry. In addition, the Company is a worldwide leader
in the manufacture of platen die cutting and creasing equipment. The Company
manufactures equipment capable of converting and printing, among other
items, food and beverage containers, liquid container cartons, banknotes,
postage stamps, lottery tickets, direct mail inserts, personal checks and
business forms. The Company has the technological and engineering expertise
to combine any of the four major printing methods (offset, flexography,
rotogravure and intaglio) together with cutters and creasers and product
delivery systems into a single system. 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,
1996 1997
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(Amounts in thousands)
<S> <C> <C>
Finished product $ 5,205 $ 2,569
Work in progress 4,026 3,538
Raw materials 4,938 8,090
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$14,169 $14,197
======= =======
</TABLE>
4. For a description of the restructured bank credit facility and Senior
Subordinated Notes at August 1, 1997, see "Liquidity and Capital Resources".
Substantially all assets of the Company continue to be pledged as collateral
on the Company's credit facilities. The senior and senior subordinated debt
is classified as a current liability and is recorded net of unamortized debt
issue costs of $0.4 million at June 30, 1997.
5. The Company has been the subject of lawsuits, from time to time, with
respect to the Company's inability to pay certain vendors on a timely basis.
To date, most of such actions have been settled, but there can be no
assurance that the Company, if named a defendant in such actions in the
future, will be able to settle such claims in the future. In addition, the
Company is subject to various claims, including product liability claims,
which arise in the ordinary course of business, and is a party to various
legal proceedings that constitute ordinary routine litigation incidental to
the Company's business. A successful product liability claim brought against
the Company in excess of its product liability coverage could have a
material adverse effect upon the Company's business, operating results and
financial condition.
In management's opinion, other than with respect to collection lawsuits, the
Company has adequate legal defenses and/or insurance coverage in respect to
each of these legal 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 1996 Form 10-K.
6. In March 1997, the Company sold substantially all of the assets of its
Bernal Division ("Bernal") including the product technology and related
intangibles to Bernal International, Inc., a new company formed for the
asset purchase. The cash proceeds were approximately $15 million, and in
addition, the purchaser assumed certain liabilities of Bernal approximating
$5 million, including the accounts payable. This transaction resulted in a
$12 million permanent reduction of availability under the Company's bank
credit agreement. For the year ended December 31, 1996, Bernal contributed
sales of approximately $17.8 million and approximately $0.7 million income
before interest, corporate charges and taxes, of which $10.6 million in
sales and $1.0 million in income before interest, corporate charges and
taxes were recorded in the first six months of 1996. The loss on the sale of
Bernal net assets of approximately $3.5 million was reflected in the 1996
results of operations.
8
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7. Due to accumulated losses, there are no recoverable income taxes for the
three and six months ended June 30, 1997. The benefit of recoverable income
tax expense for the three and six months ended June 30, 1996 was $1,553,000
and $2,528,000, respectively, which was principally related to reductions in
currently payable taxes.
8. Earnings (loss) per common share for 1997 and 1996 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Sales The Company's sales for the six months ended June 30, 1997 decreased by
- -----
$25.3 million (or 61.1%) compared to sales in the same period in 1996 due
primarily to sales decreases in the packaging systems divisions ($14.7 million),
specialty web products division ($9.6 million) and banknote printing equipment
division ($0.8 million) offset by increases in sales at the French service and
repair division ($0.2 million). Sales and gross profit in 1997 include $0.7
million in proceeds from the sale of certain press system contract rights. The
Company sold these rights in lieu of a long repossession and resale process. The
packaging systems divisions decrease included $10.6 million of Bernal sales
which division was sold by the Company in the first quarter of 1997.
Gross Profit The Company's gross profit for the six months ended June 30, 1997
- ------------
decreased by $5.5 million compared to gross profit in the same period in 1996
due primarily to decreased sales volume for packaging systems and specialty web
products. Gross profit margin for 1997 decreased to 2.4% of sales as compared to
14.2% for 1996. This decrease in gross profit margin in 1997 was due primarily
to absorption of fixed costs over a lower volume of sales and costs incurred in
completing the Automatic Currency Examination ("ACE") system for the Bank of
England Printing Works. Sales and gross profit in 1997 include $0.7 million in
proceeds from the sale of certain press system contract rights. The Company sold
these rights in lieu of a long repossession and resale process.
Selling, General and Administrative Expenses The Company's selling, general and
- --------------------------------------------
administrative expenses decreased by $4.5 million (or 48.8%) for the six months
ended June 30, 1997 compared to the same period in 1996 due to cost reduction
efforts at corporate headquarters and at all divisions in connection with the
reduced volume of sales, the sale of Bernal, and a reduction in the allowance
for losses on collection of trade accounts receivable in the 1997 period.
Selling, general and administrative expenses for the six months ended June 30,
1997 were 29.5% of sales compared to 22.5% of sales for the same period in 1996
due to the decrease in sales in 1997 described above.
9
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Other Income (Expense) The Company's interest expense decreased by $0.1
- ----------------------
million for the six months ended June 30, 1997 compared to the same period in
1996 due to the reduced borrowings in 1997 resulting from the application of
Bernal sale proceeds to pay down bank indebtedness, offset by an increased cost
of borrowing in 1997. Interest income was approximately the same for the six
months ended June 30, 1997 as compared to interest income in the same period in
1996.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Sales The Company's sales for the three months ended June 30, 1997 decreased by
- -----
$11.4 million (or 61%) compared to sales in the same period in 1996 due
primarily to sales decreases in the packaging systems divisions ($7.3 million),
specialty web products division ($3.4 million) and banknote printing equipment
division ($0.6 million) offset by increases in sales at the French service and
repair division ($0.1 million). The packaging systems divisions decrease
included $6.2 million of Bernal sales which division was sold by the Company in
the first quarter of 1997.
Gross Profit (Loss) The Company's gross profit (loss) for the three months
- -------------------
ended June 30, 1997 decreased by $2.6 million compared to gross profit in the
same period in 1996 due primarily to decreased sales volume for packaging
systems and specialty web products. Gross profit margin for 1997 decreased to
(-7.8%) of sales as compared to 11.0% for 1996. This decrease in gross profit
margin in 1997 was due primarily to absorption of fixed costs over a lower
volume of sales and cost incurred in completing the ACE system.
Selling, General and Administrative Expenses The Company's selling, general and
- --------------------------------------------
administrative expenses decreased by $2.6 million (or 58.5%) for the three
months ended June 30, 1997 compared to the same period in 1996 due to cost
reduction efforts at corporate headquarters and at all divisions in connection
with the reduced volume of sales, the sale of Bernal, and a reduction in the
allowance for losses on collection of trade accounts receivable in the 1997
period. Selling, general and administrative expenses for the three months ended
June 30, 1997 were 25.2 % of sales compared to 23.7% of sales for the same
period in 1996 due to the decrease in sales in 1997 described above.
Other Income (Expense) The Company's interest expense decreased by $0.2
- ----------------------
million for the three months ended June 30, 1997 compared to the same period in
1996 due to the reduced borrowings in 1997 resulting from the application of the
Bernal sale proceeds to pay down bank indebtedness, offset by an increased cost
of borrowing in 1997. Interest income decreased slightly for the three months
ended June 30, 1997 as compared to interest income in the same period in 1996.
TAX MATTERS
The Company's effective state and federal income tax rate ("effective tax rate")
was 0% and 29.3% for the three months and 0% and 34.4% for the six months ended
June 30, 1997 and 1996, respectively. Due to continuing losses in 1997, there
are no recoverable tax benefits for the three and six months ended June 30,
1997. The 1996 effective tax rate was due to recoverable taxes in 1996 and
certain research and experimental expenditure tax credits that were recorded in
March 1996.
10
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LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
As a result of its cash collections and the sale of Bernal (see Note 6 of Notes
to Consolidated Condensed Financial Statements), the Company was able to make
principal payments on its bank credit facility of $2 million and $15 million in
January and March, 1997, respectively. These transactions and normal working
capital advances decreased the Company's net direct bank borrowings from $23.1
million at December 31, 1996 to $10.8 million at June 30, 1997.
The Company requires capital primarily to fund its ongoing operations, to
service its existing debt and to pursue its strategic objectives including new
product development and penetration of international markets. The Company's
working capital needs typically increase because of a number of factors,
including the duration of the manufacturing process and the relatively large
size of most orders.
Net cash provided by (used in) operating activities (before working capital
requirements) was ($4.97) and ($4.35) million for the six months ended June 30,
1997 and 1996, respectively. Working capital provided cash of $1.15 and $4.74
million for the six months ended June 30, 1997 and 1996, respectively. The
Company's working capital needs increase during periods of sales growth because
of a number of factors, including the duration of the manufacturing process and
the relatively large size of most orders. During periods of sales decline such
as 1996 and the first six months of 1997, the Company's working capital provides
cash as receivables are collected and inventory is utilized.
In August 1997, the Company, its bank lender and the holders ("Note Holders") of
the Company's Senior Subordinated Notes due June 30, 2000 ("Senior Subordinated
Notes") entered into agreements providing for the modification of the bank
credit facility and the agreement governing the Senior Subordinated Notes. These
agreements provided for the waiver of all prior defaults; revised financial
covenants, including a minimum net worth requirement of $2 million; certain
limitations on permitting refinancings of the bank credit facility; payment of
$100,000 in interest on the Senior Subordinated Notes in August, 1997, with an
additional payment of $200,000 in interest in December, 1997, and $1.03 million
in interest and fees added to principal of the Senior Subordinated Notes and due
on June 30, 2000; and an increase in the interest rate under the bank credit
facility to 2.5% over the bank's prime rate of interest. Substantially all of
the assets of the Company continue to serve as collateral for the indebtedness
evidenced by the bank credit facility and the Senior Subordinated Notes. In
addition, the modifications contemplate sales of certain assets of the Company
in order to further reduce bank indebtedness, subject to approval of the bank,
prior to December 31, 1997 and May 31, 1998.
At June 30, 1997, the Company's indebtedness was comprised primarily of a bank
credit facility due December 31, 1997 and the Company's Senior Subordinated
Notes due June 30, 2000. In addition, the Company's Chairman has loaned the
Company $950,000 as described below. As of June 30, 1997, there was outstanding
$15.3 million in Senior Subordinated Notes, bearing interest at the rate of
10.5% per annum, with principal payments of $7.2 million being due on June 30,
1998, $4.0 million due on June 30, 1999, and a final payment of $5.1 million at
maturity, including $1.03 million in interest and fees per the August 1997
agreement with the Note Holders. The Senior
11
<PAGE>
Subordinated Notes are classified as currently payable since the Company has not
completed the sale of certain assets being offered for sale.
Under its credit facility at June 30, 1997 and under the August 1997
modification discussed earlier, the Company's maximum borrowings were limited to
a borrowing base formula, which could not exceed $14.7 million in the form of
direct borrowings and letters of credit. As of June 30, 1997 there was $10.8
million in direct borrowings and $0.1 million in standby letters of credit
outstanding under the bank credit facility, with additional availability for
such borrowings of $0.4 million as determined by the borrowing base formula.
At June 30, 1997, $10.8 million of the Company's bank borrowings were at the
lender's prime rate of interest (8.50%) plus 1.75%, or a total of 10.25%
interest. The amounts borrowed under the credit facility have been used for
working capital. As indicated above, effective August 1, 1997 the interest rate
on the bank credit facility increased to 2.5% over the lender's prime rate.
The borrowings under the bank credit facility and Senior Subordinated Notes
agreement are subject to various restrictive covenants related to financial
ratios as well as limitations on capital expenditures and additional
indebtedness. The Company is not allowed to pay dividends.
With the sale of Bernal, and assuming that one of several strategic, financial
alternatives, principally the additional sale of assets, among others presently
being pursued by the Company is consummated, management believes that cash flow
from operations will be adequate to fund its existing operations and repay
scheduled indebtedness over the next 12 months.
There can be no assurance that future sales of assets, if any, can be
successfully accomplished on terms acceptable to the Company. Under current
circumstances, the Company's ability to continue as a going concern depends upon
the further redeployment of assets and the sale of certain assets by December
31, 1997, and a return to profitable operations. If the Company is unsuccessful
in these efforts, it may be unable to comply with the covenants in its debt
agreements, as well as other obligations, making it necessary to undertake such
other actions as may be appropriate to preserve asset values.
In addition, the Company may incur, from time to time subject to the approval of
the bank and Note Holders, additional short- and long-term bank indebtedness
(under its existing credit facility or otherwise) and may issue, in public or
private transactions, its equity and debt securities to provide additional funds
necessary for the continued pursuit of the Company's operational strategies. The
availability and terms of any such sources of financing will depend on market
and other conditions. There can be no assurance that such additional financing
will be available or, if available, will be on terms and conditions acceptable
to the Company. In 1996, the Company's Chairman and Chief Executive Officer
loaned the Company $950,000 for its short-term cash requirements which is to be
mandatorily repaid from proceeds of the Banque de France receivable
(approximately $1.7 million). The Chairman has agreed with the Company's bank
not to seek repayment until after December 31, 1997. Although the Banque de
France receivable has been collected, as of June 30, 1997, this loan from the
Chairman had not been repaid.
The success of the Company's plans will continue to be impacted by its ability
to achieve timely deliveries, final acceptance of the ACE system by the Bank of
England, improved terms of domestic
12
<PAGE>
orders, and timely implementation of cost reduction measures. While the Company
believes it is making significant progress in these areas, there can be no
assurance that the Company will be successful in these endeavors.
Backlog and Orders The Company's backlog of unfilled orders at June 30, 1997
- ------------------
was approximately $13.8 million compared to $20.7 million at December 31, 1996,
a decrease of (33%). The backlog decrease included $5.5 million of specialty web
and $2.3 million of packaging equipment as compared to year-end 1996, offset by
small changes in the Company's other divisions. The backlog at June 30 in each
of the preceding five years has ranged from a low of $27.4 million in 1996 to a
high of $65.0 million in 1995.
The reduction in backlog is the result of a reduced order flow in 1997 and 1996.
Orders for the six months ended June 30, 1997 were $9.4 million compared to
$29.8 for the comparable period in 1996, a decrease of $20.4 million, including
a $7.9 million decrease due to the sale of Bernal, while shipments decreased
$25.2 million. The Company believes the reduced order flow is the result of
fluctuations in the flow of major printing and packaging system orders, certain
product performance issues, and in part to liquidity problems faced by the
Company. As a result, the Company is continuing to adjust its rate of future
production and accompanying costs to match this reduced order flow.
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
In 1996, the Company filed a suit seeking damages and injunctive relief against
Paul W. Bergland, a former vice-president, for, among other things, theft of
trade secrets, fraud, breach of contract, and breach of a confidential
relationship. Discovery is ongoing. On March 3, 1997, Bergland filed his
original answer and a counterclaim. ConverTek, Inc., a corporation in which
Bergland claims an ownership interest, has joined the suit as a counter claimant
against the Company. The counterclaim alleges claims for defamation, tortious
interference with prospective business relationships and breach of contract
against the Company. It also seeks a declaratory judgment declaring that the
confidential information agreement and agreement not to compete signed by
Bergland are unenforceable. The Company denies all liability and intends to
prosecute its claims and defend the counterclaims vigorously.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1997 Annual Meeting of Stockholders (the "Meeting") on May
22, 1997. At the Meeting, the stockholders of the Company considered and voted
upon the following matters, with the results indicated:
(1) The following directors, constituting all of the directors of the Company,
were elected to serve as directors for the ensuing year:
<TABLE>
<CAPTION>
Series A Nominees Votes For Votes Withheld
----------------- --------- --------------
<S> <C> <C>
John W. Stodder 3,961,740 95,915
Edgar H. Schollmaier 3,962,890 94,765
Series B Nominees
-----------------
Paul I. Stevens 1,812,220 85
Richard I. Stevens 1,812,220 85
Constance I. Stevens 1,812,220 85
Robert H. Brown, Jr. 1,812,220 85
James D. Cavanaugh 1,812,220 85
Michel A. Destresse 1,812,220 85
</TABLE>
(2) The stockholders of the Company ratified the selection of Deloitte & Touche
as the Company's independent accountants to audit the Company's financial
statements for the 1997 fiscal year by the following vote:
Abstentions /
Votes For Votes Against Broker Non-Votes
--------- ------------- ----------------
5,833,435 17,800 18,725
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------
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 Sixth Amendment to Amended and Restated Senior Subordinated Note
Agreement and Waiver by and between Stevens International, Inc.,
Aetna Life Insurance Company, The Mutual Life Insurance Company of
New York, and MONY Life Insurance Company of America, dated July
31, 1997. (*)
10.2 Fifth Amendment to Credit Agreement by and between Bank of America
Texas, N.A., Stevens International, Inc., PMC Liquidation, Inc.,
and Printing and Packaging Equipment Finance Corporation, dated
July 31, 1997. (*)
14
<PAGE>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------
10.3 Second Amendment to Amended and Restated Subordination and
Intercreditor Agreement by and between Stevens International,
Inc., PMC Liquidation, Inc., Printing and Packaging Equipment
Finance Corporation, Aetna Life Insurance Company, The Mutual Life
Insurance Company of New York, MONY Life Insurance Company of
America, Bank of America Texas, N.A., and The Bank of New York,
dated July 31, 1997. (*)
11.1 Computation of Net Income per Common Share. (*)
27.1 Financial Data Schedule. (*)
- ------------------------
* Filed herewith.
(1) Previously filed as an exhibit to the Company'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 Company's Registration Statement on
Form S-1 (No. 33-15279) and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 33-24486) and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's report on Form 8-A filed
August 19, 1988 and incorporated herein by reference.
(b) The Registrant filed a Current Report on Form 8-K dated March 18, 1997
to report the sale of Bernal under Item 2. Acquisition or Disposition of Assets.
15
<PAGE>
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 11, 1997 By: /s/ Paul I. Stevens
------------------------
Paul I. Stevens
Chief Executive Officer
and Acting Chief Financial Officer
16
<PAGE>
EXHIBIT 10.1
SIXTH AMENDMENT TO AMENDED AND
RESTATED SENIOR SUBORDINATED NOTE AGREEMENT AND WAIVER
------------------------------------------------------
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED SENIOR SUBORDINATED NOTE
AGREEMENT AND WAIVER (this "Amendment and Waiver"), dated as of July 31, 1997,
--------------------
is executed by and among STEVENS INTERNATIONAL, INC., a Delaware corporation,
f/k/a Stevens Graphics Corporation ("Company"), and AETNA LIFE INSURANCE
-------
COMPANY, THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, AND MONY LIFE INSURANCE
COMPANY OF AMERICA (each such insurance company, together with its successors
and assigns, being hereinafter referred to individually as a "Purchaser," and
---------
collectively as the "Purchasers"), and each corporation listed on the signature
----------
pages hereof under the heading "Guarantors" (each such corporation, together
with any other person or entity that guarantees payment of the hereinafter
defined Notes being hereinafter referred to individually as a "Guarantor," and
---------
collectively as the "Guarantors").
----------
RECITALS:
A. The Company, the Purchasers, and the Guarantors heretofore entered
into that certain Amended and Restated Senior Subordinated Note Agreement (as
amended, the "Note Agreement") dated as of March 27, 1992, as amended by First
--------------
Amendment and Waiver dated as of July 8, 1992, Second Amendment and Waiver dated
as of June 30, 1993, Third Amendment and Waiver dated as of August 5, 1993,
Fourth Amendment and Waiver dated as of April 26, 1994 and Fifth Amendment and
Waiver dated August 16, 1995, pursuant to which the Purchasers purchased from
the Company 12% Senior Subordinated Notes of the Company in an aggregate
principal amount of $26,000,000.00 due December 31, 2000 (such notes, together
with all extensions, renewals, and modifications thereof, and all replacements
and substitutions therefor, being hereinafter referred to as the "Notes").
-----
B. Zerand-Bernal Group, Inc., Hamilton-Stevens Group, Inc., and Stevens
Securities Systems International, Inc., have merged with the Company, and the
Company is the surviving entity.
C. Pursuant to the Note Agreement, the Guarantors guaranteed to
Purchasers the payment and performance of the Notes and all other amounts
payable by the Company under the Note Agreement.
D. The Company has requested that Purchasers waive the Company's
noncompliance with certain provisions of the Note Agreement described herein as
the Specified Defaults (hereinafter defined) and restructure the indebtedness
evidenced by the Notes, and the Purchasers have agreed to do so upon the terms
and conditions set forth below.
<PAGE>
E. The Company, Guarantors and Purchasers now desire to amend the Note
Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Definitions
-----------
Section 1.1 Definitions. Capitalized terms used in this Amendment and
-----------
Waiver, to the extent not otherwise defined herein, shall have the same
meanings as in the Note Agreement, as amended hereby.
ARTICLE II
----------
Amendments
----------
Section 2.1 Amendment to Required Payments. Effective as of the date
------------------------------
hereof, Section 2.1 of the Note Agreement is hereby amended in its entirety to
read as follows:
Section 2.1. Required Payments. On July 31, 1997, the principal
-----------------
balance of the Notes is acknowledged to be $15,260,939.40. A principal
payment on the Notes in the aggregate amount of $7,200,000 shall be due and
payable on July 31, 1998, and a principal payment on the Notes in the
aggregate amount of $4,000,000 shall be due and payable on June 30, 1999.
In addition, a final principal payment of $5,296,940.55 [$4,060,939.40
plus the remaining Past Due Interest (as set forth in Section 2.4 below)],
together with a fee in the amount of $200,668.95, shall be due and payable
on June 30, 2000. Subject to Section 2.4 below, the Company shall pay
accrued and unpaid interest on the Notes at the times, in the amounts, and
in the manner specified in the Notes. The entire outstanding principal of
and accrued and unpaid interest on the Notes shall be due and payable on
June 30, 2000. The Purchasers shall not have any obligation to extend,
renew, or restructure the Notes at maturity (whether at stated maturity, by
acceleration, or otherwise). The Company's obligation to make the payments
required by this Section 2.1 shall not be reduced by any payment pursuant
to Section 2.2(a), 2.2(b) or 2.2(c), except as specifically provided in
such subsections.
Section 2.2 Amendment to Prepayments. Effective as of the date hereof,
------------------------
the Purchasers hereby waive the requirements of Section 2.2(b) of the Note
Agreement which require the Company to pay a Make-Whole Premium in connection
with certain prepayments of the Notes.
Section 2.3 Amendment to Payments. Effective as of the date hereof,
---------------------
Section 2.4 of the Note Agreement is hereby amended in its entirety to read as
follows:
<PAGE>
Section 2.4. Interest Payments on the Notes. Interest on the Notes at the
------------------------------
rate of 10 1/2% (the "Past Due Interest") has accrued but has not been paid by
-----------------
the Company during the period beginning October 1, 1996, and ending on July 31,
1997. The Company agrees to pay the Past Due Interest by making (a) an interest
payment in the amount of $100,000 on August 1, 1997, and (b) an interest payment
in the amount of $200,000 on December 31, 1997. Effective July 31, 1997, the
remaining Past Due Interest in the amount of $1,035,332.20 shall be capitalized
and added to the principal amount of the Notes. Accrued and unpaid interest on
the Notes from July 31, 1997, through June 30, 1998, shall be due and payable on
July 31, 1998, and thereafter all accrued and unpaid interest on the Notes shall
be due and payable on the last day of each calendar quarter commencing September
30, 1998, until and including June 30, 2000. Effective July 31, 1997, the rate
of interest which accrues on the unpaid principal balance of the Notes shall
accrue at the rate set forth in the Notes.
Section 2.4 Amendment to Financial and Business Information. Effective as
-----------------------------------------------
of the date hereof, Section 3.1 of the Note Agreement is hereby amended to add
the following subsections (k), (l), (m) and (n):
(k) Status Reports -- upon the 15th and the 30th day of each calendar
--------------
month, a report regarding the status of the Company's efforts to sell/*/
which report shall be in form and substance satisfactory to the Purchasers
and which report shall be accompanied by such other information as the
Purchasers may reasonably request;
(l) Appraisals -- as soon as available, and in any event within 30
----------
days after the receipt thereof, copies of all appraisals received or
obtained by the Company of assets, divisions, and/or locations of the
Company and its Subsidiaries which are currently held for sale or
contemplated to be held for sale;
(m) Notice of Judgments -- monthly, a status report with respect to
-------------------
any judgments, arbitration awards or settlement agreements, describing the
nature and amount of judgment or other award and the action that the
Company proposes to take with respect thereto.
(n) Reports Under Senior Credit Agreement -- contemporaneously with
-------------------------------------
delivery thereof to Senior Lenders, copies of all reports and financial
information delivered to Senior Lenders.
Section 2.5 Amendment to Senior Debt Covenant. Effective as of the date
---------------------------------
hereof, Section 4.2(a) of the Note Agreement is hereby amended in its entirety
to read as follows:
(a) The Company and its Operating Subsidiaries may remain liable with
respect to the Senior Debt, as the same shall be reduced from time to time
in accordance with the terms of the Intercreditor Agreement, and any
Permitted Refinancing thereof which occurs prior to the sale of/*/ of the
Company, and thereafter the
- ---------------
/*/ A portion of this document has been filed separately by paper with the
Securities and Exchange Commission pursuant to an application for
confidential treatment.
<PAGE>
Company and its Operating Subsidiaries may incur Senior Debt in an amount
to be negotiated by the Company and the Purchasers upon negotiation of an
Intercreditor Agreement between the provider of such Senior Debt and the
Purchasers upon terms and conditions mutually satisfactory to all such
Persons;
Section 2.6 Amendment to Funded Debt Covenant. Effective as of the date
---------------------------------
hereof, Section 4.2(d) of the Note Agreement is hereby amended in its entirety
to read as follows:
(d) the Company and its Operating Subsidiaries may remain liable with
respect to existing unsecured Funded Debt, and may become liable on new
unsecured Funded Debt with the prior written consent of the Purchasers;
Section 2.7 Amended to Subordinated Funded Debt Covenant. Effective as of
--------------------------------------------
the date hereof, Section 4.3(c) of the Note Agreement is hereby amended in its
entirety to read as follows:
(c) the Company and its Operating Subsidiaries may remain liable with
respect to existing unsecured Subordinated Funded Debt and may become
liable on new Subordinated Funded Debt with the prior written consent of
the Purchasers; and
Section 2.8 Deletion of Consolidated Pre-Tax Interest Coverage Covenant.
-----------------------------------------------------------
Effective as of the date hereof, Section 4.5 of the Note Agreement is hereby
deleted in its entirety.
Section 2.9 Amendment to Net Worth Covenant. Effective as of the date
-------------------------------
hereof, Section 4.6 of the Note Agreement is hereby amended in its entirety as
follows:
4.6 Net Worth.
---------
The Company will at all time maintain a Consolidated Net Worth of at
least $2,000,000, calculated at the end of each fiscal quarter of the
Company.
Section 2.10 Additional Asset Sale Covenant. Effective as of the date
------------------------------
hereof, the following Section 4.8A is hereby added following Section 4.8 of the
Note Agreement:
4.8A Agreement to Sale of Divisions. (i) On or before December 31,
------------------------------
1997, the Company hereby agrees that it will effect sales of/*/ The Net
Cash Proceeds/*/ shall be applied in accordance with the provisions of the
Intercreditor Agreement until the Senior Debt is repaid in full, and
thereafter all Net Cash Proceeds from any and all sales or other
dispositions of assets (other than sales of inventory and other receipts in
the ordinary course of business) shall be paid to the Purchasers to be
applied to the Notes in the direct order of maturity, notwithstanding
anything to the contrary in Section 4.8 of the Note Agreement.
- ---------------
/*/ A portion of this document has been filed separately by paper with the
Securities and Exchange Commission pursuant to an application for
confidential treatment.
<PAGE>
(ii) On or before May 31, 1998, the Company hereby agrees that it
will effect the sale of/*/ The Net Cash Proceeds of such sale, /*/
shall be applied as set forth in subsection 4.8A(i) above.
Section 2.11 Amendment to Defaults. Effective as of the date hereof,
---------------------
Sections 5.1(a), (b) and (c) of the Note Agreement are hereby amended in their
entirety to read as follows:
(a) Principal, Premium or Interest Payments -- failure to pay any
---------------------------------------
principal or interest on any Note when the payment is due or failure to pay
any Premium on any Note on the date such payment is due, provided that any
--------
payment made after its due date shall also include additional interest on
the overdue amount (to the extent permitted by applicable law) at the rate
of 14% per annum;
(b) Breach of Particular Covenants -- failure to comply with any
------------------------------
covenant contained in Section 4;
(c) Other Breaches -- failure by the Company or any Operating
--------------
Subsidiary to comply with any other provision of this Agreement, any of the
Collateral Documents, or any other Subordinated Document (other than
covenants to pay the Notes or interest or Premium thereon);
Section 2.12 Amendment to Terms Defined. Effective as of the date hereof,
--------------------------
the following definitions set forth in Section 6.1 of the Note Agreement are
amended to read as follows:
Permitted Refinancing means any extension, renewal, refinancing, or
---------------------
replacement of the Senior Debt outstanding under the Senior Credit
Agreement (whether in a single transaction or a series of transactions) and
any number of subsequent extensions, renewals, refinancings or replacements
of Senior Debt; provided that (a) the maximum credit available to the
Company and the Operating Subsidiaries under any Permitted Refinancing
shall not exceed the maximum amount available under the refinanced
facility, (b) the maximum non-default rate of interest charged on amounts
outstanding under a Permitted Refinancing shall not exceed the "prime" rate
announced from time to time by Citibank, N.A. plus two and one-half percent
(2.5%), (c) such shall not involve fees and expenses to be paid by the
Company or its Subsidiaries in excess of the fees and expenses customarily
charged by commercial banks in comparable transactions with companies
similarly situated, provided, further, that any lender or lenders that
-------- -------
provide a Refinancing must agree to become a party to the Intercreditor
Agreement and the Company must pay all reasonable fees and expenses
(including attorneys' and financial advisors' fees) incurred by the
Subordinated Lenders in connection with any Refinancing; provided, further,
-------- -------
that no Refinancing shall be permitted after the sale/*/
- ---------------
/*/ A portion of this document has been filed separately by paper with the
Securities and Exchange Commission pursuant to an application for
confidential treatment.
<PAGE>
if the Net Cash Proceeds thereof shall repay in full the Senior Debt, in
which case the provisions of Section 4.2(a) of the Note Agreement shall be
applicable to any Senior Debt incurred thereafter.
Senior Agent means Bank of America Texas, N.A., in its capacity as
------------
Senior Lender; from and after April 26, 1994, there is only a single Senior
Lender and no Agent therefor under the Senior Credit Agreement.
Senior Credit Agreement means that certain Credit Agreement dated as
-----------------------
of May 16, 1995, between the Company and Bank of America Texas, N.A., as
the same may be amended, modified, or restated from time to time.
Section 2.13 Amendment to Attachments. Effective as of the date hereof,
------------------------
(a) Attachment B to the Note Agreement is hereby amended to read in the form
attached hereto as Attachment B, and (b) all references in Attachment D to the
Note Agreement to financial statements of the Company are amended to be
references to the financial statements most recently delivered to Purchasers
prior to the date hereof.
Section 2.14 Amendment to Intellectual Property Security Agreement.
-----------------------------------------------------
Effective as of the date hereof, Schedules A, B and C to the Intellectual
Property Security Agreement (as defined in the Collateral Agreement) are amended
to read in the form attached hereto as Attachment E.
Section 2.15 Amendment to Pledge, Assignment and Security Agreement.
------------------------------------------------------
Effective as of the date hereof, Schedule 1 to the Pledge, Assignment and
Security Agreement of the Company dated as of March 27, 1992, is amended to read
in the form attached hereto as Attachment D.
Section 2.16 Waivers. (a) Subject to the terms and conditions hereof,
-------
Purchasers hereby waive, the Specified Defaults (hereinafter defined); provided,
--------
however, that (a) Purchasers agree to waive the Specified Defaults only on the
- -------
condition that the Company, the Guarantors, and all other liable parties hereby
waive any requirements of notice and cure periods with respect to any and all
future defaults or events of default which may occur under the Note Agreement
and (b) Purchasers' waiver of the Specified Default and their rights and
remedies as a result of the occurrence thereof shall not constitute and shall
not be deemed to constitute a waiver of any other Event of Defaults, whether
arising as a result of further violations of any provision of the Note Agreement
previously violated by Company, or a waiver of any rights and remedies arising
as a result of such other Events of Default. As used herein, "Specified
---------
Defaults" shall mean (i) the failure of Company to comply with Section 2.1 of
- --------
the Note Agreement with respect to the principal payments due June 30, 1996 and
June 30, 1997, (ii) the failure of Company to comply with Section 2.1 of the
Note Agreement and the provisions of the Notes with respect to quarterly
interest payments due from the period beginning October 1, 1996, through the
date of this Amendment and Waiver, (iii) the Event of Default specified in
Section 5.1(g) of the Note Agreement (an Event of Default under the Senior
Credit Agreement) and (iv) the failure of Company to comply with the covenants
set forth on Attachment C hereto.
<PAGE>
(b) In consideration of Purchasers' waiver of the Specified Defaults and
certain other good and valuable consideration, Company and each Guarantor hereby
expressly acknowledges and agrees that it does not have any setoffs,
counterclaims, adjustments, recoupments, defenses, claims or actions of any
character, whether contingent, non-contingent, liquidated, unliquidated, fixed,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, known or unknown, against any Purchaser or any grounds or cause for
reduction, modification or subordination of the obligations under the Note
Agreement or any liens or security interests of any Purchaser or the Collateral
Agent. To the extent Company or any Guarantor may possess any such setoffs,
counterclaims, adjustments, recoupments, claims, actions, grounds or causes,
Company and each Guarantor hereby waives, and hereby releases each Purchaser and
the Collateral Agent from, any and all of such setoffs, counterclaims,
adjustments, recoupments, claims, actions, grounds and causes, such waiver and
release being with full knowledge and understanding of the circumstances and
effects of such waiver and release and after having consulted counsel with
respect thereto. Company hereby acknowledges and agrees that as of July 31,
1997, the outstanding principal balance of the Notes equals $15,260,939.40,
accrued but unpaid interest thereunder equals $1,335,332.20, and the fee due and
payable to Purchasers equals $200,668.95 (which fee shall be added to the
principal amount of the Notes as of July 31, 1997).
ARTICLE III
-----------
Conditions Precedent
--------------------
Section 3.1 Conditions. The effectiveness of this Amendment and Waiver is
----------
subject to the satisfaction of the following conditions precedent:
(a) Purchasers shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment and Waiver, in form
and substance satisfactory to Purchasers:
(1) Resolutions. Resolutions of the Board of Directors of
-----------
Company and each Guarantor certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery, and performance by
such Person of this Amendment and Waiver and the other Subordinated
Documents to which such Person is or is to be a party hereunder;
(2) Incumbency Certificate. A certificate of incumbency
----------------------
certified by the Secretary or an Assistant Secretary of Company and
each Guarantor certifying the names of the officers of such Person
authorized to sign this Amendment and Waiver and each of the other
Subordinated Documents to which such Person is or is to be a party
hereunder (including the certificates contemplated herein) together
with specimen signatures of such officers;
<PAGE>
(3) Articles of Incorporation. The articles of incorporation of
-------------------------
Company and each Guarantor certified by the appropriate government
official of the state of incorporation of such Person within thirty
(30) days prior to the date of this Amendment and Waiver;
(4) Bylaws. The bylaws of Company and each Guarantor certified
------
by the Secretary or an Assistant Secretary of such Person;
(5) Governmental Certificates. Certificates of the appropriate
-------------------------
government officials of the state of incorporation of Company and each
Guarantor as to the existence and good standing of such Person, each
dated within thirty (30) days prior to the date of this Amendment and
Waiver;
(6) Opinion of Counsel. A favorable opinion of Jackson &
------------------
Walker, L.L.P., legal counsel to Company and Guarantors, in form and
substance satisfactory to Purchasers and their counsel; and
(7) Additional Information. Purchasers shall have received such
----------------------
additional documents, instruments and information as Purchasers or its
legal counsel, Winstead Sechrest & Minick P.C., may request.
(b) The Company shall have paid to the Purchasers accrued and past due
interest on the Notes in the amount of $100,000.
(c) The Company shall have paid to the Collateral Agent and the
Purchasers all reasonable fees and expenses heretofore incurred or to be
incurred by the Purchasers in connection with the negotiation, execution
and delivery of this Amendment and Waiver and all other documents relating
thereto, including without limitation the following amounts which were due
and owing as of June 30, 1997:
Zolfo Cooper LLC $ 9,075.69
Emmet, Marvin & Martin LLP $ 1,000.00
(Counsel to The Bank of New
York, as Collateral Agent)
The Bank of New York $12,000.00
(annual administrative fees
12/96 through 12/97)
Winstead Sechrest & Minick P.C. $17,580.32
----------
Total Amount Due: $39,656.01
----------
(d) The Company, the Senior Agent, the Purchasers and others shall
have
<PAGE>
entered into a Second Amendment to the Amended and Restated Subordination
and Intercreditor Agreement, in form and substance satisfactory to the
Purchasers, including without limitation (i) an amendment to the definition
of Senior Debt therein to provide that same shall reduce dollar-for-dollar
as Senior Debt is repaid with the Net Cash Proceeds of asset sales, and
(ii) an amendment to the standstill provisions thereof satisfactory to the
Purchasers.
(e) The Company and all of its Subsidiaries covenant to execute and
deliver to the Collateral Agent and the Purchasers such modifications of
the existing Collateral Documents as the Collateral Agent, the Purchasers,
and their counsel shall deem reasonably necessary to preserve and protect
the liens and security interests of the Collateral Agent and the Purchasers
in the Collateral within thirty (30) days of the effective date hereof.
(f) The Company shall execute and deliver to the Purchasers all
documents necessary to grant the Purchasers a lien on the stock of the
Company's French Subsidiary, which stock is owned by the Company and
currently pledged as security for the Senior Debt.
(g) An amendment to the Senior Credit Agreement shall have been
executed by all parties thereto, all conditions to its effectiveness shall
have been satisfied, and the Purchasers shall have been provided with a
true and correct copy of such document and shall be reasonably satisfied
with the terms thereof.
(h) The Company shall have executed and delivered to the Purchasers
the Notes in the forms attached hereto as Attachments B-1, B-2, and B-3.
The holders of the existing Notes shall mark them to reflect that they have
been restated.
(i) The Company shall deliver to the Purchasers copies of all
appraisals previously received or obtained by the Company of assets,
divisions, and/or locations of the Company and its Subsidiaries which are
currently held for sale or contemplated to be held for sale.
(j) Except as set forth on Attachment A hereto, the representations
and warranties contained herein and in all other Subordinated Documents, as
amended hereby, shall be true and correct as of the date hereof as if made
on the date hereof.
(k) After giving effect to this Amendment and Waiver, no Event of
Default shall have occurred and be continuing and no event or condition
shall have occurred that with the giving of notice or lapse of time or both
would be an Event of Default.
(l) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and Waiver and all documents,
instruments, and other legal matters incident thereto shall be satisfactory
to Purchasers and their legal counsel, Winstead Sechrest & Minick P.C.
<PAGE>
ARTICLE IV
----------
Ratifications, Representations and Warranties
---------------------------------------------
Section 4.1 Ratifications. The terms and provisions set forth in this
-------------
Amendment and Waiver and Waiver shall modify and supersede all inconsistent
terms and provisions set forth in the Note Agreement and except as expressly
modified and superseded by this Amendment and Waiver, the terms and provisions
of the Note Agreement and the other Subordinated Documents are ratified and
confirmed and shall continue in full force and effect. Company, Guarantors, and
Purchasers agree that the Note Agreement as amended hereby and the other
Subordinated Documents shall continue to be legal, valid, binding and
enforceable in accordance with their respective terms.
Section 4.2 Representations and Warranties. Company hereby represents and
------------------------------
warrants to Purchasers that (i) the execution, delivery and performance of this
Amendment and Waiver and any and all other Subordinated Documents executed
and/or delivered in connection herewith have been authorized by all requisite
corporate action on the part of Company and will not violate the articles of
incorporation or bylaws of Company, (ii) except as described on Attachment A
hereto, the representations and warranties contained in the Note Agreement, as
amended hereby, and any other Subordinated Document are true and correct on and
as of the date hereof as though made on and as of the date hereof, (iii) after
giving effect to this Amendment and Waiver, no Event of Default has occurred and
is continuing and no event or condition has occurred that with the giving of
notice or lapse of time or both would be an Event of Default, and (iv) except
for the Specified Defaults, Company is in full compliance with all covenants and
agreements contained in the Note Agreement as amended hereby.
ARTICLE V
---------
Miscellaneous
-------------
Section 5.1 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment and Waiver or any other
Subordinated Document including any Subordinated Document furnished in
connection with this Amendment and Waiver shall survive the execution and
delivery of this Amendment and Waiver and the other Subordinated Documents, and
no investigation by Purchasers or any closing shall affect the representations
and warranties or the right of Purchasers to rely upon them.
Section 5.2 Reference to Agreement. Each of the Subordinated Documents,
----------------------
including the Note Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Note Agreement as amended hereby, are hereby
amended so that any reference in such Subordinated Documents to the Note
Agreement shall mean a reference to the Note Agreement as amended hereby.
<PAGE>
Section 5.3 Expenses of Purchasers. As provided in the Note Agreement,
----------------------
Company agrees to pay on demand, all reasonable costs and expenses incurred by
Purchasers in connection with the preparation, negotiation, and execution of
this Amendment and Waiver and the other Subordinated Documents executed pursuant
hereto and any and all amendments, modifications, and supplements thereto,
including without limitation the reasonable costs and fees of Purchasers' legal
counsel and financial advisors, and all costs and expenses incurred by
Purchasers in connection with the enforcement or preservation of any rights
under the Note Agreement, as amended hereby, or any other Subordinated Document,
including without limitation the reasonable costs and fees of Purchasers' legal
counsel and financial advisors.
Section 5.4 Severability. Any provision of this Amendment and Waiver held
------------
by a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and Waiver and the effect
thereof shall be confined to the provision so held to be invalid or
unenforceable.
Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND WAIVER AND ALL OTHER
--------------
SUBORDINATED DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN
MADE AND TO BE PERFORMABLE IN NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 5.6 Successors and Assigns. This Amendment and Waiver is binding
----------------------
upon and shall inure to the benefit of Purchasers, Company, and Guarantors and
their respective successors and assigns, except neither Company nor any
Guarantor may assign or transfer any of their respective rights or obligations
hereunder without the prior written consent of Purchasers. The Purchasers may
sell participations in or assign this Amendment and Waiver, the Note Agreement
and the Subordinated Documents, and may exchange financial information about the
Company and the Guarantors with actual or potential participants or assignees,
provided that such potential participants and assignees agree to keep non-public
information regarding Company and the Guarantors confidential. If a
participation is sold or the loan is assigned, the purchaser will have the right
to set-off against the Company.
Section 5.7 Counterparts. This Amendment and Waiver may be executed in
------------
one or more counterparts, each of which when so executed shall be deemed to be
an original, but all of which when taken together shall constitute one and the
same instrument. Telecopies of signatures shall be binding and effective as
originals.
Section 5.8 Effect of Waiver. No consent or waiver, express or implied,
----------------
by Purchasers to or for any breach of or deviation from any covenant, condition
or duty by Company or any Guarantor shall be deemed a consent or waiver to or of
any other breach of the same or any other covenant, condition or duty.
Section 5.9 Headings. The headings, captions, and arrangements used in
--------
this Amendment and Waiver are for convenience only and shall not affect the
interpretation of this Amendment and Waiver.
<PAGE>
Section 5.10 Non-Application of Chapter 15 of Texas Credit Code. The
--------------------------------------------------
provisions of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas
Statutes, Article 5069-15) are specifically declared by the parties not to be
applicable to this Amendment and Waiver or any of the Subordinated Documents or
the transactions contemplated hereby.
Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT AND WAIVER AND ALL OTHER
----------------
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT AND WAIVER EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS
AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT AND
WAIVER, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
<PAGE>
Executed as of the date first written above.
Company:
-------
STEVENS INTERNATIONAL, INC.
By: /s/ PAUL I. STEVENS
Name: Paul I. Stevens
Title: Chairman & CEO
Guarantors:
----------
PMC LIQUIDATION, INC.
By: /s/ GEORGE A. WIEDERAENDERS
Name: George A. Wiederaenders
Title: Treasurer
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By: /s/ GEORGE A. WIEDERAENDERS
Name: George A. Wiederaenders
Title: Secretary - Treasurer
Purchasers:
----------
AETNA LIFE INSURANCE COMPANY
By: /s/ PETER C. NILSEN
Name: Peter C. Nilsen
Title: Investment Manager
<PAGE>
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ PETER W. OLIVER
Name: Peter W. Oliver
Title: Managing Director
MONY LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ PETER W. OLIVER
Name: Peter W. Oliver
Title: Authorized Agent
<PAGE>
EXHIBIT 10.2
FIFTH AMENDMENT
---------------
TO
--
CREDIT AGREEMENT
----------------
This Fifth Amendment to Credit Agreement (this "Amendment") is entered into
---------
effective as of the 31st day of July, 1997, by and between Bank of America
Texas, N.A. (the "Bank") and Stevens International, Inc., formerly known as
----
Stevens Graphics Corporation, a Delaware corporation (the "Borrower"), and PMC
--------
Liquidation, Inc. and Printing and Packaging Equipment Finance Corporation
(individually a "Guarantor" and together, the "Guarantors").
--------- ----------
Borrower is the surviving corporation of the several mergers between
Borrower, on the one hand, and each of Zerand-Bernal Group, Inc., a Delaware
corporation, Hamilton-Stevens Group, Inc., a Delaware corporation, and Stevens
Securities Systems International, Inc., a Delaware corporation. Each of the
mergers is evidenced by the respective Certificate of Ownership and Merger,
dated December 21, 1995, signed by the Borrower, and filed with the Office of
the Secretary of State of the State of Delaware on December 22, 1995.
REFERENCE:
----------
Reference is made to the Credit Agreement (as amended, the "Credit
------
Agreement") dated as of May 16, 1995 by and between Bank and Borrower, as
- ---------
amended by that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995, by and between Bank and Borrower, as further
amended by that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995, by and between Bank and Borrower, as further
amended by that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996, as further amended by that certain Agreement and
Fourth Amendment dated as December 31, 1996, as further amended by that certain
First Amendment to Agreement and Fourth Amendment to Credit Agreement dated as
of February 28,1997, as further amended by that certain Second Amendment to
Agreement and Fourth Amendment to Credit Agreement dated as of March 17, 1997,
as further amended by that certain Third Amendment to Agreement and Fourth
Amendment to Credit Agreement dated as of May 1, 1997, and as further amended by
that certain Fourth Amendment to Agreement and Fourth Amendment to Credit
Agreement dated as of July 1, 1997.
RECITALS:
---------
Bank and Borrower desire to amend certain existing terms of the Credit
Agreement and to add additional terms and conditions to the Credit Agreement to
restructure the existing revolving line of credit.
FIFTH AMENDMENT-PAGE 1
<PAGE>
AGREEMENTS:
-----------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENTS
--------------
1.1 Additional Definitions. Article 1 of the Credit Agreement is hereby
-----------------------
amended as follows:
The term "Borrowing Base Advance Cap" is amended to mean at any time
--------------------------
an amount equal to the lesser of:
(a) $11,800,000.00; or
(b) the sum of:
(i) 80% of the amount of Eligible Accounts; plus
(ii) the lesser of (A) $4,500,000.00; or (B) 25% of the amount of
Eligible Inventory, plus
(iii) $7,637,000.00.
The term "Note" is amended to mean that certain Revolving Credit Note
----
dated April 26, 1994 executed by Borrower payable to the order of Bank
One, Milwaukee, National Association ("Bank One"), in the original
--------
principal amount of $20,000,000.00, which was assigned to Bank pursuant to
that certain Master Assignment of Note and Security Documents executed by
Bank One in favor of Bank, dated May 22, 1995, as amended by that certain
Amended and Restated Master Note dated May 16, 1995, executed by Borrower
and payable to the order of Bank, in the amount of $22,000,000.00, as
amended by that certain Second Amended and Restated Master Note: Reference
Rate Related dated August 15, 1995, executed by Borrower and payable to
the order of Bank, in the amount of $27,000,000.00, and as further amended
by the certain Note and Liens Modification Agreement of even date herewith
by and between Borrower and Bank (the "Modification Agreement").
----------------------
The term "Reference Rate" is amended to mean the rate of interest
--------------
publicly announced from time to time by Bank of America National Trust and
Savings Association ("BofA NT&SA"), in San Francisco, California, as its
----------
Reference Rate. The Reference Rate is set by BofA NT&SA based on various
factors, including its costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing
some loans. Bank may price loans to its customers at, above, or below the
Reference Rate. Any change in the Reference shall take effect at the
opening of business on the date specified
FIFTH AMENDMENT-PAGE 2
<PAGE>
in the public announcement of a change in the BofA NT&SA. Interest will be
calculated on the basis of a 360-day year and actual days elapsed, which
results in more interest than if a 365-day year were used.
The term "Revolving Line of Credit Rate" is amended to mean a floating
-----------------------------
rate per annum equal to the Reference Rate plus 2.50%.
1.2. Section 2.1., of the Credit Agreement is hereby restated in its
------------
entirety to read as follows:
(a) During the availability period described below, the Bank will
provide the Revolving Line of Credit to the Borrower. The Borrower agrees
that it will use the proceeds of each advance under the Revolving Line of
Credit only for working capital purposes and for capital expenditures
permitted by Section 9.4 of the Credit Agreement, and will not use the
proceeds of any advance to retire or repay any indebtedness for borrowed
money. The amount of the Revolving Line of Credit is an initial amount of
up to the lesser of (i) $14,730,000.00 or (ii) the Borrowing Base plus
$2,930,000 (the "Commitment"). The amount of the Revolving Line of Credit
----------
available for advances outstanding at any time including amounts paid under
any Letter of Credit is an amount of up to the lesser of (i)
$11,800,000.00, or (ii) the Borrowing Base Advance Cap. The amount of the
Revolving Line of Credit available for issuances of letters of credit
outstanding at any time is in an initial amount of $2,930,000.00. The
Commitment and the amount available for issuances of letters of credit
shall decrease by $70,000.00 on the last day of each calendar month.
(b) The Borrower agrees not to permit the outstanding principal
balance of the Revolving Line of Credit to exceed the lesser of (i)
$11,800,000.00 or (ii) the Borrowing Base Advance Cap. The Borrower agrees
not to permit the outstanding principal balance of the Revolving Line of
Credit plus the outstanding amounts of all letters of credit, including
amounts drawn on letters of credit and not yet reimbursed, to exceed the
then effective Commitment. If such amounts outstanding exceed the foregoing
limitations, 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 Section to the obligations of the Borrower to the Bank in the
order and the manner as the Bank, in its discretion, may determine.
1.3 In Section 2.2. of the Credit Agreement, the term "Expiration Date,"
------------ ---------------
is amended to mean December 31, 1997.
1.4 Section 2.5 of the Credit Agreement is amended by restating subsection
-----------
(a) thereof in its entirety as follows:
(a) Borrower will pay interest on August 8, 1997, and then on the last
day of each calendar month thereafter until payment in full of any
principal outstanding under this line of credit.
FIFTH AMENDMENT-PAGE 3
<PAGE>
1.5 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
--------- -----------------
amended by the addition of the following provisions:
3.7 Loan Restructure Fees: Borrower agrees to pay Bank the following
---------------------
fees:
(i) a commitment fee in the amount of $74,000.00 on August 4,
1997; and
(ii) an audit and field examination fee of $18,339.87 on August
4, 1997.
1.6 Section 8.9 of the Credit Agreement, is amended by adding the
-----------
following Subsection (e).
(e) Borrower shall deliver to Bank, at the time such notice is
given to the holders of the Subordinated Debt, a copy of each notice given
to or required to be given to the holders of the Subordinated Debt.
1.7 The first sentence of Section 9.1. of the Credit Agreement is hereby
------------
deleted in its entirety and replaced with the following:
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 2.50:1.00.
1.8 Section 9.2. of the Credit Agreement is hereby deleted in its entirety
------------
and replaced with the following:
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 (excluding payments of principal on
the Revolving Line of Credit) of at least .025:1.00.
1.9 Section 9.4 of the Credit Agreement is amended by substituting the
-----------
dollar amount $2,200,000.00 for the dollar amount $5,000,000.00.
1.10 Section 11.6. of the Credit Agreement is hereby deleted in its
-------------
entirety and replaced with the following:
11.6 Judgments; Garnishments. 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
Eight Hundred Thousand Dollars ($800,000) or more, and such judgment
or settlement is not paid, stayed or released within thirty (30) days
of becoming final; or any garnishment or similar attachment of funds
is instituted or entered against the Borrower (or any guarantor)
involving a claim or claims in an aggregate amount of Seventy-Five
Thousand Dollars ($75,000) or more.
FIFTH AMENDMENT-PAGE 4
<PAGE>
1.11 A Section 11.14 is added to the Credit Agreement to read as follows:
-------------
11.14 Failure to Deliver Or Perform Under Intercreditor
-------------------------------------------------
Agreement. The Bank shall not have received by August 15, 1997 an
---------
Intercreditor Agreement in form and content acceptable to Bank in
its discretion, fully executed and delivered by each of Paul Stevens
and the Borrower whereby Borrower and Paul Stevens agree that no
payments shall be made on any debt of the Borrower to Paul Stevens
prior to January 1, 1998, or Borrower shall make any payment
prohibited by the terms of such Intercreditor Agreement.
1.12 Application of Proceeds from Sale of Assets other than from Inventory
---------------------------------------------------------------------
in the Ordinary Course of Business. Notwithstanding anything to the contrary
- -----------------------------------
contained in any of the Loan Documents, all proceeds of any sale of assets by
the Borrower other than inventory in the ordinary course of business must be
applied to reduction of the balance of the revolving line of credit, and the
Commitment shall be permanently reduced by the amount of proceeds received by
Bank. The Bank may allocate the reduction of the Commitment to, at the Bank's
option, all or any part of either or both of the line of credit facility or the
within-line facility for letters of credit. All sales of assets, except for
inventory in the ordinary course of business shall require the prior approval
of Bank, to be granted or withheld in its sole discretion.
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon
satisfaction of the following, each in form and content acceptable to Bank:
2.1 Amendment to Intercreditor Agreement. The Intercreditor Agreement
-------------------------------------
must be amended to the satisfaction of Bank, and such amendment must be
delivered to the Bank.
2.2 Amendments to Subordinated Debt. The Subordinated Debt must be
--------------------------------
restructured to the satisfaction of Bank in its discretion.
2.3 Corporate Documents and Legal Opinions. Appropriate corporate
--------------------------------------
documentation, including borrowing resolutions and an opinion of counsel to
Borrower and to Guarantors, must be delivered to the Bank.
2.4 The Modification Agreement. The executed Modification Agreement must
--------------------------
be delivered to the Bank.
2.5 Payment of Expenses. Payment of all reasonable costs and expenses,
-------------------
including, without limitation, legal fees and expenses, incurred by the Bank in
connection with the Credit Agreement to date must be made by the Borrower to
Bank.
FIFTH AMENDMENT-PAGE 5
<PAGE>
2.6 The Master Amendment. A fully executed Third Master Amendment to
--------------------
Security Documents dated of even date herewith, executed by Borrower, Guarantors
and Bank, must be delivered to the Bank.
2.7 Notice of Final Agreement. A fully executed Notice of Final Agreement
--------------------------
in compliance with Section 26.02 of the Texas Business and Commerce Code must be
delivered to the Bank.
2.8 Other Documentation. Such other documents as the Bank may request
--------------------
must be delivered to the Bank.
3. MISCELLANEOUS.
------------------
3.1 Representations. Borrower represents and warrants that the execution,
---------------
delivery and performance by Borrower of this Amendment and the Credit Agreement
as amended hereby have been duly authorized by all necessary corporate action
and that this Amendment and the Credit Agreement as amended hereby are legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally, or by general principles of equity limiting the
availability of certain remedies.
3.2 Ratifications. The terms and provisions set forth in this Amendment
-------------
shall modify and supersede all inconsistent terms and provisions set forth in
the Credit Agreement, and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Credit Agreement are ratified and
confirmed and shall continue in full force and effect. Borrower and Bank agree
that the Credit Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms and that the amounts
outstanding under the Revolving Line of Credit or obligations under the Credit
Agreement and are secured by the Collateral described in Article 4 of the Credit
Agreement .
3.3 Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of Texas.
3.4 Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
3.5 Definitions. Capitalized terms used in this Amendment and not
-----------
otherwise defined in this Amendment shall have the meanings given them in the
Credit Agreement.
3.6 WAIVER OF JURY TRIAL. BORROWER, EACH OF THE UNDERSIGNED GUARANTORS
--------------------
(THE "GUARANTORS") AND THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS FOURTH AMENDMENT,
FIFTH AMENDMENT-PAGE 6
<PAGE>
THE CREDIT AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
BORROWER, EACH OF THE GUARANTORS AND BANK EACH AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS FOURTH AMENDMENT, THE CREDIT AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
3.7 RELEASES. BORROWER AND EACH GUARANTOR FULLY, COMPLETELY AND FOREVER
--------
RELEASES THE BANK AND ITS PRESENT AND FORMER AFFILIATES, SUBSIDIARIES, AGENTS,
ATTORNEYS, APPRAISERS, CONSULTANTS, EMPLOYEES, OFFICERS, DIRECTORS,
STOCKHOLDERS, SUCCESSORS AND ASSIGNS ("OTHER RELEASED PARTIES") FROM ANY
----------------------
DEMANDS, CLAIMS AND CAUSES OF ACTION EXISTING AS OF THE DATE HEREOF, WHETHER
KNOWN OR UNKNOWN, WHETHER FOR KNOWN OR UNKNOWN DAMAGES OR ANY OTHER RELIEF,
INCLUDING, BUT NOT LIMITED TO, DEMANDS, CLAIMS, CAUSES OF ACTION OR DAMAGES
DIRECTLY OR INDIRECTLY RELATING TO OR BASED ON:
(a) ANY AND ALL TRANSACTIONS RELATING TO THE CREDIT AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS AS AMENDED FROM TIME TO TIME, INCLUDING, WITHOUT
LIMITATION, ANY LOSS, EXPENSES AND/OR DETRIMENT OF ANY KIND OR CHARACTER GROWING
OUT OF OR IN ANY WAY RESULTING FROM THE ACTS OR OMISSIONS OF LENDER OR THE OTHER
RELEASED PARTIES;
(b) ANY LOSS, COST OR DAMAGE IN CONNECTION WITH ANY BREACH OF
FIDUCIARY DUTY, FRAUD, BREACH OF A DUTY OF GOOD FAITH AND FAIR DEALING, BREACH
OF CONFIDENCE, BREACH OF FUNDING COMMITMENT, IMPAIRMENT OF COLLATERAL,
VIOLATIONS OF THE BANK TYING ACT (12 U.S.C. (S) 1971, ET SEQ.), UNDUE INFLUENCE,
DURESS, ECONOMIC COERCION, CONFLICT OF INTERESTS, NEGLIGENCE, BAD FAITH,
MALPRACTICE, INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS, TORTIOUS
INTERFERENCE WITH CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE
GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE, BREACH
FIFTH AMENDMENT-PAGE 7
<PAGE>
OF CONTRACT, DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, OR CONSPIRACY; AND
(C) ANY OTHER CLAIM BASED ON CONTRACT, TORT, COMMON LAW, OR ANY RIGHT
CREATED BY A STATUTE OR REGULATION PROMULGATED BY ANY GOVERNMENT AGENCY.
THE ABOVE LISTING OF DEMANDS, CLAIMS AND CAUSES OF ACTION RELEASED IS NOT
EXCLUSIVE OR EXHAUSTIVE. IT IS THE EXPRESS INTENTION OF THE BORROWER AND
GUARANTORS TO RELEASE AND FORGIVE THE BANK OF ALL DEMANDS, CLAIMS AND CAUSES OF
ACTION FROM THE PAST AND HAVE A FRESH START FROM THIS DAY FORWARD. BORROWER AND
EACH GUARANTOR, ON BEHALF OF THEMSELVES AND THEIR SUCCESSORS AND ASSIGNS,
COVENANT AND AGREE NOT TO SUE, INSTITUTE, OR COOPERATE IN THE INSTITUTION,
COMMENCEMENT, FILING, OR PROSECUTION OF ANY SUIT, ADMINISTRATIVE PROCEEDING,
DEMAND, CLAIM OR CAUSE OF ACTION ARISING FROM ANY ASPECT OF THE CREDIT AGREEMENT
OR ANY OTHER LOAN DOCUMENTS, AS AMENDED, WHETHER ASSERTED INDIVIDUALLY OR
DERIVATIVELY OR IN ANY CAPACITY AGAINST BANK OR THE OTHER RELEASED PARTIES.
FURTHERMORE, BORROWER AND EACH GUARANTOR REPRESENT AND WARRANT THAT THEY HAVE
NOT ASSIGNED, AND WILL NOT HEREAFTER ASSIGN, ANY OF THEIR ALLEGED CLAIMS OR
CAUSES OF ACTION, OF ANY KIND OR NATURE WHATSOEVER, AGAINST THE BANK OR THE
OTHER RELEASED PARTIES TO ANY PERSON OR ENTITY, SO THAT NO OTHER PARTY IS IN A
POSITION TO ASSERT ANY SUCH CLAIM OR CAUSE OF ACTION.
3.8 Ratification of Security Documents. Borrower and each Guarantor agree
----------------------------------
that those certain security documents (as heretofore amended, the "Security
--------
Documents"), which are more fully described in Exhibit A attached to that
- ---------
certain Master Amendment to Security Documents, dated May 16, 1995, executed by
Guarantors and Borrower in favor of the Bank, are in full force and effect as of
the date hereof. Borrower and each Guarantor hereby ratify the rights, titles,
liens and security interests under the Security Documents existing in favor of
Bank.
3.9 Successors and Assigns. This Amendment, the Credit Agreement and all
----------------------
documents executed in connection with or as security for the Credit Agreement
(the "Security Documents") are 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 Amendment, the Credit Agreement and the Security Documents, 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.
3.10. Ratification of Guaranties. The Guarantors agree that that
---------------------------
certain Business Loan Continuing Guaranty, dated May 16, 1995 (the "Guaranty"),
--------
executed by the Guarantors in favor of the Bank, shall remain in full force and
effect and shall continue to be the legal, valid and binding obligation
FIFTH AMENDMENT-PAGE 8
<PAGE>
of the Guarantors enforceable against Guarantors in accordance with its terms.
Furthermore, the Guarantors hereby agree and acknowledge that (a) the
obligations, indebtedness and liabilities arising in connection with this
Agreement constitute "Debt," as such term is defined in the Guaranty, (b) as of
the date hereof, the Guaranty is not subject to any claims, defenses or offsets,
(c) nothing contained in this Agreement shall adversely affect any right or
remedy of Bank under the Guaranty, and (d) the execution and delivery of the
Agreement shall in no way reduce, impair or discharge any obligations of the
Guarantors pursuant to the Guaranty.
IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be duly
executed as of the day and year first above written.
BANK OF AMERICA TEXAS, N.A. STEVENS INTERNATIONAL, INC.,
formerly known as Stevens Graphics
Corporation
By: By:
------------------------------
Name: Name:
Title: ------------------------------
Title:
-----------------------------
Executed for the purposes of acknowledging and agreeing to the provisions
of Sections 3.6, 3.7, 3.8 and 3.9 hereof.
GUARANTORS
PMC LIQUIDATION, INC.
formerly known as Post Machinery
Company, Inc.
By:
Name:
Title:
FIFTH AMENDMENT-PAGE 9
<PAGE>
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
Name:
Title:
FIFTH AMENDMENT-PAGE 10
<PAGE>
EXHIBIT 10.3
SECOND AMENDMENT TO AMENDED
---------------------------
AND RESTATED SUBORDINATION AND
------------------------------
INTERCREDITOR AGREEMENT
-----------------------
This Second Amendment to Amended and Restated Subordination and
Intercreditor Agreement (this "Second Amendment") is entered into effective as
----------------
of the 31st day of July, 1997, among Stevens International, Inc., PMC
Liquidation, Inc., Printing & Packaging Equipment Finance Corporation, Aetna
Life Insurance Company, The Mutual Life Insurance Company of New York, MONY Life
Insurance Company of America, Bank of America Texas, N.A., and The Bank of New
York, as Collateral Agent.
WHEREAS, Stevens International, Inc., formerly known as Stevens Graphics
Corporation (the "Company"), Hamilton-Stevens Group, Inc., PMC Liquidation,
-------
Inc., formerly known as Post Machinery Co., Inc. ("PMC"), Zerand-Bernal Group,
---
Inc., Printing & Packaging Equipment Finance Corporation ("PPEF"), Stevens
----
Securities Systems International, Inc., Bank One, Milwaukee, National
Association ("Bank One"), Aetna Life Insurance Company ("Aetna"), The Mutual
-------- -----
Life Insurance Company of New York ("Mutual"), MONY Life Insurance Company of
America ("MONY"; MONY, Mutual, and Aetna being hereinafter called the
-----------------------------------------------------------
"Purchasers"), and NationsBank of Texas, N.A. as Collateral Agent for the
- ------------
Purchasers ("NationsBank") entered into that certain Amended and Restated
-----------
Subordination and Intercreditor Agreement dated as of April 26, 1994, as amended
by First Amendment to Amended and Restated Subordination and Intercreditor
Agreement dated as of August __, 1995 (the "Intercreditor Agreement";
-----------------------
capitalized terms used in this Second Amendment, to the extent not otherwise
defined herein, shall have the same meanings as in the Intercreditor Agreement,
as amended hereby);
WHEREAS, Bank of America Texas, N.A. ("Senior Lender") has succeeded to the
-------------
rights and obligations of Bank One under the Intercreditor Agreement;
WHEREAS, Zerand-Bernal Group, Inc., Hamilton-Stevens Group, Inc. and
Stevens Securities Systems International, Inc. have merged with the Company, and
the Company is the surviving entity;
WHEREAS, The Bank of New York as Collateral Agent ("Collateral Agent") has
----------------
replaced NationsBank as Collateral Agent for the holders of the Subordinated
Debt;
WHEREAS, Senior Lender and the Company have restructured the Senior Debt,
as evidenced by the Fifth Amendment to Credit Agreement dated as of July 31,
1997 (the "Fifth Amendment"), a copy of which is attached hereto as Exhibit A;
--------------- ---------
WHEREAS, the Purchasers have restructured the Subordinated Debt, as
evidenced by the Sixth Amendment to Amended and Restated Senior Subordinated
Note Agreement and Waiver dated as of July 31, 1997 (the "Sixth Amendment"), a
---------------
copy of which is attached hereto as Exhibit B;
---------
<PAGE>
WHEREAS, the Purchasers desire to consent to the Senior Debt restructure by
the Senior Lender, and the Senior Lender desires to consent to the Subordinated
Debt restructure by the Purchasers;
WHEREAS, the parties hereto desire to amend the Intercreditor Agreement as
set forth herein.
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt of which is
acknowledged and agreed to by each of the parties hereto, Senior Lender, the
Company, the Purchasers, PMC, and PPEF agree as follows:
1. The Purchasers acknowledge and agree that the Subordinated Debt is and
shall continue to be subordinate and junior in right of payment to all Senior
Debt under the terms set forth in the Intercreditor Agreement.
2. Effective as of the date hereof, the definition of Senior Debt in
Section 1 of the Intercreditor Agreement is hereby amended to read as follows:
"Senior Debt means all present and future obligations, indebtedness
-----------
and liabilities of the Company or any Guarantor arising under or pursuant
to the Bank Credit Agreement, any Permitted Refinancing, all other
agreements or financing arrangements with Senior Lender, all interest
accruing pursuant to the aforementioned agreements and arrangements, all
attorneys' fees, costs, expenses or other fees incurred in the enforcement
and collection thereof and any and all renewals, extensions, increases, and
amendments thereto and includes, without limitation, all obligations of the
Company under (i) that certain Credit Agreement entered into effective as
of August 15, 1995, by and between Senior Lender and the Company, as such
Credit Agreement has been amended from time to time, including, without
limitation, as amended by the Fifth Amendment and (ii) each of the other
Loan Documents (as defined in the Credit Agreement), as such Loan Documents
have been amended from time to time; provided that the aggregate principal
--------
amount of such Senior Debt (excluding attorneys' fees, costs, expenses,
other fees, or any indemnified amounts) shall not exceed the sum of
$14,730,000 less all amounts repaid and irrevocably received by Senior
Lender on or after July 31, 1997, on the Senior Debt, dollar-for-dollar, as
Net Proceeds from any sale, transfer, disposition, or settlement of all or
any part of the Collateral or Proceeds thereof (whether by voluntary
dispositions or through Lien Enforcement Actions), but excluding sales of
inventory or other receipts in the ordinary course of business."
3. Each of the Purchasers consents to the Fifth Amendment; and Senior
Lender consents to the Sixth Amendment.
4. Effective as of the date hereof, Section 2.2(c)(i) of the
Intercreditor Agreement is amended to read as follows:
"(i) of 60 days after written notice of such default shall have been given
to
<PAGE>
the Company and Senior Lender or to each holder of at least ten percent
(10%) of the principal amount of the Subordinated Debt outstanding as
certified by the Company in its most recent certification thereof to the
holders of the Senior Debt, as the case may be; provided that only one such
notice shall be given pursuant to this Section 2.2(c)(i) in any 12
consecutive months; provided further that, the holders of the Senior Debt
shall be justified in relying upon the most recent certification by the
Company with respect to the holders of the Subordinated Debt, and the
notices required hereunder shall not be ineffective or invalidated as a
result of any such information provided by the Company being inaccurate or
incomplete; or".
5. Effective as of the date hereof, Section 4.2 of the Intercreditor
Agreement is hereby amended to add at the end thereof the following sentence:
"Nothing in this Intercreditor Agreement shall prohibit the holders of the
Subordinated Debt and/or the Collateral Agent from giving the thirty (30)
day notice required by this Section during any blockage period described in
Section 2.2(c) hereof."
6. All references in the other Senior Documents and Subordinated
Documents are hereby modified and amended wherever necessary to reflect the
modifications to the Intercreditor Agreement referenced in Sections 1 through 5
above, and all references therein to the "180 day period specified in Section
2.2(c)(i)" shall mean references to the "60 day period specified in Section
2.2(c)(i)."
7. Set forth below are the addresses of the Company, Senior Lender,
Aetna, Mutual, MONY and Collateral Agent for purposes of notices under the
Intercreditor Agreement:
The Company: Stevens International, Inc.
5500 Airport Freeway
Fort Worth, Texas 76117
Senior Lender: Bank of America Texas, N.A.
Bank of America Arizona
101 N. 1st Avenue
Phoenix, AZ 85003
Aetna: Aetna Life Insurance Company
Corporate Bond Research, RTAA
151 Farmington Avenue
Hartford, CT 06156
Mutual: The Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
<PAGE>
MONY: MONY Life Insurance Company of America
1740 Broadway
New York, NY 10019
Collateral Agent: The Bank of New York as Collateral Agent
Insurance Trust and Escrow Unit, 12 East
101 Barclay Street
New York, NY 10288
Attn: Sharia Jones-Bey
8. The Purchasers represent and warrant as follows:
(a) to their knowledge and belief all presently existing defaults and
events of default under the Subordinated Debt have been waived as of the
date of this Second Amendment;
(b) the restructuring of the Subordinated Debt has been entered into
by the Company and the Purchasers, and true and correct copies of the
documents evidencing such restructuring have been delivered to Senior
Lender; and
(c) the Purchasers are the present owners and holders of all of the
right, title and interest in and to the Subordinated Debt.
9. The Senior Lender represents and warrants that to its knowledge and
belief all presently existing defaults and events of default under the Senior
Debt other than the breach by virtue of the $950,000 loan made by Paul Stevens
to the Company in April 1996, have been waived as of the date of this Second
Amendment.
10. Except as set forth herein, the Intercreditor Agreement shall continue
in full force and effect according to its original provisions.
11. This Second Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
12. No waiver or modification, discharge or amendment of this Second
Amendment will be valid in the absence of the written and signed consent of the
party against which enforcement of such is sought.
13. This Second Amendment, together with the other documents and
instruments referenced herein, contains the entire agreement between the parties
relating to the transaction contemplated hereby. All prior or contemporaneous
agreements, understandings, representations and statements, whether written or
oral, are merged herein.
14. This Agreement shall be construed in accordance with the applicable
laws of the State of Texas and applicable federal law. In the event of a
dispute involving this Agreement or
<PAGE>
any other instruments executed in connection herewith, the undersigned
irrevocably agrees that venue for such dispute shall lie in any court of
competent in Dallas County, Texas.
15. This Agreement may be executed in one or more counterparts, all of
which when taken together shall be deemed to be one original.
<PAGE>
EXECUTED effective for all purposes as of the 31st day of July, 1997.
SENIOR LENDER:
-------------
BANK OF AMERICA TEXAS, N.A.
By: /s/ JAY DENNEY
Name: Jay Denney
Its:
COMPANY:
-------
STEVENS INTERNATIONAL, INC.,
a Delaware corporation, formerly known as
Stevens Graphics Corporation, successor-by-
merger to Hamilton-Stevens Group, Inc.,
Zerand-Bernal Group, Inc. and Stevens
Securities Systems International, Inc.
By: /s/ PAUL I. STEVENS
Name: Paul I. Stevens
Its: Chairman & CEO
PURCHASERS:
----------
AETNA LIFE INSURANCE COMPANY
By: /s/ PETER C. NILSEN
Name: Peter C. Nilsen
Its: Investment Manager
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ PETER W. OLIVER
Name: Peter W. Oliver
Its: Managing Director
<PAGE>
MONY LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ PETER W. OLIVER
Name: Peter W. Oliver
Its: Authorized Agent
PPEF:
----
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By: /s/ GEORGE A. WIEDERAENDERS
Name: George A. Wiederaenders
Its: Secretary - Treasurer
PMC:
---
PMC LIQUIDATION, INC.,
formerly known as Post Machinery Co., Inc.
By: /s/ GEORGE A. WIEDERAENDERS
Name: George A. Wiederaenders
Its: Treasurer
COLLATERAL AGENT:
----------------
THE BANK OF NEW YORK AS COLLATERAL AGENT
By: /s/ SHARIA JONES-BEY
Name: Sharia Jones-Bey
Its: Assistant Treasurer
<PAGE>
EXHIBIT 11.1
STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATIONS OF NET INCOME (LOSS) PER COMMON SHARE
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY AND FULLY DILUTED:
WEIGHTED AVERAGE SHARES OUTSTANDING................ 9,451 9,451 9,451 9,451
ASSUMED EXERCISE OF SERIES A AND B STOCK OPTIONS
(TREASURY STOCK METHOD).......................... -- -- -- --
------- ------- ------- ------
TOTAL COMMON SHARE EQUIVALENTS..................... 9,451 9,451 9,451 9,451
======= ======= ======= ======
NET INCOME (LOSS).................................. $(3,741) $(3,405) $(4,826) $(6,404)
======= ======= ======= ======
PER SHARE AMOUNTS -- PRIMARY AND FULLY DILUTED:
NET INCOME (LOSS).................................. $ (0.40) $ (0.36) $ (0.51) $ (0.68)
======= ======= ======= ======
</TABLE>
-17-
<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, 1997 AND FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 183
<SECURITIES> 1,360
<RECEIVABLES> 10,521
<ALLOWANCES> 3,496
<INVENTORY> 14,197
<CURRENT-ASSETS> 25,865
<PP&E> 39,679
<DEPRECIATION> 23,061
<TOTAL-ASSETS> 49,325
<CURRENT-LIABILITIES> 42,356
<BONDS> 58
0
0
<COMMON> 945
<OTHER-SE> 3,332
<TOTAL-LIABILITY-AND-EQUITY> 49,325
<SALES> 16,091
<TOTAL-REVENUES> 16,091
<CGS> 15,712
<TOTAL-COSTS> 20,465
<OTHER-EXPENSES> 176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,854
<INCOME-PRETAX> (6,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,404)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
