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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
---- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
-----------------------------------
or
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 1-9603
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STEVENS INTERNATIONAL, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2159407
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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)
----------__________________________________________
(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 May 6, 1998
- ------------------------------- --------------------------
Series A Stock, $0.10 Par Value 7,390,899
Series B Stock, $0.10 Par Value 2,097,134
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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, 1997 and March 31, 1998
(unaudited)
Consolidated Condensed Statements of Operations 4
Three months ended March 31, 1998 and 1997
(unaudited)
Consolidated Condensed Statements of 5
Stockholders' Equity December 31, 1997 and
Three months ended March 31, 1998 (unaudited)
Consolidated Condensed Statements of Cash Flows 6
Three months ended March 31, 1998 and 1997
(unaudited)
Notes to Consolidated Condensed Financial 7
Statements (unaudited)
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash..................................................... $ 699 $ 211
Trade accounts receivable, less allowance for losses of
$138 and $374 in 1998 and 1997, respectively........... 1,614 3,158
Costs and estimated earnings in excess of billings on
long-term contracts.................................... 3,432 2,209
Inventory (Note 3)....................................... 6,501 6,610
Other current assets..................................... 708 759
Assets held for sale (Note 6)........................... 13,448 14,735
-------- --------
Total current assets................................. 26,402 27,682
Property, plant and equipment............................... 2,449 2,409
Other assets, net........................................... 1,727 1,799
-------- --------
$ 30,578 $ 31,890
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................... $ 2,811 $ 2,691
Billings in excess of costs and estimated earnings on
long-term contracts.................................... -- 133
Other current liabilities................................ 5,685 6,322
Customer deposits........................................ 829 802
Advances from affiliates................................. 950 950
Current portion of long-term debt (Note 4)............... 15,476 27,678
-------- --------
Total current liabilities............................ 25,751 38,576
Long-term debt.............................................. 12,201 55
Accrued pension costs....................................... 2,870 2,870
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, 7,391,000 shares issued and
outstanding at March 31, 1998 and December 31,
1997, respectively..................................... 739 739
Series B common stock, $0.10 par value, 6,000,000
shares authorized, 2,098,000 shares issued and
outstanding at March 31, 1998 and December 31,
1997, respectively..................................... 210 210
Additional paid-in-capital............................... 39,941 39,941
Foreign currency translation adjustment.................. (986) (769)
Excess pension liability adjustment...................... (2,245) (2,245)
Retained (deficit)....................................... (47,903) (47,487)
-------- --------
Total stockholders' equity (deficit)................. (10,244) (9,611)
-------- --------
$ 30,578 $ 31,890
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
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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 MARCH 31,
----------------------------
1998 1997
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<S> <C> <C>
Net sales..................................................... $ 9,697 $ 8,780
Cost of sales................................................. (6,912) (7,829)
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Gross profit.................................................. 2,785 951
Selling, general and administrative expenses.................. (2,228) (2,907)
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Operating income (loss)....................................... 557 (1,956)
Other income (expense):
Interest income............................................ -- 12
Interest expense........................................... (825) (1,064)
Other, net................................................. (148) 9
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(973) (1,043)
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Loss before income taxes...................................... (416) (2,999)
Income tax benefit (Note 7)................................... -- --
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Net loss...................................................... $ (416) $(2,999)
======= =======
Net loss per common share - basic............................. $(0.04) $(0.32)
======= =======
Net loss per common share - diluted........................... $(0.04) $0.32
======= =======
Weighted average number of shares of common and common
stock equivalents outstanding during the periods - basic.... 9,488 9,451
======= =======
Weighted average number of shares of common and common
stock equivalents outstanding during the periods - diluted.. 9,488 9,451
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
SHARES AMOUNT
------ ---------
Series A Stock
Balance, December 31, 1997........................ 7,391 $ 739
Conversion of Series B stock to Series A stock.... -- --
------ --------
Balance, March 31, 1998........................... 7,391 $ 739
====== ========
Series B Stock
Balance, December 31, 1997........................ 2,098 $ 210
Conversion of Series B stock to Series A stock.... -- --
------ --------
Balance, March 31, 1998........................... 2,098 $ 210
====== ========
Additional Paid-In Capital
Balance, December 31, 1997........................ $ 39,941
--------
Balance, March 31, 1998........................... $ 39,941
========
Foreign Currency Adjustment
Balance, December 31, 1997........................ $ (769)
Translation adjustments........................... (217)
--------
Balance, March 31, 1998........................... $ (986)
========
Pension Liability Adjustment
Balance, December 31, 1997........................ $ (2,245)
--------
Balance, March 31, 1998........................... $ (2,245)
========
Retained (Deficit)
Balance, December 31, 1997........................ $(47,487)
Net (loss) for three months ended March 31, 1998.. (416)
--------
Balance, March 31, 1998........................... $(47,903)
========
Stockholders' Equity (Deficit) at March 31, 1998..... $(10,244)
========
See notes to consolidated condensed financial statements.
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
-------- ----------
<S> <C> <C>
Cash provided by operations:
Net income (loss)....................................... $ (416) $ (2,999)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 453 927
Other................................................... (217) (181)
Changes in operating assets and liabilities:
Trade accounts receivable............................ 1,544 3,465
Contract costs in excess of billings................. (1,356) (1,255)
Inventory............................................ 110 441
Other assets......................................... 1,191 1,755
Trade accounts payable............................... 193 (1,573)
Other liabilities.................................... (683) (299)
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Total cash provided by operating activities................ $ 819 $ 281
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Cash provided by (used in) investing activities:
Additions to property, plant and equipment................ $ (160) $ (7)
Disposal of Bernal division............................... -- 14,263
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Total cash provided by (used in) investing activities...... $ (160) $ 14,256
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Cash provided by (used in) financing activities:
Net proceeds from (repayments of) long-term debt.......... $ (171) $(15,863)
------- --------
Total cash provided by (used in) financing activities...... $ (171) $(15,863)
------- --------
Increase (decrease) in cash and temporary investments...... $ 488 $ (1,326)
Cash and temporary investments at beginning of period...... 211 3,338
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Cash and temporary investments at end of period............ $ 699 $ 2,012
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest................................................ $ 285 $ 12
Income taxes............................................ -- --
</TABLE>
See notes to consolidated condensed financial statements.
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STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated condensed balance sheet as of March 31, 1998, the
consolidated condensed statement of stockholders' equity for the period
ended March 31, 1998, the consolidated condensed statements of operations
for the three months ended March 31, 1998 and 1997, and the consolidated
condensed statements of cash flows for the three 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 March
31, 1998 and the results of operations for the three months ended March 31,
1998 and 1997 and the cash flows for the three months ended March 31, 1998
and 1997 have been made. The December 31, 1997 consolidated condensed
balance sheet is derived from the audited consolidated balance sheet as of
that date. Complete financial statements for December 31, 1997 and related
notes thereto are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "1997 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 1997 Form 10-K. The results of operations for the three
months ended March 31, 1998 and 1997 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
securities segments of the printing industry. The Company also markets and
manufactures high-speed digital image processing systems primarily for use
in the banknote and security printing industry. The Company combines
various types of 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's technological and engineering capabilities
allow it to combine any of the four major printing technologies (offset,
flexography, rotogravure and intaglio) in its systems. 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.
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3. Inventories consist of the following:
March 31, December 31,
1998 1997
--------- ------------
(Amounts in thousands)
Finished product........ $1,066 $1,413
Work in progress........ 1,567 2,723
Raw materials........... 3,868 2,474
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$6,501 $6,610
====== ======
4. For a description of the status of the bank credit facility at March 31,
1998, 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 debt is classified as a current liability at March
31, 1998. The senior subordinated debt is classified as $4.5 million of
current indebtedness and $12.2 million of long-term indebtedness based upon
the terms of the restructured debt discussed in detail in "Liquidity and
Capital Resources".
5. As a result of the Company's continuing liquidity problems, 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 1997 Form 10-K.
6. A description of the Company's divestitures in 1998 and 1997 follow:
Sale of Assets of Zerand Division in April 1998
-----------------------------------------------
On April 27, 1998, the Company sold substantially all the assets of the
Zerand division to Valumaco Incorporated, a new company formed for the
asset purchase. In addition, Valumaco Incorporated assumed certain
liabilities of the Zerand division. The assets sold included the real
property, platen die cutter systems, and other original Zerand products
such as delivery equipment, wide-web rotogravure printing systems, stack
flexographic printing systems, unwind and butt splicer systems, and related
spare parts, accounts payable, and other assumed liabilities. Excluded from
the proposed transaction were the System 2000 flexographic printing systems
and the System 9000 narrow-web rotogravure printing systems produced at the
Zerand division and related accounts receivable, inventory and engineering
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drawings. The sale price was approximately $13.7 million, which consisted
of cash proceeds of $10.1 million, a one-year $1 million escrow "holdback",
and the purchaser's assumption of approximately $2.6 million of certain
liabilities of Zerand, including the accounts payable.
This transaction resulted in an approximate $10 million reduction of the
Company's senior debt. In 1997, Zerand contributed sales of approximately
$11.6 million and approximately $1.8 million income before interest,
corporate charges and taxes to the Company's financial statements. The
Company will realize an approximate $3.6 million gain on the sale of Zerand
assets, which will be reflected in the financial statements for the second
quarter of 1998.
Sale of Bernal Division in March 1997
-------------------------------------
In March 1997, the Company sold substantially all the assets of its Bernal
division 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, including the accounts payable. This
transaction resulted in a $12 million permanent reduction of the Company's
senior debt. In 1996, Bernal contributed sales of approximately $17.8
million and approximately $0.7 million income before interest, corporate
charges and taxes.
7. Due to accumulated losses, there are no recoverable income taxes for the
three months ended March 31, 1998 and 1997.
8. In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
("EPS") which established new standards for computing and presenting EPS.
SFAS No. 128 replaced the presentation of primary EPS with a presentation
of basic EPS. Basic EPS excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. EPS
amounts for 1998 and 1997 have been presented and, where appropriate,
restated to conform to the SFAS No. 128 requirements. 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 THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Sales The Company's sales for the three months ended March 31, 1998 increased
by $0.9 million (or 10.4%) compared to sales in the same period in 1997 due
primarily to packaging systems sales
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increases ($2.0 million) offset by decreases in sales at the French service and
repair division ($0.1 million), and banknote printing equipment division ($1.0
million). Sales and gross profit in 1997 includes $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. Sales included $3.6 million
of Zerand division sales in the three months ended March 31, 1998, a division
that was sold in April 1998.
Gross Profit The Company's gross profit for the three months ended March 31,
1998 increased by $1.8 million compared to gross profit in the same period in
1997 due primarily to increased sales volume for packaging systems and reduced
depreciation and product development costs in 1998. Gross profit margin for
1998 increased to 28.7% of sales as compared to 10.8% for 1997. This increase
in gross profit margin in 1998 was due primarily to higher margins on standard
products in 1998 compared to lower margins on prototype orders in 1997 and
reduced depreciation charges on assets held for sale. Sales and gross profit in
1997 includes $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 $0.7 million (or 23.4%) for the three
months ended March 31, 1998 compared to the same period in 1997 due to
continuing cost reduction efforts at all divisions. Selling, general and
administrative expenses for the three months ended March 31, 1998 were 23% of
sales compared to 33.1% of sales for the same period in 1997 due to the increase
in sales in 1998 described above and the reduction in expenses.
Other Income (Expense) The Company's interest expense decreased by $0.2
million for the three months ended March 31, 1998 compared to the same period in
1997 due to the reduced borrowing in 1998, primarily from the $12 million in
loan payments from the sale of Bernal in March 1997.
TAX MATTERS
The Company's effective state and federal income tax rate ("effective tax rate")
was 0% for the three months ended March 31, 1998 and 1997, respectively. Due to
continuing losses in 1998, there are no recoverable tax benefits for the three
months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
As a result of its cash collections and the sale of Zerand (see Note 6 of Notes
to Consolidated Condensed Financial Statements), the Company was able to make
principal payments on its bank credit facility of approximately $10 million on
April 27, 1998. This transaction and normal working capital advances decreased
the Company's net direct bank borrowings from $10.96 million at March 31, 1998
to $583,000 at April 27, 1998.
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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 ($0.2) and ($2.2) million for the three months ended March 31,
1998 and 1997, respectively. Working capital provided cash of $1.0 and $2.5
million for the three months ended March 31, 1998 and 1997, respectively.
During periods of lower sales such as 1997 and the first quarter of 1998, the
Company's working capital provides cash as receivables are collected and
inventory is utilized. Alternatively, 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.
On April 22, 1998 the Company and its Note Holders reached an agreement in
principle to modify the Senior Subordinated Notes, including principal of $15.3
million and interest of $2.35 million, as follows (the "Restructuring"):
a. A total of $4 million of 6% term notes, due December 31, 1998, to be
collateralized by certain assets of the Company and are to be
mandatorily pre-paid from proceeds of sale of the Hamilton Machining
Center and/or the Hamilton production facility. Interest on these notes
is payable monthly and increases 1% per month commencing August 1, 1998
until maturity;
b. A total of $1 million of 6% term notes, due December 31, 1999, to be
collateralized by certain assets of the Company and are to be
mandatorily pre-paid from proceeds of the $1 million escrow amount from
the April 1998 sale of certain Zerand assets. Interest on these notes
is payable monthly and increases 1% per month (a) commencing October 1,
1998 until $500,000 in principal is re-paid and (b) commencing April 1,
1999 until maturity;
c. A total of $4 million of 6% term notes, due June 30, 2003 to be payable
in principal payments of $1.33 million on each of June 30, 2001, 2002
and 2003, with interest paid in kind until June 30, 2000, and
thereafter in cash semi-annually. Collateral will include first liens
on certain assets and a second lien on all remaining assets of the
Company. An accelerated principal payment of $500,000 is due on June
30, 2000 payable out of 50% of excess or "free" cash flow.
d. A total of $3 million of 6% unsecured term notes, due June 30, 2005, to
be payable in principal payments of $1 million on June 30, 2003, 2004
and 2005, with interest paid in kind through June 30, 2000 and
thereafter in cash out of 50% of net income of the Company. If the
Company pre-pays $0.5 million of these unsecured term notes before June
30, 2003, $1.5 million of these term notes will be converted directly
into Series A Common Stock of the Company at market price on the date
of conversion.
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e. A total of $5.65 million of 6% unsecured notes, due December 31, 1999,
which will be mandatorily converted to 5.65 million shares of
Convertible Preferred Stock (liquidation value of $1 per share) upon
the payment of the $4 million term notes described in paragraph a.
above, and the conversion to Convertible Preferred Stock of $1.5
million of a Bridge Convertible Senior Secured Note described below.
The Convertible Preferred Stock will be convertible, at the option of
the Note Holders, to Series A Common Stock of the Company at the market
value of the Series A Common Stock as of the date of conversion of the
preferred stock. Cumulative dividends at 8% per annum will be paid
after June 30, 2003 out of 50% of net income not used to pay interest
on senior debt and the term notes described in paragraph d. above.
A summary table of required Note Holder principal payment due dates follows:
ON OR BEFORE: PAYMENT AMOUNT
------------------- --------------
December 31, 1998.. $4,500,000
December 31, 1999.. $ 500,000
June 30, 2001...... $1,333,333
June 30, 2002...... $1,333,333
June 30, 2003...... $2,333,334
June 30, 2004...... $1,000,000
June 30, 2005...... $1,000,000
As a condition to the implementation of the Restructuring, (a) the Company must
raise $1.5 million in the form of a Bridge Convertible Senior Secured Note,
convertible into 1.5 million shares of Convertible Preferred Stock, which in
turn is convertible into Series A Common Stock at market price on the day of
conversion, and (b) a $950,000 loan from Paul I. Stevens to the Company must be
converted into Convertible Preferred Stock of the Company on the same terms and
conditions as described in paragraph e. above.
The Company believes that its commitment to raise $1.5 million of Bridge Senior
Convertible Debt and the conversion of the $950,000 advanced to the Company by
Paul I. Stevens to Convertible Preferred Stock will enhance the Company's
ability to obtain and produce the new orders which have been forecasted.
At March 31, 1998, the Company's indebtedness was comprised primarily of a bank
credit facility and the Company's Senior Subordinated Notes due September 30,
2000. In addition, the Company's Chairman has loaned the Company $950,000 as
described below. As of March 31, 1998, there was outstanding $15.3 million in
Senior Subordinated Notes, bearing interest at the rate of 10.5% per annum.
Under its credit facility at March 31, 1998, the Company's maximum borrowings
were limited to a borrowing base formula, which could not exceed $11 million in
the form of direct borrowings and letters of credit. As of March 31, 1998 there
was $10.97 million in direct borrowings and $8,600 in standby letters of credit
outstanding under the bank credit facility, with additional availability for
such borrowings of $24,000. After the sale of Zerand, the bank credit facility
borrowings were
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$583,000, and the bank credit facility was modified to provide for a maximum of
$2 million in direct borrowings and letters of credit.
At March 31, 1998, $10.97 million of the Company's bank borrowings were at the
lender's prime rate of interest (8.50%) plus 2.0%, or a total of 10.50%
interest. The amounts borrowed under the credit facility have been used for
working capital.
Both the agreement concerning the bank credit facility and the agreement with
the holders of the Senior Subordinated Notes provide for joint and several
guaranties by the domestic operating subsidiaries of the Company. To secure the
indebtedness and the guaranties, a first lien was granted to the lender, and a
second lien was granted to the holders of the Senior Subordinated Notes, on
substantially all the assets of the Company and its domestic divisions.
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 the Zerand division, the above described Restructuring, 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 a return to profitable operations. If
the Company is unsuccessful in its efforts, it may continue to be unable to meet
its obligations or fulfill 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, 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. As of March 31, 1998, this loan had not been repaid.
Backlog and Orders The Company's backlog of unfilled orders (excluding Zerand
backlog), at March 31, 1998 was approximately $8.1 million compared to $12.0
million at December 31, 1997 (excluding Zerand backlog), a decrease of (32.5%).
The backlog decrease included $3.9 million of packaging systems as compared to
year-end 1997, offset by small changes in the Company's other divisions. The
backlog at March 31 in each of the preceding five years has ranged from a low of
$17.4 million in 1997 to a high of $68.0 million in 1995.
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The reduction in backlog is the result of a reduced order flow in 1997 and 1998.
Orders for the three months ended March 31, 1998 were $1.9 million compared to
$5.4 million for the comparable period in 1997, a decrease of $3.5 million while
shipments increased $0.9 million. The Company believes the above noted reduced
order flow is the result of fluctuations in the flow of major printing and
packaging system orders, 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 1997, 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 counterclaimant
against the Company. The counterclaim alleges claims for defamation, tortious
interference with prospective business relationships and breach of contract. 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.
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 Seventh Amendment to Credit Agreement dated December 31, 1997 by and
between the Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
10.2 Eighth Amendment to Credit Agreement dated January 23, 1998 by and
between the Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
-14-
<PAGE>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------
10.3 Ninth Amendment to Credit Agreement dated February 6, 1998 by and
between the Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
10.4 Tenth Amendment to Credit Agreement dated February 28, 1998 by and
between the Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
10.5 Eleventh Amendment to Credit Agreement dated March 31, 1998 by and
between the Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
10.6 Twelfth Amendment to Credit Agreement dated April 16, 1998 by and
between Bank of America Texas, N.A., the Company, PMC Liquidation,
Inc., and Printing and Packaging Equipment Finance Corporation.(*)
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) Reports on Form 8-K.
None.
-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: May 12, 1998 By: /s/ Paul I. Stevens
------------------------------------
Paul I. Stevens
Chief Executive Officer
and Acting Chief Financial Officer
-16-
<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)
THREE MONTHS ENDED
MARCH 31,
1998 1997
--------- ---------
Basic and diluted:
Weighted average shares outstanding - basic....... 9,488 9,451
Assumed exercise of Series A and B stock options
(Treasury stock method)......................... -- --
------ -------
Total common share equivalents - diluted............. 9,488 9,451
====== =======
Net income (loss).................................... $ (416) $(2,999)
====== =======
Per share amounts -- Basic and fully diluted:
Net income (loss) - basic............................ $(0.04) $ (0.32)
====== =======
Net income (loss) - diluted.......................... $(0.04) $ (0.32)
====== =======
-17-
<PAGE>
EXHIBIT 10.1
SEVENTH AMENDMENT
-----------------
TO
--
CREDIT AGREEMENT
----------------
This Seventh Amendment to Credit Agreement (this "Amendment") is entered
into effective as of the 31st day of December, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31,
1996 (the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
SEVENTH AMENDMENT - Page 1
<PAGE>
(h) that certain Fourth Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance Amendment");
(i) that certain Fifth Amendment to Credit Agreement dated as of July 31,
1997 (the "Fifth Amendment"); and
(j) that certain Sixth Amendment to Credit Agreement dated as of August 28,
1997.
RECITALS AND AFFIRMATION OF FACTS:
----------------------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Bernal Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the Subordinated Debt. Bank
agreed to four extensions of the such Forbearance Period, but notified
Borrower that Bank would not extend the Forbearance Period beyond July,
1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the Bank in full by December 31,
1997. After the holders of the Subordinated Debt agreed in principal with
Borrower's proposal Borrower requested that Bank agree to restructure its
agreements with Borrower in accordance with the proposals made to the
holders of the Subordinated Debt. After continued negotiations among Bank,
Borrower and the holders of the Subordinated Debt, Bank agreed to waive its
then existing defaults and modified its agreements with Borrower in
accordance with the Fifth Amendment. The Fifth Amendment and the documents
executed in connection therewith are herein called the "Modification
Documents."
SEVENTH AMENDMENT - Page 2
<PAGE>
(d) In early December, 1997, Borrower reported to Bank that it had reached
an agreement in principal to sell one of its divisions, but requested (the
"Early December Request") that rather than complying with the terms of the
Modification Documents, Borrower be allowed to use the majority of the net
proceeds of such sale to retire the Subordinated Debt rather than to retire
the debt of Borrower to Bank. Bank would not agree to the use of its
collateral to retire indebtedness to others in direct contradiction of the
terms of the Modification Documents and the Credit Agreement. Borrower has
now proposed that in lieu of the Early December Request (i) the proceeds of
Bank's collateral, including without limitation all net proceeds of the
sale of such division, be applied be applied to retire the debt of Borrower
to Bank in accordance with the terms of the Credit Agreement and related
loan documents, and (ii) that the maturity of Borrower's obligations to
Bank be extended as set forth herein. Borrower acknowledges and agrees
that Bank has no duty to agree to any modification of the existing
agreements between Borrower and Bank.
(E) BORROWER ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK
THAT DURING ALL NEGOTIATIONS WITH BANK, BORROWER HAS BEEN REPRESENTED BY
COMPETENT LEGAL COUNSEL AND HAS CONSULTED WITH SUCH OTHER PROFESSIONALS AS
IT HAS DEEMED PRUDENT WITH RESPECT TO ITS AGREEMENTS WITH BANK AND ALL
MODIFICATIONS THERETO AND THAT BORROWER HAS MADE ITS DECISIONS BASED UPON
ADVICE FROM ITS LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS WITHOUT ANY
ADVICE FROM BANK OR BANK'S REPRESENTATIVES OR COUNSEL. BORROWER FURTHER
ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK THAT WITHOUT ANY
REQUIREMENT THEREFOR BY BANK, ALL DECISIONS TO SELL ANY OF BORROWER'S
ASSETS WERE MADE SOLELY BY BORROWER BASED UPON ITS BUSINESS JUDGMENT AND
UPON THE ADVICE OF LEGAL COUNSEL AND OTHER PROFESSIONALS AS BEING IN THE
BEST INTERESTS OF BORROWER TO GIVE BORROWER THE GREATEST OPPORTUNITY TO
RETURN TO A PROFITABLE OPERATION AND TO RETIRE ITS OBLIGATIONS TO ITS
LENDERS AND OTHER CREDITORS.
(f) Bank and Borrower have agreed that upon the terms and subject in
all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
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 TO CREDIT AGREEMENT AND AGREEMENT TO PAY
-------------------------------------------------------
APPRAISAL AND ENVIRONMENTAL AUDIT EXPENSES
------------------------------------------
1.1 The definition of the term Borrowing Base Advance Cap in Article 1 of
the Credit Agreement is hereby restated in its entirety to read as follows:
(a) The term "Borrowing Base Advance Cap" means at any time an amount
equal to the lesser of:
SEVENTH AMENDMENT - Page 3
<PAGE>
(1) $11,500,000.00; or
(2) the sum of:
(i) 80% of the amount of Eligible Accounts; plus
(ii) the lesser of:
(A) $2,750,000.00, or
(B) 25% of the amount of Eligible Inventory; plus
(iii) $7,837,000.00.
1.2 The definition of the term "Note" in Article 1 of the Credit Agreement
is amended to mean the Note as defined in the Fifth Amendment as further amended
by that certain Second Note and Liens Modification Agreement of even date
herewith (the "Note Modification Agreement").
1.3. 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. The amount of the Revolving Line of Credit
available for Letters of Credit and advances outstanding at any time including
amounts paid under any Letter of Credit is an amount of up to the lesser of (i)
$11,500,000.00 or (ii) the Borrowing Base Advance Cap (the "Commitment").
(b) The Borrower agrees not to permit the outstanding principal
balance of the Revolving Line of Credit plus the amount of all then outstanding
Letters of Credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the lesser of (i) $11,500,000.00 or (ii) the Borrowing
Base Advance Cap. 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.
1.4 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean January 23, 1998.
1.5 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
SEVENTH AMENDMENT - Page 4
<PAGE>
3.8 Additional Loan Restructure Fees: Borrower agrees to pay Bank
$9,000.00 on January 20, 1998, as a loan restructuring and commitment fee for
extending the Expiration Date beyond December 31, 1997.
1.6 Section 9.2 of the Credit Agreement is hereby amended to correct a
typographical error to provide that the Quick Ratio test is .25:1.00 rather than
.025:1.00.
1.7 Borrower agrees to promptly pay to Bank upon demand therefor all costs
of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.8 Except as amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with its provisions.
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Fifth
Master Amendment to Security Documents.
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Amendment to
Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower
SEVENTH AMENDMENT - Page 5
<PAGE>
agree that no payments will be made upon any indebtedness of Borrower to Paul
Stevens until January 28, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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 are 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 AMENDMENT, 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
SEVENTH AMENDMENT - Page 6
<PAGE>
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 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
RELEASE 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 BANK 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 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.
SEVENTH AMENDMENT - Page 7
<PAGE>
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 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
Amendment 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 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 the Credit
Agreement as amended by this Amendment 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 the Credit
Agreement or this Amendment shall adversely affect any right or remedy of Bank
under the Guaranty, and
SEVENTH AMENDMENT - Page 8
<PAGE>
(d) the execution and delivery of this Amendment 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, 3.9 and 3.10 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SEVENTH AMENDMENT - Page 9
<PAGE>
EXHIBIT 10.2
EIGHTH AMENDMENT
----------------
TO
--
CREDIT AGREEMENT
----------------
This Eighth Amendment to Credit Agreement (this "Amendment") is entered
into effective as of the 23rd day of January, 1998, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into effective
as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into effective
as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31, 1996
(the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
EIGHTH AMENDMENT - PAGE 1
<PAGE>
(h) that certain Fourth Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance Amendment");
(i) that certain Fifth Amendment to Credit Agreement dated as of July 31,
1997 (the "Fifth Amendment");
(j) that certain Sixth Amendment to Credit Agreement dated as of August 28,
1997; and
(k) that certain Seventh Amendment to Credit Agreement dated as of December
31, 1997 .
RECITALS AND AFFIRMATION OF FACTS:
----------------------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Bernal Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the Subordinated Debt. Bank
agreed to four extensions of the such Forbearance Period, but notified
Borrower that Bank would not extend the Forbearance Period beyond July,
1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the Bank in full by December 31,
1997. After the holders of the Subordinated Debt agreed in principal with
Borrower's proposal Borrower requested that Bank agree to restructure its
agreements with Borrower in accordance with the proposals made to the
holders of the Subordinated Debt. After continued negotiations among Bank,
Borrower and the holders of the Subordinated Debt, Bank agreed to waive its
then existing defaults and modified
EIGHTH AMENDMENT - PAGE 2
<PAGE>
its agreements with Borrower in accordance with the Fifth Amendment. The
Fifth Amendment and the documents executed in connection therewith are
herein called the "Modification Documents."
(d) In early December, 1997, Borrower reported to Bank that it had
reached an agreement in principal to sell one of its divisions, but
requested (the "Early December Request") that rather than complying with
the terms of the Modification Documents, Borrower be allowed to use the
majority of the net proceeds of such sale to retire the Subordinated Debt
rather than to retire the debt of Borrower to Bank. Bank would not agree
to the use of its collateral to retire indebtedness to others in direct
contradiction of the terms of the Modification Documents and the Credit
Agreement. Borrower has now proposed that in lieu of the Early December
Request (i) the proceeds of Bank's collateral, including without limitation
all net proceeds of the sale of such division, be applied to retire the
debt of Borrower to Bank in accordance with the terms of the Credit
Agreement and related loan documents, and (ii) that the maturity of
Borrower's obligations to Bank be extended as set forth herein. Borrower
acknowledges and agrees that Bank has no duty to agree to any modification
of the existing agreements between Borrower and Bank.
(e) BORROWER ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK
THAT DURING ALL NEGOTIATIONS WITH BANK, BORROWER HAS BEEN REPRESENTED BY
COMPETENT LEGAL COUNSEL AND HAS CONSULTED WITH SUCH OTHER PROFESSIONALS AS
IT HAS DEEMED PRUDENT WITH RESPECT TO ITS AGREEMENTS WITH BANK AND ALL
MODIFICATIONS THERETO AND THAT BORROWER HAS MADE ITS DECISIONS BASED UPON
ADVICE FROM ITS LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS WITHOUT ANY
ADVICE FROM BANK OR BANK'S REPRESENTATIVES OR COUNSEL. BORROWER FURTHER
ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK THAT WITHOUT ANY
REQUIREMENT THEREFOR BY BANK, ALL DECISIONS TO SELL ANY OF BORROWER'S
ASSETS WERE MADE SOLELY BY BORROWER BASED UPON ITS BUSINESS JUDGMENT AND
UPON THE ADVICE OF LEGAL COUNSEL AND OTHER PROFESSIONALS AS BEING IN THE
BEST INTERESTS OF BORROWER TO GIVE BORROWER THE GREATEST OPPORTUNITY TO
RETURN TO A PROFITABLE OPERATION AND TO RETIRE ITS OBLIGATIONS TO ITS
LENDERS AND OTHER CREDITORS.
(f) Bank and Borrower have agreed that upon the terms and subject in
all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
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 TO CREDIT AGREEMENT AND AGREEMENT TO PAY APPRAISAL AND
---------------------------------------------------------------------
ENVIRONMENTAL AUDIT EXPENSES
- ----------------------------
EIGHTH AMENDMENT - PAGE 3
<PAGE>
1.1 The definition of the term "Note" in Article 1 of the Credit Agreement
is amended to mean the Note as defined in the Fifth Amendment as further amended
by that certain Third Note and Liens Modification Agreement of even date
herewith (the "Note Modification Agreement").
1.2 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean February 6, 1998.
1.3 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
3.9 Additional Loan Restructure Fees: Borrower agrees to pay
Bank $4,500.00 on January 23, 1998, as a loan restructuring and commitment
fee for extending the Expiration Date beyond January 23, 1998.
1.4 Borrower agrees to promptly pay to Bank upon demand therefor all costs
of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.5 Except as amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with its provisions.
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Sixth
Master Amendment to Security Documents.
EIGHTH AMENDMENT - PAGE 4
<PAGE>
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Amendment to
Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower agree that no payments will be made upon any indebtedness of
Borrower to Paul Stevens until February 7, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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 are 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
EIGHTH AMENDMENT - PAGE 5
<PAGE>
AMENDMENT, 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 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
RELEASE 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 BANK 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
EIGHTH AMENDMENT - PAGE 6
<PAGE>
BUSINESS ADVANTAGE, BREACH 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 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
Amendment 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
EIGHTH AMENDMENT - PAGE 7
<PAGE>
of the Bank, shall remain in full force and effect and shall continue to be the
legal, valid and binding obligation 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 the Credit Agreement as amended by this Amendment
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 the Credit Agreement or this Amendment shall adversely
affect any right or remedy of Bank under the Guaranty, and (d) the execution and
delivery of this Amendment 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, 3.9 and 3.10 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EIGHTH AMENDMENT - PAGE 8
<PAGE>
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
EIGHTH AMENDMENT - PAGE 9
<PAGE>
EXHIBIT 10.3
NINTH AMENDMENT
---------------
TO
--
CREDIT AGREEMENT
----------------
This Ninth Amendment to Credit Agreement (this "Amendment") is entered into
effective as of the 6th day of February, 1998, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31,
1996 (the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment
to Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
NINTH AMENDMENT - Page 1
<PAGE>
(h) that certain Fourth Amendment to Agreement and Fourth Amendment
to Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance
Amendment");
(i) that certain Fifth Amendment to Credit Agreement dated as of July
31, 1997 (the "Fifth Amendment");
(j) that certain Sixth Amendment to Credit Agreement dated as of
August 28, 1997;
(k) that certain Seventh Amendment to Credit Agreement dated as of
December 31, 1997 (the "Seventh Amendment"); and
(l) that certain Eighth Amendment to Credit Agreement dated as of
January 23, 1998 (the "Eighth Amendment");
RECITALS AND AFFIRMATION OF FACTS:
----------------------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Bernal Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the Subordinated Debt. Bank
agreed to four extensions of the such Forbearance Period, but notified
Borrower that Bank would not extend the Forbearance Period beyond July,
1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the
NINTH AMENDMENT - Page 2
<PAGE>
Bank in full by December 31, 1997. After the holders of the Subordinated
Debt agreed in principal with Borrower's proposal Borrower requested that
Bank agree to restructure its agreements with Borrower in accordance with
the proposals made to the holders of the Subordinated Debt. After
continued negotiations among Bank, Borrower and the holders of the
Subordinated Debt, Bank agreed to waive its then existing defaults and
modified its agreements with Borrower in accordance with the Fifth
Amendment. The Fifth Amendment and the documents executed in connection
therewith are herein called the "Modification Documents."
(d) In early December, 1997, Borrower reported to Bank that it had
reached an agreement in principal to sell one of its divisions, but
requested (the "Early December Request") that rather than complying with
the terms of the Modification Documents, Borrower be allowed to use the
majority of the net proceeds of such sale to retire the Subordinated Debt
rather than to retire the debt of Borrower to Bank. Bank would not agree
to the use of its collateral to retire indebtedness to others in direct
contradiction of the terms of the Modification Documents and the Credit
Agreement. Borrower then proposed that in lieu of the Early December
Request (i) the proceeds of Bank's collateral, including without limitation
all net proceeds of the sale of such division, be applied to retire the
debt of Borrower to Bank in accordance with the terms of the Credit
Agreement and related loan documents, and (ii) that the maturity of
Borrower's obligations to Bank be extended as set forth herein. Borrower
acknowledges and agrees that Bank had no duty to agree to any modification
of the existing agreements between Borrower and Bank.
(e) Borrower and Bank have entered into the Seventh Amendment and the
Eighth Amendment and Borrower has requested that Bank again extend the
credit facility evidenced by the Credit Agreement until February 28, 1998.
(e) BORROWER ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK
THAT DURING ALL NEGOTIATIONS WITH BANK, BORROWER HAS BEEN REPRESENTED BY
COMPETENT LEGAL COUNSEL AND HAS CONSULTED WITH SUCH OTHER PROFESSIONALS AS
IT HAS DEEMED PRUDENT WITH RESPECT TO ITS AGREEMENTS WITH BANK AND ALL
MODIFICATIONS THERETO AND THAT BORROWER HAS MADE ITS DECISIONS BASED UPON
ADVICE FROM ITS LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS WITHOUT ANY
ADVICE FROM BANK OR BANK'S REPRESENTATIVES OR COUNSEL. BORROWER FURTHER
ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK THAT WITHOUT ANY
REQUIREMENT THEREFOR BY BANK, ALL DECISIONS TO SELL ANY OF BORROWER'S
ASSETS WERE MADE SOLELY BY BORROWER BASED UPON ITS BUSINESS JUDGMENT AND
UPON THE ADVICE OF LEGAL COUNSEL AND OTHER PROFESSIONALS AS BEING IN THE
BEST INTERESTS OF BORROWER TO GIVE BORROWER THE GREATEST OPPORTUNITY TO
RETURN TO A PROFITABLE OPERATION AND TO RETIRE ITS OBLIGATIONS TO ITS
LENDERS AND OTHER CREDITORS.
(f) Bank and Borrower have agreed that upon the terms and subject in
all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
NINTH AMENDMENT - Page 3
<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 TO CREDIT AGREEMENT AND AGREEMENT TO PAY
-------------------------------------------------------
APPRAISAL AND ENVIRONMENTAL AUDIT EXPENSES
------------------------------------------
1.1 The definition of the term "Note" in Article 1 of the Credit Agreement
is amended to mean the Note as defined in the Fifth Amendment as further amended
by that certain Fourth Note and Liens Modification Agreement of even date
herewith (the "Note Modification Agreement").
1.2 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean February 28, 1998.
1.3 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
3.9 Additional Loan Restructure Fees: Borrower agrees to pay Bank
$9,000.00 on the date this Amendment is executed, as a loan restructuring
and commitment fee for extending the Expiration Date beyond February 6,
1998.
1.4 Borrower agrees to promptly pay to Bank upon demand therefor all costs
of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.5 Except as amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with its provisions.
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
NINTH AMENDMENT - Page 4
<PAGE>
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Seventh
Master Amendment to Security Documents.
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Multi-party
Agreement entered into with respect to the Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower agree that no payments will be made upon any indebtedness of
Borrower to Paul Stevens until March 2, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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 are 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.
NINTH AMENDMENT - Page 5
<PAGE>
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 AMENDMENT, 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 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
RELEASE 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
NINTH AMENDMENT - Page 6
<PAGE>
ANY WAY RESULTING FROM THE ACTS OR OMISSIONS OF BANK 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 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 in favor of Bank.
NINTH AMENDMENT - Page 7
<PAGE>
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
Amendment 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 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 the Credit
Agreement as amended by this Amendment 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 the Credit
Agreement or this Amendment shall adversely affect any right or remedy of Bank
under the Guaranty, and (d) the execution and delivery of this Amendment shall
in no way reduce, impair or discharge any obligations of the Guarantors pursuant
to the Guaranty.
3.11. NO DUTY TO EXTEND. BORROWER AND THE UNDERSIGNED GUARANTORS
ACKNOWLEDGE AND AGREE THAT NOTWITHSTANDING THE FACT THAT BANK SENT TO BORROWER A
TERM SHEET FOR DISCUSSION PURPOSES ONLY REGARDING AN EXTENSION OF A CREDIT
FACILITY BEYOND FEBRUARY 28, 1998, SUCH TERM SHEET IMPOSED NO OBLIGATIONS UPON
BANK OF ANY NATURE. BORROWER AND GUARANTOR ACKNOWLEDGE AND AGREE THAT BANK HAS
ABSOLUTELY NO DUTY OR OBLIGATION OF ANY NATURE TO AGAIN EXTEND THE EXPIRATION
DATE OR TO AGREE TO ANY OTHER AMENDMENT TO THE CREDIT AGREEMENT.
3.12. Year 2000. Borrower acknowledges that it has received a copy of the
brochure prepared by the Bank entitled "On Turning 00" and that it has reviewed
this material and is aware of the possible impact of the year 2000 problem (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) upon its computer applications
and on-going business. Borrower represents that any corrective action necessary
will be taken and that Borrower does not believe the year 2000 problem will
result in a material adverse change in Borrower's business condition (financial
or otherwise), operations, properties or prospects, or ability to repay the
credit.
IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be duly
executed as of the day and year first above written.
NINTH AMENDMENT - Page 8
<PAGE>
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, 3.9, 3.10 and 3.11 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
NINTH AMENDMENT - Page 9
<PAGE>
EXHIBIT 10.4
TENTH AMENDMENT
---------------
TO
--
CREDIT AGREEMENT
----------------
This Tenth Amendment to Credit Agreement (this "Amendment") is entered into
effective as of the 28th day of February, 1998, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31,
1996 (the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
(h) that certain Fourth Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance
Amendment");
TENTH AMENDMENT - Page 1
<PAGE>
(i) that certain Fifth Amendment to Credit Agreement dated as of July
31, 1997 (the "Fifth Amendment");
(j) that certain Sixth Amendment to Credit Agreement dated as of August
28, 1997;
(k) that certain Seventh Amendment to Credit Agreement dated as of
December 31, 1997 (the "Seventh Amendment");
(l) that certain Eighth Amendment to Credit Agreement dated as of
January 23, 1998 (the "Eighth Amendment"); and
(m) that certain Ninth Amendment to Credit Agreement dated as of
February 6, 1998 (the "Ninth Amendment");
RECITALS AND AFFIRMATION OF FACTS:
----------------------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Bernal Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the Subordinated Debt. Bank
agreed to four extensions of the such Forbearance Period, but notified
Borrower that Bank would not extend the Forbearance Period beyond July,
1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the
TENTH AMENDMENT - Page 2
<PAGE>
Bank in full by December 31, 1997. After the holders of the Subordinated
Debt agreed in principal with Borrower's proposal Borrower requested that
Bank agree to restructure its agreements with Borrower in accordance with
the proposals made to the holders of the Subordinated Debt. After
continued negotiations among Bank, Borrower and the holders of the
Subordinated Debt, Bank agreed to waive its then existing defaults and
modified its agreements with Borrower in accordance with the Fifth
Amendment. The Fifth Amendment and the documents executed in connection
therewith are herein called the "Modification Documents."
(d) In early December, 1997, Borrower reported to Bank that it had
reached an agreement in principal to sell one of its divisions, but
requested (the "Early December Request") that rather than complying with
the terms of the Modification Documents, Borrower be allowed to use the
majority of the net proceeds of such sale to retire the Subordinated Debt
rather than to retire the debt of Borrower to Bank. Bank would not agree
to the use of its collateral to retire indebtedness to others in direct
contradiction of the terms of the Modification Documents and the Credit
Agreement. Borrower then proposed that in lieu of the Early December
Request (i) the proceeds of Bank's collateral, including without limitation
all net proceeds of the sale of such division, be applied to retire the
debt of Borrower to Bank in accordance with the terms of the Credit
Agreement and related loan documents, and (ii) that the maturity of
Borrower's obligations to Bank be extended as set forth herein. Borrower
acknowledges and agrees that Bank had no duty to agree to any modification
of the existing agreements between Borrower and Bank.
(e) Borrower and Bank have entered into the Seventh Amendment, the
Eighth Amendment and the Ninth Amendment and now that Borrower has entered
into an agreement in principle with respect to the sale of Borrower's
Zerand division, the net proceeds of which will be paid to Bank, Borrower
has requested that Bank again extend the credit facility evidenced by the
Credit Agreement until March 31, 1998.
(F) BORROWER ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK
THAT DURING ALL NEGOTIATIONS WITH BANK, BORROWER HAS BEEN REPRESENTED BY
COMPETENT LEGAL COUNSEL AND HAS CONSULTED WITH SUCH OTHER PROFESSIONALS AS
IT HAS DEEMED PRUDENT WITH RESPECT TO ITS AGREEMENTS WITH BANK AND ALL
MODIFICATIONS THERETO AND THAT BORROWER HAS MADE ITS DECISIONS BASED UPON
ADVICE FROM ITS LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS WITHOUT ANY
ADVICE FROM BANK OR BANK'S REPRESENTATIVES OR COUNSEL. BORROWER FURTHER
ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK THAT WITHOUT ANY
REQUIREMENT THEREFOR BY BANK, ALL DECISIONS TO SELL ANY OF BORROWER'S
ASSETS WERE MADE SOLELY BY BORROWER BASED UPON ITS BUSINESS JUDGMENT AND
UPON THE ADVICE OF LEGAL COUNSEL AND OTHER PROFESSIONALS AS BEING IN THE
BEST INTERESTS OF BORROWER TO GIVE BORROWER THE GREATEST OPPORTUNITY TO
RETURN TO A PROFITABLE OPERATION AND TO RETIRE ITS OBLIGATIONS TO ITS
LENDERS AND OTHER CREDITORS.
(g) Bank and Borrower have agreed that upon the terms and subject in
all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
TENTH AMENDMENT - Page 3
<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 TO CREDIT AGREEMENT AND AGREEMENT TO PAY
-------------------------------------------------------
APPRAISAL AND ENVIRONMENTAL AUDIT EXPENSES
------------------------------------------
1.1 The definition of the term "Note" in Article 1 of the Credit
Agreement is amended to mean the Note as defined in the Fifth Amendment as
further amended by that certain Fifth Note and Liens Modification Agreement of
even date herewith (the "Note Modification Agreement").
1.2 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean the earlier to occur of (i) March 31, 1998, or
(ii) the date the sale of Borrower's Zerand Division occurs.
1.3 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
3.9 Additional Loan Restructure Fees: Borrower agrees to pay
Bank $9,000.00 on the date this Amendment is executed, as a loan
restructuring and commitment fee for extending the Expiration Date
beyond February 28, 1998.
1.4 Borrower agrees to promptly pay to Bank upon demand therefor all
costs of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.5 Except as amended hereby, the Credit Agreement shall continue in
full force and effect in accordance with its provisions.
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
TENTH AMENDMENT - Page 4
<PAGE>
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Eighth
Master Amendment to Security Documents.
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Multi-party
Agreement entered into with respect to the Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower agree that no payments will be made upon any indebtedness of
Borrower to Paul Stevens until April 2, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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 are 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.
TENTH AMENDMENT - Page 5
<PAGE>
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 AMENDMENT, 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 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
RELEASE 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 BANK OR THE OTHER
RELEASED PARTIES;
TENTH AMENDMENT - Page 6
<PAGE>
(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 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 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
TENTH AMENDMENT - Page 7
<PAGE>
Borrower agrees that it may not assign this Amendment 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 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 the Credit
Agreement as amended by this Amendment 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 the Credit
Agreement or this Amendment shall adversely affect any right or remedy of Bank
under the Guaranty, and (d) the execution and delivery of this Amendment shall
in no way reduce, impair or discharge any obligations of the Guarantors pursuant
to the Guaranty.
3.11. NO DUTY TO EXTEND. BORROWER AND THE UNDERSIGNED GUARANTORS
ACKNOWLEDGE AND AGREE THAT BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION OF ANY
NATURE TO AGAIN EXTEND THE EXPIRATION DATE OR TO AGREE TO ANY OTHER AMENDMENT TO
THE CREDIT AGREEMENT.
3.12. Year 2000. Borrower acknowledges that it has received a copy of the
brochure prepared by the Bank entitled "On Turning 00" and that it has reviewed
this material and is aware of the possible impact of the year 2000 problem (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) upon its computer applications
and on-going business. Borrower represents that any corrective action necessary
will be taken and that Borrower does not believe the year 2000 problem will
result in a material adverse change in Borrower's business condition (financial
or otherwise), operations, properties or prospects, or ability to repay the
credit.
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:
----------------------------- ------------------------------
TENTH AMENDMENT - Page 8
<PAGE>
Executed for the purposes of acknowledging and agreeing to the provisions
of Sections 3.6, 3.7, 3.8, 3.9, 3.10 and 3.11 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TENTH AMENDMENT - Page 9
<PAGE>
EXHIBIT 10.5
ELEVENTH AMENDMENT
------------------
TO
--
CREDIT AGREEMENT
----------------
This Eleventh Amendment to Credit Agreement (this "Amendment") is entered
into effective as of the 31st day of March, 1998, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31,
1996 (the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
ELEVENTH AMENDMENT - Page 1
<PAGE>
(h) that certain Fourth Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance
Amendment");
(i) that certain Fifth Amendment to Credit Agreement dated as of July
31, 1997 (the "Fifth Amendment");
(j) that certain Sixth Amendment to Credit Agreement dated as of
August 28, 1997 (the "Sixth Amendment");
(k) that certain Seventh Amendment to Credit Agreement dated as of
December 31, 1997 (the "Seventh Amendment");
(l) that certain Eighth Amendment to Credit Agreement dated as of
January 23, 1998 (the "Eighth Amendment");
(m) that certain Ninth Amendment to Credit Agreement dated as of
February 6, 1998 (the "Ninth Amendment"); and
(n) that certain Tenth Amendment to Credit Agreement dated as of
February 28, 1998 (the "Tenth Amendment");
RECITALS AND AFFIRMATION OF FACTS:
----------------------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Bernal Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the
ELEVENTH AMENDMENT - Page 2
<PAGE>
Subordinated Debt. Bank agreed to four extensions of the such Forbearance
Period, but notified Borrower that Bank would not extend the Forbearance
Period beyond July, 1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the Bank in full by December 31,
1997. After the holders of the Subordinated Debt agreed in principal with
Borrower's proposal Borrower requested that Bank agree to restructure its
agreements with Borrower in accordance with the proposals made to the
holders of the Subordinated Debt. After continued negotiations among Bank,
Borrower and the holders of the Subordinated Debt, Bank agreed to waive its
then existing defaults and modified its agreements with Borrower in
accordance with the Fifth Amendment. The Fifth Amendment and the documents
executed in connection therewith are herein called the "Modification
Documents."
(d) In early December, 1997, Borrower reported to Bank that it had
reached an agreement in principal to sell one of its divisions, but
requested (the "Early December Request") that rather than complying with
the terms of the Modification Documents, Borrower be allowed to use the
majority of the net proceeds of such sale to retire the Subordinated Debt
rather than to retire the debt of Borrower to Bank. Bank would not agree
to the use of its collateral to retire indebtedness to others in direct
contradiction of the terms of the Modification Documents and the Credit
Agreement. Borrower then proposed that in lieu of the Early December
Request (i) the proceeds of Bank's collateral, including without limitation
all net proceeds of the sale of such division, be applied to retire the
debt of Borrower to Bank in accordance with the terms of the Credit
Agreement and related loan documents, and (ii) that the maturity of
Borrower's obligations to Bank be extended as set forth herein. Borrower
acknowledges and agrees that Bank had no duty to agree to any modification
of the existing agreements between Borrower and Bank.
(e) Borrower and Bank have entered into the Seventh Amendment, the
Eighth Amendment, the Ninth Amendment and the Tenth Amendment and now that
Borrower has entered into an agreement in principle with respect to the
sale of Borrower's Zerand division, the net proceeds of which will be paid
to Bank, Borrower has requested that Bank again extend the credit facility
evidenced by the Credit Agreement until April 15, 1998.
(F) BORROWER ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK
THAT DURING ALL NEGOTIATIONS WITH BANK, BORROWER HAS BEEN REPRESENTED BY
COMPETENT LEGAL COUNSEL AND HAS CONSULTED WITH SUCH OTHER PROFESSIONALS AS
IT HAS DEEMED PRUDENT WITH RESPECT TO ITS AGREEMENTS WITH BANK AND ALL
MODIFICATIONS THERETO AND THAT BORROWER HAS MADE ITS DECISIONS BASED UPON
ADVICE FROM ITS LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS WITHOUT ANY
ADVICE FROM BANK OR BANK'S REPRESENTATIVES OR COUNSEL. BORROWER FURTHER
ACKNOWLEDGES, AGREES AND REPRESENTS AND WARRANTS TO BANK THAT WITHOUT ANY
REQUIREMENT THEREFOR BY BANK, ALL DECISIONS TO SELL ANY OF BORROWER'S
ASSETS WERE MADE SOLELY BY BORROWER BASED UPON ITS BUSINESS JUDGMENT
ELEVENTH AMENDMENT - Page 3
<PAGE>
AND UPON THE ADVICE OF LEGAL COUNSEL AND OTHER PROFESSIONALS AS BEING IN
THE BEST INTERESTS OF BORROWER TO GIVE BORROWER THE GREATEST OPPORTUNITY TO
RETURN TO A PROFITABLE OPERATION AND TO RETIRE ITS OBLIGATIONS TO ITS
LENDERS AND OTHER CREDITORS.
(g) Bank and Borrower have agreed that upon the terms and subject
in all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
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 TO CREDIT AGREEMENT AND AGREEMENT TO PAY
-------------------------------------------------------
APPRAISAL AND ENVIRONMENTAL AUDIT EXPENSES
------------------------------------------
1.1 The definition of the term "Note" in Article 1 of the Credit Agreement
is amended to mean the Note as defined in the Fifth Amendment as further amended
by that certain Sixth Note and Liens Modification Agreement of even date
herewith (the "Note Modification Agreement").
1.2 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean the earlier to occur of (i) April 15, 1998, or
(ii) the date the sale of Borrower's Zerand Division occurs.
1.3 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
3.9 Additional Loan Restructure Fees: Borrower agrees to pay Bank
$4,500.00 on the date this Amendment is executed, as a loan restructuring and
commitment fee for extending the Expiration Date beyond March 31, 1998.
1.4 Borrower agrees to promptly pay to Bank upon demand therefor all costs
of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.5 Except as amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with its provisions.
ELEVENTH AMENDMENT - Page 4
<PAGE>
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Ninth
Master Amendment to Security Documents.
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Multi-party
Agreement entered into with respect to the Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower agree that no payments will be made upon any indebtedness of
Borrower to Paul Stevens until April 17, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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.
ELEVENTH AMENDMENT - Page 5
<PAGE>
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 are 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 AMENDMENT, 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 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
RELEASE THE BANK AND ITS PRESENT AND FORMER AFFILIATES, SUBSIDIARIES, AGENTS,
ATTORNEYS, APPRAISERS, CONSULTANTS, EMPLOYEES, OFFICERS, DIRECTORS,
STOCKHOLDERS,
ELEVENTH AMENDMENT - Page 6
<PAGE>
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 BANK 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 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
ELEVENTH AMENDMENT - Page 7
<PAGE>
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 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
Amendment 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 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 the Credit
Agreement as amended by this Amendment 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 the Credit
Agreement or this Amendment shall adversely affect any right or remedy of Bank
under the Guaranty, and (d) the execution and delivery of this Amendment shall
in no way reduce, impair or discharge any obligations of the Guarantors pursuant
to the Guaranty.
3.11. NO DUTY TO EXTEND. BORROWER AND THE UNDERSIGNED GUARANTORS
ACKNOWLEDGE AND AGREE THAT BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION OF ANY
NATURE TO AGAIN EXTEND THE EXPIRATION DATE OR TO AGREE TO ANY OTHER AMENDMENT TO
THE CREDIT AGREEMENT.
3.12. Year 2000. Borrower acknowledges that it has received a copy of the
brochure prepared by the Bank entitled "On Turning 00" and that it has reviewed
this material and is aware of the possible impact of the year 2000 problem (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) upon its computer applications
and on-going business. Borrower represents that any corrective action necessary
will be taken and that Borrower does not believe the year 2000 problem will
result in
ELEVENTH AMENDMENT - Page 8
<PAGE>
a material adverse change in Borrower's business condition (financial or
otherwise), operations, properties or prospects, or ability to repay the credit.
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, 3.9, 3.10 and 3.11 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
ELEVENTH AMENDMENT - Page 9
<PAGE>
EXHIBIT 10.6
TWELFTH AMENDMENT
-----------------
TO
--
CREDIT AGREEMENT
----------------
This Twelfth Amendment to Credit Agreement (this "Amendment") is entered
into effective as of the 16th day of April, 1998, 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 dated as of May 16, 1995 by and
between Bank and Borrower, as amended by the following (as amended, including
all prior amendments described below, the "Credit Agreement"):
(a) that certain First Amendment to Credit Agreement entered into
effective as of August 15, 1995;
(b) that certain Second Amendment to Credit Agreement entered into
effective as of December 29, 1995;
(c) that certain Third Amendment to Credit Agreement entered into
effective as of May 13, 1996;
(d) that certain Agreement and Fourth Amendment dated as December 31,
1996 (the "Forbearance Agreement");
(e) that certain First Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of February 28, 1997;
(f) that certain Second Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of March 17, 1997;
(g) that certain Third Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of May 1, 1997;
(h) that certain Fourth Amendment to Agreement and Fourth Amendment to
Credit Agreement dated as of July 1, 1997 (the "Fourth Forbearance
Amendment");
TWELFTH AMENDMENT - Page 1
<PAGE>
(i) that certain Fifth Amendment to Credit Agreement dated as of July
31, 1997 (the "Fifth Amendment");
(j) that certain Sixth Amendment to Credit Agreement dated as of
August 28, 1997 (the "Sixth Amendment");
(k) that certain Seventh Amendment to Credit Agreement dated as of
December 31, 1997 (the "Seventh Amendment");
(l) that certain Eighth Amendment to Credit Agreement dated as of
January 23, 1998 (the "Eighth Amendment");
(m) that certain Ninth Amendment to Credit Agreement dated as of
February 6, 1998 (the "Ninth Amendment");
(n) that certain Tenth Amendment to Credit Agreement dated as of
February 28, 1998 (the "Tenth Amendment"); and
(o) that certain Eleventh Amendment to Credit Agreement dated as of
March 31, 1998 (the "Eleventh Amendment").
RECITALS:
---------
a. Defaults (the "Existing Defaults") have occurred under the Credit
Agreement and the Loan Documents by reason of the following acts or omissions:
(1) Violation of Section 11.12 of the Credit Agreement (failure to
comply with financial covenants), based upon non-compliance with Article
9.1 for the period ending March 31, 1998 (Debt to Tangible Net Worth
Ratio);
(2) Violation of Section 11.12 of the Credit Agreement (failure to
comply with financial covenants) based upon non-compliance with Article 9.3
for the period ending March 31, 1998 (Debt Coverage Ratio);
(3) Violation of Section 11.13 of the Credit Agreement (other breaches
under Credit Agreement) based upon non-compliance with Article 8.2(b) for
the period ending March 31, 1998 (Quarterly Report on Form 10-Q and
Compliance Certificate);
(4) Violation of Section 11.13 of the Credit Agreement (other breaches
under Credit Agreement) based upon non-compliance with Article 8.2(b) for
the period ending December 31, 1997 (Compliance Certificate) and with
Article 8.2(s) for the period ending March 31, 1998 (Weekly Cash Forecast);
b. As of the date hereof, the Existing Defaults remain uncured.
TWELFTH AMENDMENT - Page 2
<PAGE>
c. Borrower has requested that Bank waive the above noticed Events of
Default under the Credit Agreement and the Loan Documents.
d. Borrower has requested Bank's waiver to permit Borrower the
opportunity to consummate the sale of its Zerand Division.
e. Bank will waive the Existing Defaults, as requested above by Borrower,
subject to the terms and conditions of this Agreement including, without
limitation, the amendments to the Credit Agreement set forth herein.
AFFIRMATION OF FACTS:
---------------------
Bank and Borrower affirm the following facts:
(a) During 1996, Borrower defaulted under its obligations under the
Credit Agreement. As a result of such defaults, Borrower requested that
Bank restructure its agreements with Borrower and reported to Bank that
Borrower had decided to sell its Zerand Division to provide capital to
reduce its outstanding debt if Borrower could obtain the agreement of the
holders of the Subordinated Debt to a restructure of Borrower's obligations
to such holders. Borrower also requested that Bank agree to forbear from
the exercise of its rights and remedies under the Credit Agreement to allow
Borrower time to restructure its debt with the holders of the Subordinated
Debt; and Bank agreed to forbear for a limited period of time to allow
Borrower to negotiate with the holders of the Subordinated Debt.
(b) As of December 31, 1996, Bank and Borrower entered into the
Forbearance Agreement detailing the terms and conditions of Bank's
agreement to temporarily forbear from the pursuit of its rights and
remedies. Borrower was unable to obtain the agreement of the holders of
the Subordinated Debt to a restructure acceptable to Borrower during the
Bank's agreed upon period of forbearance under the Forbearance Agreement
and from time to time requested that Bank extend its forbearance period (as
extended from time to time including through the term of the Fourth
Forbearance Amendment, the "Forbearance Period") to allow Borrower time to
continue its negotiations with the holders of the Subordinated Debt. Bank
agreed to four extensions of the such Forbearance Period, but notified
Borrower that Bank would not extend the Forbearance Period beyond July,
1997.
(c) During the Forbearance Period, Borrower negotiated with the
holders of the Subordinated Debt and proposed to the holders of the
Subordinated Debt that Borrower sell among other assets one of its
divisions and retire Borrower's debt to the Bank in full by December 31,
1997. After the holders of the Subordinated Debt agreed in principal with
Borrower's proposal Borrower requested that Bank agree to restructure its
agreements with Borrower in accordance with the proposals made to the
holders of the Subordinated Debt. After continued negotiations among Bank,
Borrower and the holders of the Subordinated Debt, Bank agreed to waive its
then existing defaults and modified its agreements with Borrower in
accordance with the Fifth Amendment. The Fifth
TWELFTH AMENDMENT - Page 3
<PAGE>
Amendment and the documents executed in connection therewith are herein
called the "Modification Documents."
(d) In early December, 1997, Borrower reported to Bank that it had
reached an agreement in principal to sell one of its divisions, but
requested (the "Early December Request") that rather than complying with
the terms of the Modification Documents, Borrower be allowed to use the
majority of the net proceeds of such sale to retire the Subordinated Debt
rather than to retire the debt of Borrower to Bank. Bank would not agree
to the use of its collateral to retire indebtedness to others in direct
contradiction of the terms of the Modification Documents and the Credit
Agreement. Borrower then proposed that in lieu of the Early December
Request (i) the proceeds of Bank's collateral, including without limitation
all net proceeds of the sale of such division, be applied to retire the
debt of Borrower to Bank in accordance with the terms of the Credit
Agreement and related loan documents, and (ii) that the maturity of
Borrower's obligations to Bank be extended as set forth herein. Borrower
acknowledges and agrees that Bank had no duty to agree to any modification
of the existing agreements between Borrower and Bank.
(e) Borrower and Bank have entered into the Sixth Amendment, the
Seventh Amendment, the Eighth Amendment, the Ninth Amendment, the Tenth
Amendment, and the Eleventh Amendment and now that Borrower has entered
into an agreement in principle with respect to the sale of Borrower's
Zerand division, the net proceeds of which will be paid to Bank, Borrower
has requested that Bank again extend the credit facility evidenced by the
Credit Agreement until April 30, 1998.
(f) Borrower acknowledges, agrees and represents and warrants to Bank
that during all negotiations with Bank, Borrower has been represented by
competent legal counsel and has consulted with such other professionals as
it has deemed prudent with respect to its agreements with Bank and all
modifications thereto and that Borrower has made its decisions based upon
advice from its legal counsel and other professional advisors without any
advice from Bank or Bank's representatives or counsel. Borrower further
acknowledges, agrees and represents and warrants to Bank that without any
requirement therefor by Bank, all decisions to sell any of Borrower's
assets were made solely by Borrower based upon its business judgment and
upon the advice of legal counsel and other professionals as being in the
best interests of Borrower to give Borrower the greatest opportunity to
return to a profitable operation and to retire its obligations to its
lenders and other creditors.
(g) Bank and Borrower have agreed that upon the terms and subject in
all respects to the conditions set forth herein to again amend certain
existing terms of the Credit Agreement.
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:
TWELFTH AMENDMENT - Page 4
<PAGE>
1. AMENDMENTS TO CREDIT AGREEMENT AND AGREEMENT TO PAY
-------------------------------------------------------
APPRAISAL AND ENVIRONMENTAL AUDIT EXPENSES
------------------------------------------
1.1 Article 1 of the Credit Agreement is hereby amended to add the
following definition:
1.2 The definition of the term Borrowing Base Advance Cap in Article 1 of
the Credit Agreement is hereby restated in its entirety to read as follows:
The term "Borrowing Base Advance Cap" means the following, as
determined by reference to the periods of time indicated below:
(a) at any time prior to the sale of the Zerand Division and the
Bank's receipt of the proceeds of such sale, an amount equal to the lesser
of:
(1) $11,500,000.00; or
(2) the sum of:
(i) 80% of the amount of Eligible Accounts; plus
(ii) the lesser of:
(A) $2,750,000.00, or
(B) 25% of the amount of Eligible Inventory; plus
(iii) $7,837,000.00; and
(b) at any time after the sale of the Zerand Division and the Bank's
receipt of the proceeds of such sale, an amount equal to the lesser of:
(1) $2,000,000.00; or
(2) the sum of:
(i) 80% of the amount of Eligible Accounts; plus
(ii) the lesser of:
(A) $1,750,000.00, or
(B) 25% of the amount of Eligible Inventory; plus
(iii) $500,000.00.
TWELFTH AMENDMENT - Page 5
<PAGE>
1.3 The definition of the term "Note" in Article 1 of the Credit Agreement
is amended to mean the Note as defined in the Fifth Amendment as further amended
by that certain Seventh Note and Liens Modification Agreement of even date
herewith (the "Note Modification Agreement").
1.4. 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. The amount of the
Revolving Line of Credit available for Letters of Credit and advances
outstanding at any time including amounts paid under any Letter of Credit
is an amount of up to the lesser of (i) $11,500,000.00, prior to the sale
of the Zerand Division, and $2,000,000.00 after the sale of the Zerand
Division, or (ii) the Borrowing Base Advance Cap (the "Commitment") .
(b) The Borrower agrees not to permit the outstanding principal
balance of the Revolving Line of Credit plus the amount of all then
outstanding Letters of Credit, including amounts drawn on letters of credit
and not yet reimbursed, to exceed the lesser of (i) $11,500,000.00, prior
to the sale of the Zerand Division, and $2,000,000.00 after the sale of the
Zerand Division, or (ii) the Borrowing Base Advance Cap. 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.
1.5 The term Expiration Date contained in Section 2.2 of the Credit
Agreement, is amended to mean the earlier to occur of (i) April 30, 1998, or
(ii) the date the sale of Borrower's Zerand Division occurs.
1.6 Article 3 of the Credit Agreement, Fees and Expenses, is hereby
amended by the addition of the following provision:
3.10 Additional Loan Restructure Fees: Borrower agrees to pay Bank
$4,500.00 on the date this Amendment is executed, as a loan restructuring and
commitment fee for extending the Expiration Date beyond April 15, 1998.
1.7 Borrower agrees to promptly pay to Bank upon demand therefor all costs
of Bank's obtaining appraisals of the collateral held by Bank to secure
Borrower's obligations to Bank and all costs of an environmental audit of all
real estate that is included in such collateral.
1.8 Except as amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with its provisions.
TWELFTH AMENDMENT - Page 6
<PAGE>
2. CONDITIONS PRECEDENT
-----------------------
The effectiveness of this Amendment is expressly conditioned upon delivery
to Bank of each of the following, each document to be in form and content
acceptable to Bank in its sole discretion:
2.1 Corporate Documents. Appropriate corporate documentation, including
without limitation resolutions of the Executive Committee of the Board of
Directors of Borrower approving the execution, delivery and performance of (a)
this Amendment and all documents executed in connection herewith, and (b) the
Letter of Intent with respect to the sale of the above referenced division and
the proposed sale pursuant thereto.
2.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) Note Modification Agreement. A fully executed Note Modification
Agreement.
(c) Master Amendment to Security Documents. A fully executed Tenth
Master Amendment to Security Documents.
2.3 Legal Opinion. An opinion of legal counsel to Borrower and
Guarantors.
2.4 Amendment to Intercreditor Agreement. A fully executed Multi-party
Agreement entered into with respect to the Intercreditor Agreement.
2.5 Intercreditor Agreement With Paul Stevens. A fully executed copy of
an Intercreditor Agreement with Paul Stevens and Borrower whereby Paul Stevens
and the Borrower agree that no payments will be made upon any indebtedness of
Borrower to Paul Stevens until May 2, 1998.
2.6 Other Documentation. Such other documents as the Bank may request.
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.
TWELFTH AMENDMENT - Page 7
<PAGE>
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 are 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 AMENDMENT, 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 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
RELEASE 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
TWELFTH AMENDMENT - Page 8
<PAGE>
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 BANK 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 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
TWELFTH AMENDMENT - Page 9
<PAGE>
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 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
Amendment 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 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 the Credit
Agreement as amended by this Amendment 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 the Credit
Agreement or this Amendment shall adversely affect any right or remedy of Bank
under the Guaranty, and (d) the execution and delivery of this Amendment shall
in no way reduce, impair or discharge any obligations of the Guarantors pursuant
to the Guaranty.
3.11. NO DUTY TO EXTEND. BORROWER AND THE UNDERSIGNED GUARANTORS
ACKNOWLEDGE AND AGREE THAT BANK HAS ABSOLUTELY NO DUTY OR OBLIGATION OF ANY
NATURE TO AGAIN EXTEND THE EXPIRATION DATE OR TO AGREE TO ANY OTHER AMENDMENT TO
THE CREDIT AGREEMENT.
3.12. Year 2000. Borrower acknowledges that it has received a copy of the
brochure prepared by the Bank entitled "On Turning 00" and that it has reviewed
this material and is aware of the possible impact of the year 2000 problem (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) upon its computer applications
and on-going business. Borrower represents that any corrective action necessary
will be taken and that Borrower does not believe the year 2000 problem will
result in a material adverse change in Borrower's business condition (financial
or otherwise), operations, properties or prospects, or ability to repay the
credit.
TWELFTH AMENDMENT - Page 10
<PAGE>
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:
----------------------------- -------------------------------
TWELFTH AMENDMENT - Page 11
<PAGE>
Executed for the purposes of acknowledging and agreeing to the provisions
of Sections 3.6, 3.7, 3.8, 3.9, 3.10 and 3.11 hereof.
GUARANTORS
PMC LIQUIDATION, INC.,
formerly known as Post Machinery
Company, Inc.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PRINTING & PACKAGING EQUIPMENT
FINANCE CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
TWELFTH AMENDMENT - Page 12
<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 MARCH 31, 1998 AND FOR THE THREE 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 699
<SECURITIES> 0
<RECEIVABLES> 1,752
<ALLOWANCES> 138
<INVENTORY> 6,501
<CURRENT-ASSETS> 26,402
<PP&E> 4,383
<DEPRECIATION> 1,934
<TOTAL-ASSETS> 30,578
<CURRENT-LIABILITIES> 25,751
<BONDS> 12,201
0
0
<COMMON> 949
<OTHER-SE> (11,193)
<TOTAL-LIABILITY-AND-EQUITY> 30,578
<SALES> 9,697
<TOTAL-REVENUES> 9,697
<CGS> 6,912
<TOTAL-COSTS> 6,912
<OTHER-EXPENSES> 2,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 825
<INCOME-PRETAX> (416)
<INCOME-TAX> 0
<INCOME-CONTINUING> (416)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (416)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
