<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1995
---------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 1-7736
TAB PRODUCTS CO.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 94-1190862
- -------------------------------------- -----------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1400 PAGE MILL ROAD, PALO ALTO, CALIFORNIA 94304
- ------------------------------------------ -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number - including area code (415) 852-2400
------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
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 X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding as
of November 30, 1995 - 4,851,951
This report, including all exhibits and attachments, contains 34 pages.
------
<PAGE>
TAB PRODUCTS CO.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets
November 30, 1995 and May 31, 1995 3
Consolidated Condensed Statements of Earnings
Three and Six months ended November 30,
1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
Six months ended November 30,
1995 and 1994 5
Supplemental Financial Data - Notes 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 6. Exhibits 10
Signatures 12
2
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: Financial Statements
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(000's ommitted except share data)
<TABLE>
<CAPTION>
ASSETS November 30, 1995 May 31, 1995
----------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,522 $ 6,753
Short-term investments 2,540 1,600
Accounts receivable, less allowances of
$695 and $708 for doubtful accounts 27,625 24,692
Inventories 15,563 14,584
Prepaid income taxes and other expenses 2,421 3,704
----------------- ------------
Total current assets 53,671 51,333
Property, plant and equipment, net of accumulated
depreciation of $34,613 and $33,246 21,386 21,652
Goodwill 5,036 5,241
Other assets 3,727 3,423
----------------- ------------
$ 83,820 $ 81,649
----------------- ------------
----------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 4,093 $ 3,313
Accounts payable 8,526 7,292
Commissions payable 3,351 2,918
Other accrued liabilities 7,986 7,728
----------------- ------------
Total current liabilities 23,956 21,251
----------------- ------------
Long-term debt, less current portion 17,297 18,733
----------------- ------------
Deferred taxes and other non-current liabilities 1,837 1,837
----------------- ------------
Stockholders' Equity:
Preferred stock: $0.01 par value, authorized -
500,000 shares, issued - none - -
Common stock: $0.01 par value, authorized -
25,000,000 shares, issued - November 1995 and
May 1995 - 7,284,178 shares 73 73
Additional paid-in capital 12,705 12,705
Retained earnings 58,832 57,898
Treasury stock: November 1995 and May 1995 -
2,432,227 shares (31,365) (31,365)
Cumulative translation adjustment 485 517
----------------- ------------
40,730 39,828
----------------- ------------
$ 83,820 $ 81,649
----------------- ------------
----------------- ------------
</TABLE>
3
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
(000's ommitted except share data)
<TABLE>
<CAPTION>
Three Months
Ended November 30
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenues $ 38,862 $ 38,351
----------- -----------
Costs and expenses:
Cost of revenues 23,492 23,364
Selling 10,535 10,517
General and administrative 2,887 2,467
Research and development 96 234
----------- -----------
Total costs and expenses 37,010 36,582
----------- -----------
Operating income 1,852 1,769
Interest, net (389) (493)
----------- -----------
Earnings before income taxes 1,463 1,276
Provision for income taxes 637 555
----------- -----------
Net earnings $ 826 $ 721
----------- -----------
----------- -----------
Earnings per share $ 0.17 $ 0.15
----------- -----------
----------- -----------
Average common and equivalent shares outstanding 4,851,951 4,840,501
Six Months
Ended November 30
---------------------------
1995 1994
----------- -----------
Revenues $ 76,276 $ 74,965
----------- -----------
Costs and expenses:
Cost of revenues 46,315 45,650
Selling 20,769 20,433
General and administrative 5,674 5,343
Research and development 200 431
----------- -----------
Total costs and expenses 72,958 71,857
----------- -----------
Operating income 3,318 3,108
Interest, net (807) (974)
----------- -----------
Earnings before income taxes 2,511 2,134
Provision for income taxes 1,092 928
----------- -----------
Net earnings $ 1,419 $ 1,206
----------- -----------
----------- -----------
Earnings per share $ 0.29 $ 0.25
----------- -----------
----------- -----------
Average common and equivalent shares outstanding 4,851,951 4,837,920
</TABLE>
4
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's ommitted)
<TABLE>
<CAPTION>
Six Months
Ended November 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating Activities:
Net earnings $ 1,419 $ 1,206
Depreciation and amortization 1,825 1,882
Other (10) 54
Changes in operating assets and liabilities:
Accounts receivable (2,920) 3,424
Inventories (979) (1,331)
Prepaid income taxes and other expenses 1,283 567
Other assets (99) 283
Accounts payable 1,234 (3,319)
Commissions payable 433 (38)
Other accrued liabilities 258 (265)
---------- ----------
Net cash provided by Operating Activities 2,444 2,463
---------- ----------
Investing Activities:
Purchase of property, plant and equipment, net (1,562) (626)
Purchases of short-term investments (2,437) -
Sales of short-term investments 1,497 -
---------- ----------
Net cash required by Investing Activities (2,502) (626)
---------- ----------
Financing Activities:
Repayment of long-term debt (656) (73)
Proceeds from issuance of common stock - 200
Dividends (485) (483)
---------- ----------
Net cash required by Financing Activities (1,141) (356)
---------- ----------
Effect of exchange rate changes on cash (32) 275
---------- ----------
Increase (decrease) in cash and cash equivalents (1,231) 1,756
Cash and cash equivalents at beginning of period 6,753 2,371
---------- ----------
Cash and cash equivalents at end of period $ 5,522 $ 4,127
---------- ----------
---------- ----------
</TABLE>
5
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
SUPPLEMENTAL FINANCIAL DATA - NOTES (UNAUDITED)
1. Inventories consisted of the following (000's omitted):
November 30, 1995 May 31, 1995
----------------- ------------
Finished goods $ 9,916 $ 8,914
Work in process 649 653
Raw materials 4,998 5,017
----------------- ------------
$ 15,563 $ 14,584
----------------- ------------
----------------- ------------
2. Earnings per share data are computed using the average number
of common and dilutive common equivalent shares outstanding.
3. Dividends declared for the six month periods ended November 30,
1995 and 1994 were as follows:
Record Date Shares Outstanding Per Share Dividend
----------- ------------------ ------------------
November 22, 1995 4,851,951 $ 0.05
August 25, 1995 4,851,951 $ 0.05
November 25, 1994 4,851,951 $ 0.05
August 25, 1994 4,838,188 $ 0.05
4. The above financial information reflects all adjustments
consisting of normal recurring items which are, in the opinion
of management, necessary for a fair presentation of the results
of the interim periods. These financial statements should be read
in conjunction with the company's audited financial statements for
the year ended May 31, 1995.
5. During the six months ended November 30, 1995 the company
canceled stock options to purchase 798,500 shares of the company's
common stock at prices ranging from $6.125 to $13.50 and exchanged
them for options to purchase 598,500 shares of the company's common
stock at current market value of $6.00 per share with new vesting
periods.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
At November 30, 1995, the company had cash and short-term investments of $8.1
million, a decrease of $.3 million from the $8.4 million in cash and short-term
investments at May 31, 1995. The company's working capital position at November
30, 1995, was $29.7 million as compared with $30.1 million at May 31, 1995. The
current ratio of 2.2 at November 30, 1995, was down slightly from the 2.4
reported May 31, 1995. Accounts receivable at November 30, 1995, was $27.6
million an increase of $2.9 million from the accounts receivable of $24.7
million at May 31, 1995. The increased accounts receivable is attributable to
higher revenues in the months preceding the November 30, 1995 quarter end as
compared to May 31, 1995. The company continued to make progress on its
collections with a further reduction in its days sales outstanding at November
30, 1995 as compared to May 31, 1995. Inventories at November 30, 1995 were
higher as a result of increased demand on certain products and the build up of
inventory for product transitions. Management believes that the company's cash
and cash equivalents, available credit facilities and operational cash flows
will adequately finance anticipated growth, capital expenditures and debt
obligations for the foreseeable future.
Investments in property, plant and equipment to support operations were $1.6
million during the six months ended November 30, 1995. Capital expenditures to
support operations for fiscal 1996 are expected to be in the range of $2.5 to
$3.0 million.
For the six month period ended November 30, 1995, the company paid cash
dividends of $485,000 as compared to $483,000 in the prior fiscal year.
The company has an unsecured revolving line of credit of $10 million with a bank
that expires on October 31, 1996. There were no borrowings outstanding under the
line of credit at November 30, 1995.
RESULTS OF OPERATIONS
REVENUES for the second quarter of fiscal 1996 were $38.9 million, up $.5
million or 1.3% from revenues of $38.4 million for the second quarter of fiscal
1995. Revenues for the six months ended November 30, 1995, were $76.3 million,
up $1.3 million or 1.7% from revenues of $75.0 million in the first six months
of the prior fiscal year. The company increased list prices, in the United
States, on major product lines in late fiscal 1995 and early fiscal 1996.
During the second quarter of fiscal 1996 revenues from major product lines in
the U.S. increased $.3 million over the second quarter of fiscal 1995 and
increased $.2 million in other products. During the first six months of fiscal
1996 revenues from major product lines in the U.S. increased $1.7 million over
the first six months of fiscal 1995 but were partially offset by a $.4 million
decrease in other products. The increased revenues, for both the second quarter
and six months ended November 30, 1995, were attributable to both the price
increases and higher unit volume.
7
<PAGE>
COST OF REVENUES, as a percentage of revenues, was 60.4% for the second quarter
of fiscal 1996, down from the 60.9% reported for the second quarter of fiscal
1995. For the six months ended November 30, 1995, the cost of revenues was 60.7%
as compared to 60.9% in the first six months of the prior fiscal year. The
lower cost of revenues, as a percentage of sales, is attributable to lower
product costs primarily as a result of increased selling prices.
SELLING EXPENSES were $10.5 million or 27.1% of total revenues for the second
quarter of fiscal 1996 as compared to $10.5 million or 27.4% of total revenues
for the second quarter of fiscal 1995. For the six months ended November 30,
1995, selling expenses were $20.8 million as compared to $20.4 million in the
prior fiscal year. Total selling expenses for the first six months of fiscal
1996 increased $.4 million over the comparable period for fiscal 1995. The
increased selling expenses were attributable to higher commission expense on a
year to date basis.
GENERAL AND ADMINISTRATIVE EXPENSES, in the second quarter of fiscal 1996 were
$2.9 million, $.4 million higher than the $2.5 million reported in the second
quarter of fiscal 1995. For the six months ended November 30, 1995, general and
administrative expenses were $5.7 million, $.4 million higher than the $5.3
million reported the prior fiscal year. The increased general and administrative
expenses for the second quarter and the first six months of fiscal 1996 are
primarily due to increased employee related costs.
OPERATING INCOME for the quarter ended November 30, 1995, was $1.9 million, an
increase of $.1 million or 4.7% from the $1.8 million reported in the second
quarter of last year. For the six months ended November 30, 1995, operating
income was $3.3 million, $.2 million or 6.8% higher than the $3.1 million
reported for the prior fiscal year.
INTEREST EXPENSE, net, was $389,000 in the second quarter of fiscal 1996 as
compared to $493,000 in the second quarter of fiscal 1995. For the six months
ended November 30, 1995, interest expense, net, was $807,000 as compared to
$974,000 in the prior fiscal year. The decreases in interest expense, net, were
primarily due to a lower level of debt during fiscal 1996 compared to the same
periods of fiscal 1995 as a result of debt repayments.
EARNINGS PER SHARE for the three months ended November 30, 1995, were $.17 per
share, an increase of 13% over the $.15 per share earned in the second quarter
of the prior fiscal year. For the six months ended November 30, 1995, earnings
per share were $.29 per share, an increase of 16% over the $.25 per share in
the prior fiscal year.
8
<PAGE>
PART II: OTHER INFORMATION
ITEMS 1 - 5. Not applicable.
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ITEM 6. Exhibits
(a) 10.1 Registrants 1981 Incentive Stock Option Plan (Exhibit
(10) of the 1983 10-K)(1), (2)
10.2 Amended 1981 Incentive Stock Option Plan (Exhibit (10)
of the 1987 10-K)(1), (2)
10.3 1991 Stock Option Plan (Exhibit 10.1 of the 1991 10-K)
(1), (2)
10.4 Employment Agreement between John W. Peth and the
Registrant dated March 21, 1991 (Exhibit 10.2 of the 1991
10-K)(1), (2)
10.5 Agreement between John W. Peth and the Registrant dated
August 18, 1991 (Exhibit 10.3 of the 1991 10-K)(1), (2)
10.6 Agreement between Michael A. Dering and the Registrant
dated May 15, 1989 (Exhibit 10.4 of the 1991 10-K)(1), (2)
10.7 Amendment to Agreement between Michael A. Dering and
the Registrant dated August 28, 1991 (Exhibit 10.5 of the
1991 10-K)(1), (2)
10.8 Common Stock Purchase Agreement (Exhibit 10.2 of the
1992 10-K)(2)
10.9 Promissory Note dated October 18, 1991 (Exhibit 10.3 of
the 1992 10-K)(2)
10.10 Bank of America Business Loan Agreement dated
October 24, 1991 (Exhibit 10.4 of the 1992 10-K)(2)
10.11 Note Agreement of Tab Products Co. dated as of March 20,
1992 in the aggregate principal amount of $15,000,000
(Exhibit 10.5 of the 1992 10-K)(2)
10.12 Bank of America Revision Agreement dated March 20, 1992
(Exhibit 10.6 of the 1992 10-K)(2)
10.13 Agreement for Purchase and Sale of Assets (Exhibit 10.7
of the 1992 10-K)(2)
10.14 Amendment dated September 15, 1992 to Business Loan
Agreement dated October 24, 1991 (Exhibit 10.4 filed
with Form 10-Q for the quarter ended November 30, 1993)
(2)
10.15 Business Loan Agreement dated August 20, 1993 (Exhibit
10.15 filed with Form 10-Q for the quarter ended
November 30, 1993)(2)
10.16 Amendment dated July 27, 1993 to Note Agreement of
Tab Products Co. dated as of March 20, 1992 (Exhibit
10.16 filed with Form 10-Q for the quarter ended
August 31, 1993)(2)
10.17 Bank of America Business Loan Agreement dated
August 20, 1993 (Exhibit 10.17 filed with Form 10-Q for
the quarter ended August 31, 1993)(2)
10.18 Bank of America Amendment No. 1 dated October 6, 1993
to Business Loan Agreement (Exhibit 10.18 filed with
Form 10-Q for the quarter ended August 31, 1993)(2)
10.19 Bank of America Amendment No. 2 dated October 13, 1993
to Business Loan Agreement (Exhibit 10.19 filed with
Form 10-Q for the quarter ended August 31, 1993)(2)
10
<PAGE>
10.20 Note Agreement of Tab Products Co. dated October 7,
1993 (Exhibit 10.20 filed with Form 10-Q for the
quarter ended August 31, 1993)(2)
10.21 Letter dated October 7, 1993 amending the Note Agreement
dated March 20, 1992 (Exhibit 10.21 filed with Form
10-Q for the quarter ended August 31, 1993)(2)
10.22 Bank of America Amendment No. 3 dated December 3, 1993 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.22
filed with Form 10-Q for the quarter ended February 28, 1994)(2)
10.23 Bank of America Amendment No. 4 dated February 9, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.23
filed with Form 10-Q for the quarter ended February 28, 1994)(2)
10.24 Bank of America Amendment No. 5 dated February 28, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.24
filed with Form 10-Q for the quarter ended February 28, 1994)(2)
10.25 Bank of America Amendment No. 6 dated March 30, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.25
filed with Form 10-Q for the quarter ended February 28, 1994)(2)
10.26 Bank of America Amendment No. 7 dated April 5, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.26
filed with Form 10-Q for the quarter ended February 28, 1994)(2)
10.27 Letter dated October 27, 1993 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.27 filed with the
1994 Form 10-K)(2)
10.28 Bank of America Amendment No. 8 dated May 9, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.28
filed with the 1994 Form 10-K)(2)
10.29 Bank of America Amendment No. 9 to Business Loan Agreement
dated August 20, 1993 (Exhibit 10.29 filed with the 1994
Form 10-K)(2)
10.30 Bank of America Amendment No. 10 dated August 8, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.30
filed with the 1994 Form 10-K)(2)
10.31 Bank of America Amendment No. 11 dated August 22, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.31
filed with the 1994 Form 10-K)(2)
10.32 Letter dated June 15, 1995 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.32 filed with the
1995 Form 10-K)(2)
10.33 Letter dated July 21, 1995 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.33 filed with the
1995 Form 10-K)(2)
10.34 Bank of America Business Loan Agreement dated December 7,
1995
10.35 Letter dated December 13, 1995 amending the Prudential Note
Agreement dated March 20, 1992
(1) Compensatory Plan or Arrangement.
(2) Incorporated by reference from the noted previously filed
document.
(b) None
</TABLE>
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
TAB PRODUCTS CO.
-------------------------------------
(Registrant)
Date: January 12, 1996 /s/ John M. Palmer
-------------------------------------
John M. Palmer, Vice President,
Finance and Chief Financial Officer
Date: January 12, 1996 /s/ James L. Anderson
-------------------------------------
James L. Anderson, Controller
12
<PAGE>
- -------------------------------------------------------------------------------
[LOGO] BANK OF AMERICA BUSINESS LOAN AGREEMENT
NATIONAL TRUST AND SAVINGS ASSOCIATION
- -------------------------------------------------------------------------------
This Agreement dated as of December 7, 1995, is between Bank of America
National Trust and Savings Association (the "Bank") and Tab Products Co.
(the "Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Facility 1 Commitment") is Ten Million Dollars ($10,000,000).
(b) This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
the line of credit to exceed the Facility 1 Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date
of this Agreement and October 31, 1996 (the "Facility No. 1 Expiration
Date") unless the Borrower is in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described
below, the interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time
to time by the Bank in San Francisco, California, as its Reference
Rate. The Reference Rate is set by the Bank based on various factors,
including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate
shall take effect at the opening of business on the day specified in
the public announcement of a change in the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on January 1, 1996, and then monthly
thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Facility No. 1 Expiration Date.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period,
which shall be no later than the Facility No. 1 Expiration Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions
of the line of credit (during the availability period) bear interest at
the rate(s) described below during an interest period agreed to by the
Bank and the Borrower. Each interest rate is a rate per year. Interest
will be paid on the last day of each interest period, and on the first
day each month during the interest period. At the end of any interest
period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another optional
interest rate for the portion.
- -------------------------------------------------------------------------------
BUSLA (7/93) -1- T2-0760.DOC
<PAGE>
1.6 FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Fixed Rate,
subject to the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and the Borrower
agree will apply to the portion during the applicable interest period.
(b) The interest period during which the Fixed Rate will be in effect will
be no shorter than 30 days and no longer than 180 days.
(c) Each Fixed Rate portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).
(d) The Borrower may not elect a Fixed Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Fixed Rate will not be converted to a different
rate during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee equal to
the amount (if any) by which:
(i) the additional interest which would have been payable on the amount
prepaid had it not been paid until the last day of the interest
period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the certificate of
deposit market for a period starting on the date on which it
was prepaid and ending on the last day of the interest period
for such portion.
1.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Offshore Rate,
subject to the following requirements:
(a) The "Offshore Rate" means the interest rate the Bank and the Borrower
agree will apply to the portion during the applicable interest period.
(b) The interest period during which the Offshore Rate will be in effect will
be no shorter than 30 days and no longer than 180 days. The last day of
the interest period will be determined by the Bank using the practices
of the offshore dollar inter-bank market.
(c) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(d) The Borrower may not elect an Offshore Rate with respect to any portion
of the principal balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a
different rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid, and a prepayment fee equal to
the amount (if any) by which:
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the offshore dollar
market for a period starting on the date on which it was prepaid
and ending on the last day of the interest period for such portion.
- -------------------------------------------------------------------------------
BUSLA (7/93) -2- T2-0760.DOC
<PAGE>
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of an Offshore Rate portion are not
available in the offshore dollar inter-bank markets; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.8 FOREIGN EXCHANGE FACILITY.
(a) During the availability period, the Bank at its discretion may enter
into spot and forward foreign exchange contracts with the Borrower.
The foreign exchange contract limit will be Four Million U.S. Dollars
(U.S. $4,000,000), and the settlement limit will be One Million U.S.
Dollars (U.S. $1,000,000). The "foreign exchange contract limit" is
the maximum limit on the net difference between the total foreign
exchange contracts outstanding less the total foreign exchange
contracts for which the Borrower has already compensated the Bank. The
"settlement limit" is the maximum limit on the gross total amount of
all sale and purchase contracts on which delivery is to be effected
and settlement allowed on any one banking day.
(b) The Bank shall not be required to pay the Borrower or deliver any
foreign currency to the Borrower under any foreign exchange contract
until the Bank receives evidence satisfactory to it that the Borrower
has paid the Bank the required U.S. Dollars in immediately available
funds or delivered the required foreign currency to the Bank under such
foreign exchange contract. The Bank shall not be liable for interest or
other damages caused by any such failure to pay or deliver or any such
delay in payment or delivery.
(c) The Borrower will pay the Bank on demand the Bank's then standard
foreign exchange contract fees for each contract.
(d) Foreign exchange contracts will be in form and substance satisfactory
to the Bank.
(e) No foreign exchange contracts will mature later than ninety (90) days
after the Facility No. 1 Expiration Date.
(f) The Borrower understands the risks of, and is financially able to bear
any losses resulting from, entering into foreign exchange contracts.
The Bank shall not be liable for any loss suffered by the Borrower as
a result of the Borrower's foreign exchange trading. The Borrower will
enter into each foreign exchange contract in reliance only upon the
Borrower's own judgment. The Borrower acknowledges that in entering
into foreign exchange contracts with the Borrower, the Bank is not
acting as a fiduciary. The Borrower understands that neither the Bank
nor the Borrower has any obligation to enter into any particular
foreign exchange contract with the other.
(g) The Borrower hereby requests the Bank to rely upon and execute the
Borrower's telephonic instructions regarding foreign exchange
contracts, and the Borrower agrees that the Bank shall incur no
liability for its acts or omissions which result from interruption of
communications, misunderstood communications or instructions from
unauthorized persons, unless caused by the wilful misconduct of the
Bank or its officers or employees. The Borrower agrees to protect the
Bank and hold it harmless from any and all loss, damage, claim, expense
(including the reasonable fees of outside counsel and the allocated
costs of staff counsel) or inconvenience, however arising, which the
Bank suffers or incurs or might suffer or incur, based on or arising
out of said acts or omissions.
(h) The Borrower agrees to promptly review all confirmations sent to the
Borrower by the Bank. The Borrower understands that these confirmations
are not legal contracts but only evidence of the valid and binding
oral contract which the Borrower has already entered into with the
Bank. The Borrower agrees
- -------------------------------------------------------------------------------
BUSLA (7/93) -3- T2-0760.DOC
<PAGE>
to promptly execute and return to the Bank confirmations which
accurately reflect the terms of a foreign exchange contract, and
immediately contact the Bank if the Borrower believes a confirmation
is not accurate. In the event of a conflict, inconsistency or
ambiguity between the provisions of this Agreement and the provisions
of a confirmation, the provisions of this Agreement will prevail.
(i) The Borrower agrees that the Bank may electronically record all
telephonic conversations with the Borrower relating to foreign
exchange contracts and that such tape recordings may be submitted in
evidence to any court or in any other proceedings relating to such
contracts. The Borrower agrees that in the event of a conflict,
inconsistency or ambiguity between the terms of a foreign exchange
contract as reflected in a tape recording and the terms stated on a
confirmation, the terms reflected in the tape recording shall control.
(j) Any sum owed to the Bank under a foreign exchange contract may,
at the option of the Bank, be added to the principal amount
outstanding under this Agreement. The amount will bear interest and be
due as described elsewhere in this Agreement. The Borrower hereby
authorizes the Bank to debit the Borrower's account with the Bank for
payments due from the Borrower to the Bank with respect to any foreign
exchange contract.
(k) In addition to any other rights or remedies which the Bank may have
under this Agreement or otherwise, upon the occurrence of an event of
default under this Agreement, the Bank may:
(i) Suspend performance of its obligations to the Borrower under
any foreign exchange contract;
(ii) Declare all foreign exchange contracts, interest and any other
amounts which are payable by the Borrower to the Bank immediately
due and payable; and
(iii) Without notice to the Borrower, close out any or all foreign
exchange contracts or positions of the Borrower with the Bank.
The Bank shall not be under any obligation to exercise any such rights
or remedies or to exercise them at a time or in a manner beneficial to
the Borrower. The Borrower shall be liable for any amounts owing to the
Bank after exercise of any such rights and remedies.
2. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
2.1 OUTSTANDING TERM LOAN. There is outstanding from the Bank to the
Borrower a term loan in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000). This term loan is currently subject to
the terms and conditions of Facility No. 2 of the Business Loan Agreement
dated August 20, 1993. As of the date of this Agreement, the term loan shall
be deemed to be outstanding as Facility No. 2 under this Agreement, and shall
be subject to all the terms and conditions stated in this Agreement.
2.2 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate plus 0.75
percentage point.
2.3 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on January 1,
1996, and then monthly thereafter and upon payment in full of the
principal of the loan.
(b) The Borrower will repay principal in 80 successive monthly installments
of Twenty-Six Thousand Forty-One and 67/100 Dollars ($26,041.67)
starting January 1, 1996. On August 1, 2002, the Borrower will repay
the remaining principal balance plus any interest then due.
(c) The Borrower may repay the loan in full or in part at any time. The
prepayment will be applied to the most remote installment of principal
due under Paragraph 2.3(b).
_______________________________________________________________________________
BUSLA (7/93) -4- TS-0760.DOC
<PAGE>
2.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions of the
loan bear interest at the rate(s) described below during an interest period
agreed to by the Bank and the Borrower. Each interest rate is a rate per
year. Interest will be paid on the last day of each interest period, and on
the first day each month during the interest period. At the end of any
interest period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another optional interest
rate for the portion.
2.5 FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Fixed Rate, subject to the
same requirements set forth in subparagraphs (a) through (f) of Paragraph 1.6
(except for purposes of this Facility No. 2, the term "loan" is substituted
for the term "line of credit" in subparagraphs (d) and (e) of Paragraph
1.6).
2.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Long Term Rate, subject to
the following requirements:
(a) The interest period during which the Long Term Rate will be in effect
will be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrower agree will apply to the portion during the applicable interest
period.
(c) Each Long Term Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(d) Any portion of the principal balance of the loan already bearing
interest at the Long Term Rate will not be converted to a different rate
during its interest period.
(e) The Borrower may prepay the Long Term Rate portion in whole or in part
in the minimum amount of One Hundred Thousand Dollars ($100,000). The
Borrower will give the Bank irrevocable written notice of the
Borrower's intention to make the prepayment, specifying the date and
amount of the prepayment. The notice must be received by the Bank at
least 5 banking days in advance of the prepayment. All prepayments of
principal on the Long Term Rate portion will be applied on the most
remote principal installment or installments then unpaid
(f) Each prepayment of a Long Term Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by payment of
all accrued interest on the amount of the prepayment and the prepayment
fee described below.
(g) The prepayment fee will be the sum of fees calculated separately for
each Prepaid Installment, as follows:
(i) The Bank will first determine the amount of interest which would
have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date,
using the Long Term Rate;
(ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would
accrue for that Prepaid Installment if it were reinvested from
the date of prepayment through the Original Payment Date, using
the following rate:
(A) If the Original Payment Date is more than 5 years after
the date of prepayment: the Treasury Rate plus one-quarter
of one percentage point;
(B) If the Original Payment Date is 5 years or less after the
date of prepayment: the Money Market Rate.
(iii) If (i) minus (ii) for the Prepaid Installment is greater than
zero, the Bank will discount the monthly differences to the date
of prepayment by the rate used in (ii) above. The sum of the
discounted monthly differences is the prepayment fee for that
Prepaid Installment.
- -------------------------------------------------------------------------------
BUSLA (7/93) -5- T2-0760.DOC
<PAGE>
(h) The following definitions will apply to the calculation of the
prepayment fee:
"Money Market" means the domestic certificate of deposit market, the
eurodollar deposit market or other appropriate money market selected
by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the
Bank determines could be obtained by reinvesting a specified Prepaid
Installment in the Money Market from the date of prepayment through the
Original Payment Date.
"Original Payment Dates" means the dates on which principal of the Long
Term Rate portion would have been paid if there had been no prepayment.
If a portion of the principal would have been paid later than the end of
the interest period in effect at the time of prepayment, then the
Original Payment Date for that portion will be the last day of the
interest period.
"Prepaid Installment" means the amount of the prepaid principal of the
Long Term Rate portion which would have been paid on a single Original
Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government
Treasury Securities which the Bank determines could be obtained by
reinvesting a specified Prepaid Installment in such securities from the
date of prepayment through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect
the compounding, accrual basis, or other costs of the Long Term Rate
portion. Each of the rates is the Bank's estimate only and the Bank is
under no obligation to actually reinvest any prepayment. The rates will
be based on information from either the Telerate or Reuters information
services, THE WALL STREET JOURNAL, or other information sources the
Bank deems appropriate.
2.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Offshore Rate, subject to
the same requirements set forth in subparagraphs (a) through (g) of paragraph
1.7 (except for purposes of this Facility No. 2, the term "loan" is
substituted for the term "line of credit" in subparagraphs (d) and (e) of
Paragraph 1.7).
3. FACILITY NO. 3: TERM LOAN AMOUNT AND TERMS
3.1 OUTSTANDING TERM LOAN. There is outstanding from the Bank to the Borrower
a term loan. As of December 4, 1995, the principal amount outstanding was Seven
Hundred Eighty Thousand Dollars ($780,000). This term loan is currently subject
to the terms and conditions of Facility No. 4 of the Business Loan Agreement
dated August 20, 1993. As of the date of this Agreement, the term loan shall be
deemed to be outstanding as Facility No. 3 under this Agreement, and shall be
subject to all the terms and conditions stated in this Agreement.
3.2 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference Rate plus
0.75 percentage point.
3.3 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on January 1, 1996,
and then monthly thereafter until payment in full of the principal of the
loan.
(b) The Borrower will repay in full any principal, interest or other
outstanding charges on the loan no later than September 20, 1996.
(c) The Borrower may prepay the loan in full or in part at any time in an
amount not less than Twenty-Five Thousand Dollars ($25,000).
3.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan
bear interest at the rate(s) described below during an
- ------------------------------------------------------------------------------
BUSLA (7/93) -6- T2-0760.DOC
<PAGE>
interest period agreed to by the Bank and the Borrower. Each interest rate is
a rate per year. Interest will be paid on the last day of each interest
period, and on the first day each month during the interest period. At the
end of any interest period, the interest rate will revert to the rate based
on the Reference Rate, unless the Borrower has designated another optional
interest rate for the portion.
3.5 FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Fixed Rate, subject to the
same requirements set forth in subparagraphs (a) through (f) of Paragraph 1.6
(except for purposes of this Facility No. 3, the term "loan" is substituted
for the term "line of credit" in subparagraphs (d) and (e) of Paragraph
1.6).
3.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Long Term Rate, subject to
the same requirements set forth in subparagraphs (a) through (i) of Paragraph
2.6.
3.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the Offshore Rate, subject to
the same requirements set forth in subparagraphs (a) through (g) of Paragraph
1.7 (except for purposes of this Facility No. 3, the term "loan" is substituted
for the term "line of credit" in subparagraphs (d) and (e) of Paragraph
1.7).
4. FEES AND EXPENSES
4.1 LOAN FEE. The Borrower agrees to pay a Thirty-Seven Thousand Five
Hundred Dollar ($37,500) fee due on or before the date of this Agreement.
4.2 EXPENSES. The Borrower agrees to reimburse the Bank for any expenses it
incurs in the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's
in-house counsel.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
5.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
5.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances or repayments or
for the designation of optional interest rates given by any one of the
individuals authorized to sign loan agreements on behalf of the Borrower,
or any other individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 14934-03755, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection
with any act resulting from telephone instructions it reasonably
- -------------------------------------------------------------------------------
BUSLA (7/93) -7- T2-0760.DOC
<PAGE>
believes are made by any individual authorized by the Borrower to
give such instructions. This indemnity and excuse will survive
this Agreement.
5.4 DIRECT DEBIT.
(a) The Borrower agrees that interest and principal payments and
any fees will be deducted automatically on the due date from
checking account number 14934-03755.
(b) The Bank will debit the account on the dates the payments become
due. If a due date does not fall on a banking day, the Bank will debit
the account on the first banking day following the due date.
(c) The Borrower will maintain sufficient funds in the account on
the dates the Bank enters debits authorized by this Agreement. If
there are insufficient funds in the account on the date the Bank
enters any debit authorized by this Agreement, the debit will be
reversed.
5.5 BANKING DAYS. Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday or a Sunday on which the Bank is
open for business in California. For amounts bearing interest at an offshore
rate (if any), a banking day is a day other than a Saturday or a Sunday on
which the Bank is open for business in California and dealing in offshore
dollars. All payments and disbursements which would be due on a day which
is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit
on the next banking day.
5.6 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand,
for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is
applicable to all national banks or a class of all national banks.
The costs and losses will be allocated to the loan in a manner
determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
5.7 INTEREST CALCULATION. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the
basis of a 360-day year and the actual number of days elapsed. This
results in more interest or a higher fee than if a 365-day year is
used.
5.8 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each
instance, any amount not paid when due under this Agreement
(including interest) shall bear interest from the due date at the
Bank's Reference Rate for Facility No. 1 and at the Bank's
Reference Rate plus 0.75 percentage point for Facility No. 2 and
Facility No. 3. This may result in compounding of interest.
5.9 DEFAULT RATE. Upon the occurrence and during the continuation
of any default under this Agreement, advances under this Agreement
will at the option of the Bank bear interest at a rate per annum
which is 2.0 percentage point(s) higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a
waiver of any default.
6. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit
to the Borrower under this Agreement:
6.1 AUTHORIZATIONS. Evidence that the execution, delivery and
performance by the Borrower (and any guarantor) of this Agreement
and any instrument or agreement required under this Agreement have
been duly authorized.
6.2 GUARANTY. A guaranty signed by Tab Products of Canada, Limited
("Tab Canada") in the amount of Two Million Nine Hundred Thousand
Dollars ($2,900,000).
- -----------------------------------------------------------------------------
BUSLA (7/93) -8- T2-0760.DOC
<PAGE>
6.3 OTHER ITEMS. Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation.
7.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed
and existing under the laws of the state where organized.
7.2 AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
7.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and
enforceable.
7.4 GOOD STANDING. In each state in which the Borrower does business, it
is property licensed, in good standing, and, where required, in compliance
with fictitious name statutes.
7.5 NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.
7.6 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and any guarantor's) financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
7.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been
disclosed in writing to the Bank.
7.8 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade
name rights, patent rights and fictitious name rights necessary to enable it
to conduct the business in which it is now engaged.
7.9 OTHER OBLIGATIONS. The Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material
lease, commitment, contract, instrument or obligation.
7.10 INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
7.11 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
7.12 ERISA PLANS.
(a) The Borrower has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the code with respect to each Plan and
is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability
with respect to any Plan under Title IV of ERISA.
- -------------------------------------------------------------------------------
BUSLA (7/93) -9- T2-0760.DOC
<PAGE>
(b) No reportable event has occurred under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan has
been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists
which might constitute grounds for the commencement of such a
proceeding.
(e) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
7.13 LOCATION OF BORROWER. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this
Agreement.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 USE OF PROCEEDS (FACILITY NO. 1). To use the proceeds of Facility No. 1
only for working capital.
8.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with
an unqualified opinion) by a Certified Public Accountant ("CPA")
acceptable to the Bank. The statements shall be prepared on a
consolidated basis and must include a supplemental consolidating
schedule detailing the assets, liabilities, income and expenses of
each subsidiary, domestic or foreign, of the Borrower.
(b) Within 45 days of the period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared. The
statements shall be prepared on a consolidated and consolidating basis.
(c) Within the periods provided in (a) and (b) above, a compliance
certificate of the Borrower signed by an authorized officer of the
Borrower setting forth the information and computations (in sufficient
detail) to establish that the Borrower is in compliance with all
financial covenants at the end of the period covered by the financial
statements then being furnished.
(d) Copies of the Borrower's Form 10-K Annual Report, Form 10-Q Quarterly
Report and Form 8-K Current Report within 15 days after the date of
filing with the Securities and Exchange Commission.
8.3 QUICK RATIO. To maintain on a consolidated basis as of the end of each
quarterly accounting period a ratio of quick assets to current liabilities of
at least 1.20:1.0.
- ------------------------------------------------------------------------------
BUSLA (7/93) -10- T2-0760.DOC
<PAGE>
"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term investments. "Current
liabilities" includes all debt outstanding to the Bank except the long-term
portion of debt under Facility No. 2 of this Agreement.
8.4 QUICK ASSETS. To maintain on a consolidated basis as of the end of each
quarterly accounting period quick assets in excess in excess of current
liabilities by at least Ten Million Dollars ($10,000,000).
8.5 TANGIBLE NET WORTH. To maintain on a consolidated basis as of the end of
each quarterly accounting period tangible net worth equal to at least the sum
of the following:
(a) Twenty-Eight Million Dollars ($28,000,000); plus
(b) the sum of 50% of net income after income taxes (without subtracting
losses) earned in each quarterly accounting period commencing May 31,
1993.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles)
less total liabilities, including but not limited to accrued and deferred
income taxes, and any reserves against assets.
8.6 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain on a
consolidated basis as of the end of each quarterly accounting period that
ends within the time periods specified below a ratio of total liabilities to
tangible net worth not exceeding the corresponding ratios specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the date of this Agreement
through May 30, 1996 1.60:1.0
On May 31, 1996 and thereafter 1.35:1.0
</TABLE>
"Total liabilities" means the sum of current liabilities plus long term
liabilities including deferred taxes.
8.7 FIXED CHARGE COVERAGE RATIO. To maintain on a consolidated basis a fixed
charge coverage ratio of at least the amounts indicated for each period
specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the date of this Agreement
through May 30, 1997 1.15:1.0
From May 31, 1997 through
February 28, 1998 1.10:1.0
From March 1, 1998 and thereafter 1.15:1.0
</TABLE>
"Fixed charge coverage ratio" means the ratio of cash flow to fixed charges.
"Fixed charges" means the sum of (i) the principal payments on debt
(including, without limitation, prepayments and regularly scheduled payments
of the Senior Notes and the Senior Guaranteed Notes (both as defined below)
and regularly scheduled payments (but not prepayments) of debt to the Bank),
(ii) interest expense, and (iii) capital lease expense.
"Cash flow" means (a) the sum of (i) net income after taxes, (ii)
depreciation, (iii) amortization, (iv) interest expense, (v) capital lease
expense, and (vi) net proceeds received by the Borrower resulting from its
issuance of any equity securities after the date of this Agreement
(including, without limitation, proceeds resulting from the exercise of their
options by the holders of options to purchase the Borrower's shares), LESS
(b) the sum of (i) any amounts paid by the Borrower to purchase, redeem
or otherwise acquire any of its shares, (ii) capital expenditures (excluding
capital expenditures for the fiscal year ending May 31, 1996) and (iii)
dividends paid by the Borrower.
- ------------------------------------------------------------------------------
BUSLA (7/93) -11- T2-0760.DOC
<PAGE>
"Senior Notes" means the Borrower's 8.73% senior promissory note(s) in the
original principal amount of Fifteen Million Dollars ($15,000,000) due March
20, 2001, authorized by and subject to the terms and conditions of that
certain Note Agreement executed as of March 20, 1992, by the Borrower in
favor of The Prudential Insurance Company of America ("Prudential"), as
now in effect and as hereafter amended or restated (the "Note Agreement").
"Senior Guaranteed Notes" means the Borrower's 6.90% senior promissory
note(s) in the original principal amount of Five Million Dollars
($5,000,000) due September 20, 2002, authorized by and subject to the terms
and conditions of the certain Note Agreement executed as of October 7, 1993,
by the Borrower in favor of Prudential, as now in effect and as hereafter
amended or restated (the "Guaranteed Note Agreement").
This ratio will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters.
8.8 LIMITATION ON LOSSES. Not incur on a consolidated basis a net loss
before taxes and extraordinary items in any two (2) consecutive quarterly
accounting periods after the quarterly accounting period ending May 31, 1995.
8.9 PROFITABILITY. To maintain on a consolidated basis a positive net
income before taxes and extraordinary items and a positive net income after
taxes and extraordinary items (i) as of the end of each quarterly accounting
period on a fiscal year-to-date basis and (ii) for each annual accounting
period.
8.10 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent debts (other than those to the Bank), or become liable for the
debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts in existence on the date of this Agreement disclosed in writing
to the Bank in the Borrower's financial statement dated May 31, 1995.
(e) Additional debts for business purposes which do not exceed a total
principal amount of Five Hundred Thousand Dollars ($500,000)
outstanding at any one time.
(f) Contingent debts of the Borrower under its guaranty in the amount of
Two Hundred Thousand U.S. Dollars (U.S. $200,000) in favor of the
Australian and New Zealand Banking Company guarantying debt of Tab
Products Pty. Ltd.
8.11 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing
to the Bank.
(d) Additional purchase money security interests in personal property
acquired after the date of this Agreement if the total principal amount
of debts secured by such liens does not exceed Five Hundred Thousand
Dollars ($500,000) at any one time.
8.12 CAPITAL EXPENDITURES. Not to spend (including the total amount of any
capital leases) more than Three Million Dollars ($3,000,000) in any single
fiscal year to acquire fixed or capital assets.
- ------------------------------------------------------------------------------
BUSLA (7/93) -12- T2-0760.DOC
<PAGE>
8.13 RESTRICTED PAYMENTS LIMITATION. Not to directly or indirectly make,
declare, pay or set apart any sum of money or other property for any
restricted payments unless after giving effect thereto (a) no default exists
under this Agreement and (b) the aggregate amount of restricted payments made
after May 31, 1993, does not exceed the sum of (i) Two Million Dollars
($2,000,000) plus (ii) on a cumulative basis, the product of (A) consolidated
net income after taxes for each fiscal quarter commencing with the fiscal
quarter beginning June 1, 1993, and terminating at the end of the last fiscal
quarter preceding the date of any proposed restricted payment multiplied by
(B) the applicable rate.
"Restricted payments" means (a) any dividend payments or other
distributions of cash, assets, properties, or other property rights,
obligations or securities on account of any shares of any class of capital
stock of the Borrower (other than stock dividends) and (b) any repurchases,
redemptions, retirement or other acquisitions of the Borrower's capital stock
or the establishment of any sinking fund or other fund for any such purpose.
"Applicable rate" means (a) for any fiscal period between June 1, 1993 and
May 31, 1995, inclusive, 40% and (b) for any fiscal period after May 31,
1995, 50%.
For purposes of this covenant, "consolidated net income after taxes" does
not include (a) gains and losses on any sale, lease, exchange or other
transfer or disposal of capital assets, (b) extraordinary items, (c) income
from changes in accounting principles, (d) undistributed share of earnings
from non-subsidiary investments, (e) gains or losses from the acquisition of
securities or the retirement of debt, and (f) any gains from write-up of
assets.
8.14 LOANS TO SUBSIDIARIES. Not to make any loans or advances to any of the
Borrower's subsidiaries.
8.15 OUT OF DEBT PERIOD. To repay any advances in full, and not to draw any
additional advances on its revolving line of credit, for a period of at least
30 consecutive days in each line-year. "Line-year" means the period
between October 31, 1995, and October 31, 1996, and each subsequent one-year
period (if any).
8.16 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Million Dollars ($1,000,000) against the Borrower
(or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's (or any guarantor's)
financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrrower has more than one place of
business.
8.17 BOOKS AND RECORDS. To maintain adequate books and records.
8.18 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party
to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
8.19 COMPLIANCE WITH LAWS. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.
8.20 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.
8.21 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
- -------------------------------------------------------------------------------
BUSLA (7/93) -13- T2-0760.DOC
<PAGE>
8.22 COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.
8.23 INSURANCE. To maintain insurance as is usual for the business it is in.
8.24 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate,
or other combination.
(d) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market
value, or enter into any sale and leaseback agreement covering any
of its fixed or capital assets.
(g) voluntarily suspend its business for more than 5 days in any 30 day
period.
8.25 ERISA PLANS. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan under Section
4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
9. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property
or operations or property leased to the Borrower. The indemnity includes but
is not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. For these purposes,
the term "hazardous substances" means any substance which is or becomes
designated as "hazardous" or "toxic" under any federal, state or local
law. This indemnity will survive repayment of the Borrower's obligations to
the Bank.
10. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. With respect to Paragraphs 10.1,
10.4, 10.5, 10.6, 10.9 and 10.11, the Bank agrees that it will not have the
right to exercise its rights under the immediately preceding sentence unless
the Borrower has failed to cure such event of default in a manner acceptable
to the Bank within 5 days of its occurrence (for Paragraphs 10.1, 10.4 and
10.5) or within 5 banking days of the Borrower's receipt of notice of such
event of default (for Paragraphs 10.6, 10.9 and 10.11). If an event of
default occurs under the paragraph entitled "Bankruptcy," below, with respect
to the Borrower, then the entire debt outstanding under this Agreement will
automatically be due immediately.
- ------------------------------------------------------------------------------
BUSLA (7/93) -14- T2-0760.DOC
<PAGE>
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due.
10.2 FALSE INFORMATION. The Borrower has given the Bank false or misleading
information or representations.
10.3 BANKRUPTCY. The Borrower (or any guarantor) files bankruptcy petition,
a bankruptcy petition is filed against the Borrower (or any guarantor),
or the Borrower (or any guarantor) makes a general assignment for the
benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed against the Borrower (or any guarantor) is dismissed
within a period of 30 days after the filing; provided, however, that the
Bank will not be obligated to extend any additional credit to the
Borrower during that period.
10.4 RECEIVERS. A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated.
10.5 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor), or the Borrower (or any guarantor) enters
into any settlement agreements with respect to any litigation or
arbitration, in an aggregate amount of One Million Dollars ($1,000,000)
or more in excess of any insurance coverage.
10.6 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.
10.7 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's (or any guarantor's) financial condition, properties or
prospects, or ability to repay the loan, including, without limitation,
any material adverse change evidenced by the comparison of the
Borrower's CPA-audited annual financial statements dated as of May 31,
1995 to the Borrower's draft financial statements for such period as
previously submitted to the Bank.
10.8 CROSS-DEFAULT. Any default occurs and has not been cured or waived in a
manner acceptable to the Bank under any agreement in connection with any
credit the Borrower (or any guarantor) has obtained from anyone else or
which the Borrower (or any guarantor) has guaranteed.
10.9 OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet
the conditions of, or fails to perform any obligation under any other
agreement the Borrower (or any guarantor) has with the Bank or any
affiliate of the Bank.
10.10 ERISA PLANS. The occurrence of any one or more of the following events
with respect to the Borrower, provided such event or events could
reasonably be expected, in the judgment of the Bank, to subject the
Borrower to any tax, penalty or liability (or any combination of the
foregoing) which, in the aggregate, could have a material adverse effect
on the financial condition of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is, in
the reasonable judgement of the Bank likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the Borrower's full or partial withdrawal from a Plan.
10.11 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement
not specifically referred to in this Article.
10.12 PREPAYMENT OF DEBT TO PRUDENTIAL. The Borrower fails, upon making any
partial or full prepayment (whether mandatory, voluntary, by
acceleration or otherwise) of the Senior Notes or the Senior Guaranteed
Notes, to simultaneously prepay, in the order and manner required by the
Bank, its loan under Facility No. 2 in an amount at least equal to 27%
of the amount of the prepayment(s) to Prudential.
10.13 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this
Agreement is violated or no longer in effect.
- -------------------------------------------------------------------------------
BUSLA (7/93) -15- T2-0760.DOC
<PAGE>
10.14 DEBTS OF SUBSIDIARIES. Any subsidiary of the Borrower has outstanding
or incurs any direct or contingent debts (others than those to the Bank), or
becomes liable for the debts of other without the Bank's written consent.
This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and lines of credit in existence on the date of this
Agreement disclosed in writing to the Bank in the Borrower's
consolidated financial statement dated May 31, 1995.
(e) Contingent debts of Tab Canada under a guaranty in the
maximum amount of Five Million Dollars ($5,000,000) in favor of
Prudential.
(f) Debts of Tab Products Pty. Ltd. owed to the Australian and
New Zealand Banking Company in the maximum amount of Two Hundred
Thousand U.S. Dollars (U.S. $200,000).
10.15 PRUDENTIAL DOCUMENTS. The Borrower fails to promptly provide the Bank
with copies of any extensions, amendments, revisions, renewals, or
restatements of the Senior Notes, Senior Guaranteed Notes, Note Agreement or
Guaranteed Note Agreement.
10.16 FINANCIAL COVENANTS. Any financial covenant under any loan or other
agreement executed by the Borrower evidencing indebtedness permitted in
Paragraph 8.10 is more restrictive than any financial covenant under this
Agreement.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
11.2 CALIFORNIA LAW. This Agreement is governed by California law.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.
11.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies
or claims between the Borrower and the Bank, including but not
limited to those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered
in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
- ------------------------------------------------------------------------------
BULSA (7/93) -16- T2-0760.DOC
<PAGE>
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or claim,
at the time of the proposed submission to arbitration, arises from or
relates to an obligation to the Bank secured by real property located in
California. In this case, both the Borrower and the Bank must consent
to submission of the claim or controversy to arbitration. If both
parties do not consent to arbitration, the controversy or claim will be
settled as follows:
(i) The Borrower and the Bank will designate a referee (or a panel of
referees) selected under the auspices of the American Arbitration
Association in the same manner as arbitrators are selected in
Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgment in the court that appointed
the referee, in accordance with the provisions of California Code
of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if
the other party contests the lawsuit. However, if the controversy or
claim arises from or relates to an obligation to the Bank which is
secured by real property located in California at the time of the
proposed submission to arbitration, this right is limited according to
the provision above requiring the consent of both the Borrower and the
Bank to seek resolution through arbitration.
- -------------------------------------------------------------------------------
BUSLA (7/93) -17- T2-0760.DOC
<PAGE>
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even
if it makes a loan after default. If the Bank waives a default, it may enforce
a later default. Any consent or waiver under this Agreement must be in
writing.
11.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
11.7 ATTORNEY'S FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with
the enforcement or preservation of any rights or remedies under this
Agreement any any other documents executed in connection with this Agreement,
and including any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. As used in this paragraph, "attorneys' fees" includes the
allocated costs of in-house counsel.
11.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
11.9 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and
the Borrower may specify from time to time in writing.
11.10 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in as many counterparts as
neccessary or convenient, any by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
11.12 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Business Loan
Agreement entered into as of August 20, 1993, between the Bank and the
Borrower, and any credit outstanding thereunder shall be deemed to be
outstanding under this Agreement.
- ------------------------------------------------------------------------------
BUSLA (7/93) -18- T2-0760.DOC
<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
Bank of America
National Trust and Savings Association Tab Products Co.
X /s/ C.P. Giannotti X /s/ John Palmer
----------------------------------- ---------------------------------
By: Chris P. Giannotti By:
Title: Vice President Title: V.P. Finance & CFO
X /s/ Robert Sexton
---------------------------------
By:
Title: Treasurer & Secretary
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT: ARE TO BE SENT:
Palo Alto Commercial Banking Office #1493
P.O. Box 180 1400 Page Mill Road
Palo Alto, CA 94301 Palo Alto, CA 94304
- ------------------------------------------------------------------------------
BUSLA (7/93) -19- T2-0760.DOC
<PAGE>
[Logo] RAYMOND G. KENNEDY, CFA
VICE PRESIDENT
PRUDENTIAL CAPITAL GROUP
777 South Figueroa Street, Suite 2950
Los Angeles, CA 90017
213 486-5376 Fax: 213 623-9764
December 13, 1995
Tab Products Co.
Tab Canada Limited
1400 Page Mill Road
Palo Alto, California 94304
Ladies and Gentlemen:
Reference is made to the Note Agreement between Tab Products Co. (the
"Company") and The Prudential Insurance Company of America ("Prudential")
dated as of (i) March 20, 1992 (the "1992 Agreement"), pursuant to which the
Company issued and sold and Prudential purchased the Company's 8.73% Senior
Notes due March 20, 2001 in the principal amount of $15,000,000 and (ii)
October 7, 1993 (the "1993 Agreement"), pursuant to which the Company issued
and sold and Prudential purchased the Company's 6.90% Senior Guaranteed Notes
due September 20, 2002. The 1992 Agreement and the 1993 Agreement are together
are together referred to as the "Agreements," and each is an "Agreement."
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the applicable Agreement.
Pursuant to the request of the Company and the provisions of paragraph
11C of each Agreement, Prudential and the Company agree with respect to each
Agreement as follows:
1. Paragraph 6L of each Agreement is hereby amended and restated in its
entirety to read as follows:
"6.L. FIXED CHARGE COVERAGE. Permit its Fixed Charge
Coverage Ratio calculated at the end of each fiscal quarter
commencing with the fiscal quarter ending May 30, 1994, on
the basis of the consolidated results of operations of the
Company and its Subsidiaries, to be less than (A) 1.15 from
May 30, 1994 through and including May 30, 1997; (B) 1.00
from May 31, 1997 through February 28, 1998, inclusive; and
(C) 1.15 at all times from and after March 1, 1998."
<PAGE>
Tab Products Co.
Tab Canada Limited
December 13, 1995
Page -2-
2. Notwithstanding anything to the contrary contained in the
Agreements, for purposes of calculating the Fixed Charge Coverage Ratio, for
the periods ending November 30, 1995, through May 31, 1996, capital
expenditures of the Company or any Subsidiary shall not be subtracted from
Consolidated Net Earnings.
If you agree with the foregoing, please sign below and return a copy
of this letter to the undersigned. Upon such execution, this letter shall
become a binding agreement between the Company and Prudential amending the
1992 Agreement and the 1993 Agreement in the manner and to the extent herein
provided. Execpt as otherwise set forth herein, the 1992 Agreement and the
1993 Agreement shall each continue unmodified and in full force and effect.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ Raymond G. Kennedy
-------------------------
Vice President
ACCEPTED AND AGREED
TAB PRODUCTS CO.
By: /s/ Robert J. Sexton
---------------------------
Name: Robert J. Sexton
Title: Treasurer & Secretary
<PAGE>
Tab Products Co.
Tab Canada Limited
December 13, 1995
Page -3-
The undersigned, as a guarantor of the 6.90% Notes pursuant to its Guaranty
thereof dated October 7, 1993, expressly agrees with and consents to the
amendments set forth in this letter and confirms that its Guaranty remains in
full force and effect as originally executed and is expressly reaffirmed
hereby.
TAB CANADA LIMITED
By /s/ J.W. Peth
--------------------
Its Secretary
--------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 5522
<SECURITIES> 2540
<RECEIVABLES> 28320
<ALLOWANCES> 695
<INVENTORY> 15563<F1>
<CURRENT-ASSETS> 53671
<PP&E> 55999
<DEPRECIATION> 34613
<TOTAL-ASSETS> 83820
<CURRENT-LIABILITIES> 23956
<BONDS> 17297
0
0
<COMMON> 40245
<OTHER-SE> 485
<TOTAL-LIABILITY-AND-EQUITY> 83820
<SALES> 71825
<TOTAL-REVENUES> 76276
<CGS> 42287
<TOTAL-COSTS> 46315
<OTHER-EXPENSES> 26643
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> 807
<INCOME-PRETAX> 2511
<INCOME-TAX> 1092
<INCOME-CONTINUING> 1419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1419
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<FN>
<F1>Tag #14 Inventory detail at November 30,1995 was finished goods $9916;
work in process $649; raw materials $4998
</FN>
</TABLE>
