-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, plEpWkzkLNQOazqsBzHRrLRxilkZccgxZvR6TcRFi/4Hs6fg0Fe/grxqLNf90Qfx MADkgwcVeaA8pPuYS+2Pew== 0000014995-95-000014.txt : 19950516 0000014995-95-000014.hdr.sgml : 19950516 ACCESSION NUMBER: 0000014995-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXON TICONDEROGA CO CENTRAL INDEX KEY: 0000014995 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 230973760 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02655 FILM NUMBER: 95539898 BUSINESS ADDRESS: STREET 1: 2600 MAITLAND CENTER PKWY STREET 2: STE 200 CITY: MAITLAND STATE: FL ZIP: 32751 BUSINESS PHONE: 4078759000 MAIL ADDRESS: STREET 1: 2600 MAITLAND CTR PARKWAY STREET 2: STE 200 CITY: MAITLAND STATE: FL ZIP: 32751 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR CORP/DE/ DATE OF NAME CHANGE: 19831002 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR GROUP INC DATE OF NAME CHANGE: 19730619 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR CAMP RESORTS INC DATE OF NAME CHANGE: 19700608 10-Q 1 MARCH 31, 1995 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NO. O-2655 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DIXON TICONDEROGA COMPANY - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 23-0973760 - --------------------------------- ---------------------------------- (State or other jurisdiction I.R.S. Employer of incorporation or organization) Identification No. 2600 Maitland Center Parkway, Suite 200, Maitland, FL 32751 - ---------------------------------------------------------------------------- (Address of principal executive offices) Zip Code (407) 875-9000 Registrant's telephone number, including area code: ---------------------- 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 close of the period covered by this report. Class Outstanding as of March 31, 1995 - ---------------------------- ----------------------------------------- Common Stock $1 par value 3,182,697 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ INDEX ----- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Information Consolidated Balance Sheets -- March 31, 1995 and September 30, 1994 3-4 Consolidated Statements of Operations -- For The Three Months and Six Months Ended March 31, 1995 and 1994 5 Consolidated Statements of Cash Flows -- For The Six Months Ended March 31, 1995 and 1994 6-7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 PART I - FINANCIAL INFORMATION Item 1. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES - ------- CONSOLIDATED BALANCE SHEETS
March 31, September 30, 1995 1994 ------------ ------------- CURRENT ASSETS: Cash and cash equivalents $ 515,528 $ 1,822,764 Receivables, less allowance for doubtful accounts of $514,609 at March 31, 1995 and $564,905 at September 30, 1994 17,624,734 20,335,421 Inventories 32,538,978 28,881,083 Assets held for sale 247,136 256,947 Other current assets 2,180,293 1,924,754 ----------- ----------- Total current assets 53,106,669 53,220,969 ----------- ----------- CONDOMINIUMS UNDER DEVELOPMENT 783,973 773,067 ----------- ----------- PROPERTY, PLANT and EQUIPMENT: Land and buildings 11,171,809 11,867,046 Machinery and equipment 16,727,531 18,983,203 Furniture and fixtures 909,916 843,316 ----------- ----------- 28,809,256 31,693,565 Less accumulated depreciation (16,621,162) (18,308,662) ----------- ----------- 12,188,094 13,384,903 OTHER ASSETS 1,379,565 1,473,059 ----------- ----------- $67,458,301 $68,851,998 =========== =========== March 31, September 30, 1995 1994 ------------ ------------- CURRENT LIABILITIES: Notes payable $16,926,363 $11,054,169 Current maturities of long-term debt 4,415,106 4,431,570 Accounts payable 4,988,360 5,258,085 Accrued liabilities 4,991,855 8,626,772 ----------- ----------- Total current liabilities 31,321,684 29,370,596 ----------- ----------- LONG-TERM DEBT 18,667,266 19,140,668 ----------- ----------- OTHER NONCURRENT LIABILITIES 119,837 233,818 ----------- ----------- DEFERRED INCOME TAXES 986,772 1,144,799 ----------- ----------- MINORITY INTEREST 2,192,252 3,421,253 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par $1, authorized 100,000 shares, none issued - - Common stock, par $1, authorized 8,000,000 shares; issued 3,447,967 shares as of March 31, 1995 and 3,424,873 as of September 30, 1994 3,447,966 3,424,873 Capital in excess of par value 2,124,659 2,042,639 Retained earnings 12,028,878 11,577,719 Cumulative translation adjustment (2,458,101) (531,455) ----------- ----------- 15,143,402 16,513,776 Less - treasury stock, at cost (265,270 shares) (972,912) (972,912) ----------- ----------- 14,170,490 15,540,864 ----------- ----------- $67,458,301 $68,851,998 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 1995 1994 1995 1994 -------- -------- -------- -------- REVENUES $19,371,467 $19,472,303 $40,764,818 $38,037,039 ----------- ----------- ----------- ----------- COST AND EXPENSES: Cost of goods sold 12,589,621 13,486,274 27,063,073 26,530,083 Selling and administrative expenses 5,190,580 4,937,382 10,766,324 9,506,133 ----------- ----------- ----------- ----------- 17,780,201 18,423,656 37,829,397 36,036,216 ----------- ----------- ----------- ----------- OPERATING INCOME 1,591,266 1,048,647 2,935,421 2,000,823 INTEREST EXPENSE 838,219 914,320 1,594,300 1,833,097 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 753,047 134,327 1,341,121 167,726 INCOME TAXES 272,268 105,136 500,604 111,304 ----------- ----------- ----------- ----------- 480,779 29,191 840,517 56,422 MINORITY INTEREST 331,577 --- 389,359 --- ----------- ----------- ----------- ----------- NET INCOME $ 149,202 $ 29,191 $ 451,158 $ 56,422 =========== =========== =========== =========== EARNINGS PER COMMON SHARE $ .05 $ .01 $ .14 $ .02 =========== =========== =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING 3,176,000 3,152,047 3,167,762 3,150,863 =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 451,158 $ 56,422 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,188,991 1,215,670 Deferred taxes 310,192 (140,902) Income attributable to currency translation (197,390) --- Income attributable to minority interest 389,359 --- Changes in assets and liabilities: Receivables, net 808,317 (1,450,238) Inventories (5,520,594) (771,179) Other current assets (381,113) (488,587) Accounts payable and accrued liabilities (3,326,775) (638,558) Condominiums (10,906) 120,712 Other assets (166,997) (144,856) ----------- ----------- Net cash provided by (used in) operations (6,455,758) (2,241,516) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of plant and equipment, net (648,953) (737,552) Proceeds from sale of assets --- 469,883 ----------- ----------- Net cash provided by (used in) investing activities (648,953) (267,669) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from (reductions of) notes payable 6,952,871 (1,266,999) Net proceeds from (principal reductions of) long-term debt (502,843) 4,081,834 Exercise of stock options 98,814 9,500 Other non-current liabilities (11,283) 9,449 ----------- ----------- Net cash provided by (used in) financing activities 6,537,559 2,833,784 ----------- ----------- Effect of exchange rate changes on cash (740,084) (151,467) Net increase (decrease) in cash and cash equivalents (1,307,236) 173,132 Cash and cash equivalents, beginning of period 1,822,764 332,041 ----------- ----------- Cash and cash equivalents, end of period $ 515,528 $ 505,173 =========== =========== Supplemental Disclosures: Cash paid during the period: Interest (net of amount capitalized) $ 2,043,623 $ 1,807,304 Income taxes 1,292,542 93,026
The accompanying notes to consolidated financial statements are an integral part of these statements. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation: The condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Registrant's latest annual report on Form 10-K. In the opinion of the Registrant, all adjustments (solely of a normal recurring nature) necessary to present fairly the financial position of the Dixon Ticonderoga Company and subsidiaries as of March 31, 1995, and the results of their operations and cash flows for the six months ended March 31, 1995, and 1994, have been included. The results of operations for such interim periods are not necessarily indicative of the results for the entire year. 2. Inventories: Since amounts for inventories under the LIFO method are based on annual determinations of quantities and costs as of the end of the fiscal year, the inventories at March 31, 1995 (for which the LIFO method of accounting are used) are based on certain estimates relating to quantities and costs as of year end. Inventories consist of (in thousands):
March 31, September 30, 1995 1994 ------------ ------------- Raw materials $11,752 $12,273 Work in process 4,894 4,494 Finished goods 15,893 12,114 ------- ------- $32,539 $28,881 ======= =======
3. Accounting for long-lived assets: The Financial Accounting Standards Board issued Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This statement, which must be adopted no later than fiscal 1997, establishes accounting standards with respect to the impairment of long-lived assets. Its adoption is not expected to materially affect the future results of operations or financial position of the Company. 4. Accounting for income taxes: The difference between income taxes calculated at the U.S statutory federal income tax rate and the provision in the condensed consolidated financial statements is primarily due to the net effect of utilization of U.S. net operating loss carryforwards, foreign and state income taxes and other permanent items. 5. Contingencies: The Registrant, in the normal conduct of its business, is a party in certain litigation. In the opinion of management (after taking into account accruals), the ultimate outcome of this litigation will not materially affect the Company's future results of operations or financial position. Included in this litigation is a claim against the Company under New Jersey's Environmental Clean-up Responsibility Act, by a 1984 purchaser of industrial property from the Company. The Company has evaluated the merits of the case and believes the outcome will not be material to the future results of operations as well as the financial position of the Company. The Registrant is aware of several environmental matters related to certain facilities purchased or to be sold. The Registrant assesses the extent of these matters on an ongoing basis. In the opinion of management (after taking into account accruals), the resolution of these matters will not materially affect the Company's future results of operations or financial position. In conjunction with the sale of a discontinued business in a previous year, the Registrant guaranteed a loan to the buyer. The loan balance is approximately $375,000 as of March 31, 1995. In the opinion of management, the guarantee will not ultimately have any material effect on the Company's future results of operations or financial condition. 6. New financing arrangements: The Company's $35 million loan and security agreement with its primary lender was amended in February 1995, whereby its interest rate was reduced from the prime rate plus 1% to either the prime rate plus 0.5% or the prevailing LIBOR rate plus 2.5%. 7. Shareholders rights plan: In March 1995, the Company declared a dividend distribution of one Preferred Stock Purchase Right on each share of Company common stock. Each Right will entitle the holder to buy one-thousandth of a share of a new series of preferred stock at a price of $30.00 per share. The Rights will be exercisable only if a person or group (other than the Company's chairman, Gino N. Pala, and his family members) acquires 20% or more of the outstanding shares of common stock of the Company or announces a tender offer following which it would hold 30% or more of such outstanding common stock. The Rights entitle the holders other than the acquiring person to purchase Company common stock having a market value of two times the exercise price of the Right. If, following the acquisition by a person or group of 20% or more of the Company's outstanding shares of common stock, the Company were acquired in a merger or other business combination, each Right would be exercisable for that number of the acquiring company's shares of common stock having a market value of two times the exercise price of the Right. The Company may redeem the Rights at one cent per Right at any time until 10 days following the occurrence of an event that causes the Rights to become exercisable for common stock. The rights expire in ten years. 8. Executive employment agreements: The Company has entered into employment agreements with two executives which provide for the continuation of salary (currently aggregating $27,500 per month) and related employee benefits for a period of 24 months following their termination of employment under certain changes in control of the Company. In addition, all options held by the executives would become immediately exercisable upon the date of termination and remain exercisable for 90 days thereafter. Item 2. - ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVENUES for the quarter ended March 31, 1995, decreased $101,000 from the same quarter last year. The changes by segment are as follows:
% Increase (Decrease) Increase --------------------- (Decrease) Total Volume Price/Mix ---------- ----- ------ --------- Consumer U.S. $ 886 9 6 3 Consumer Foreign (1,177) (30) (28) (2) Graphite & Lubricants 96 3 (3) 6 Refractory 94 3 2 1
Revenue in Canada and Mexico decreased $66,000 and $935,000, respectively, due to the decline of their currencies' value compared to the U.S. dollar. The effect of the devaluation of the Mexican peso contributed principally to the decline in domestic volume. As expected, customers in Mexico deferred buying to allow the peso to stabilize. The effect of the postponement in Mexico domestic sales was mitigated by increased sales to the U.S. of certain products enjoying lower cost (in terms of U.S. dollars). Revenues for the six months ended March 31, 1995, increased $2,728,000 over the same period last year. The changes by segment are as follows:
% Increase (Decrease) Increase --------------------- (Decrease) Total Volume Price/Mix ---------- ----- ------ --------- Consumer U.S. $ 2,935 14 13 1 Consumer Foreign (1,249) (20) (12) (8) Graphite & Lubricants 433 8 6 2 Refractory 737 14 16 (2)
U.S. Consumer volume increases were primarily in the mass retail and office supply mega-store markets. Revenue in Canada and Mexico decreased $106,000 and $995,000, respectively, due to the decline of their local currencies' value. Mexico's revenues decreased $1,122,000 with approximately half due to the devaluation of the peso (price/mix) and half due to lower domestic volume as discussed above. Revenues decreased $2,022,000 from the prior quarter as follows:
% Increase (Decrease) Increase --------------------- (Decrease) Total Volume Price/Mix ---------- ----- ------ --------- Consumer U.S. $(2,800) (21) (20) (1) Consumer Foreign 412 17 40 (23) Graphite & Lubricants 373 13 15 (2) Refractory (6) - 14 (14)
Foreign Consumer revenue was adversely affected by the Mexican peso devaluation, reflecting a decrease of $880,000 from the prior quarter. This devaluation and its accompanying effect of lowering domestic customer demand held Foreign revenue to a modest increase of $412,000 in what is historically a strong quarter due to higher educational market sales. Strong exports from Mexico to the U.S., however, mitigated the effects of this lower domestic volume. Real Estate revenues were not significant in any period presented. OPERATING INCOME increased $543,000 over the same quarter last year. U.S. Consumer products increased $125,000 on higher volume, despite increased selling and distribution costs connected with aggressive efforts in the mass retail and office supply mega-store markets. Foreign Consumer products operating income increased $368,000, primarily in Mexico. Increased shipments to the U.S. and related currency gains helped to maintain efficient manufacturing conditions and higher operating profits, despite the large decrease in Mexican domestic sales. Operating income for the six months ended March 31, 1995, increased $935,000 over the same period last year. U.S. and Foreign Consumer accounted for most of this increase for the reasons stated above. Operating income for the quarter ended March 31, 1995, increased $247,000 over the first quarter. U.S. Consumer products decreased $556,000 due to the prior quarter historically reflecting higher seasonal revenue. Foreign Consumer increased $520,000 on higher seasonal revenue and the increased operating profits from manufacturing for U.S. shipments in Mexico. Lubricants and Refractory products increased $172,000 and $95,000, respectively, on higher revenues. INTEREST EXPENSE decreased $76,000 and $239,000 in the quarter and six months ended March 31, 1995, over the comparable periods last year. The effect of decreases in consolidated debt were partially offset by higher average rates of interest in the U.S. INCOME TAXES increased in all periods presented due to the increase in pre- tax income. The Financial Accounting Standards Board issued Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This statement, which must be adopted no later than fiscal 1997, establishes accounting standards with respect to the impairment of long-lived assets. Its adoption is not expected to materially affect the future results of operations or financial position of the Company. LIQUIDITY AND CAPITAL RESOURCES The financial condition of the Company improved dramatically in the past year, principally due to its recent operating success and the completion of major financing initiatives. Cash flows used in operating activities in the first half of fiscal 1995 increased due to higher working capital requirements (primarily inventories) to support increasing business segments. Despite higher consolidated revenues, the Company managed to maintain its strong collection practices which have reduced average days outstanding under normal terms. As is the case historically, cyclical inventory levels increased to service the upcoming "back-to-school" buying season in the Company's Consumer segment. Investing activities included approximately $649,000 in purchases of property and equipment for the first six months of 1995 (as compared with $738,000 in the prior year). Generally, all major capital projects are discretionary in nature and thus no material purchase commitments exist. The Company anticipates its normal capital expenditures to accelerate during the year and approximate $2 million, less than its annual depreciation expense. These expenditures will include strategic manufacturing equipment purchases as well as customary projects, and will continue to be funded from operations and existing financing arrangements. Before the end of fiscal 1995, the Company intends to begin construction of a new corporate headquarters facility in Florida. The estimated total cost of the project is approximately $3 million with construction costs financed through a separate fixed-rate permanent mortgage arrangement. The Company previously completed major financing arrangements, in the amount of $35 million, which refinanced certain short-term obligations and provided additional working capital. The arrangements provide up to $10 million in additional financing and permit the Company to meet all current debt obligations. The related credit agreement provides for the maintenance of certain financial covenants and ratios, with which the Company is presently in compliance. In February 1995, the interest rate under this arrangement was reduced (as discussed in Note 6 to Consolidated Financial Statements). Increases in borrowings under this arrangement are used to finance cyclical working capital requirements discussed above. At March 31, 1995, the Registrant has approximately $9 million of unused lines of credit available under this financing agreement. The Company also has $13.7 million of Senior Subordinated Notes outstanding with several insurance companies. The note agreement, as amended, provides for the payment of approximately $3.3 million annually, commencing August 1994. This agreement also provides for the maintenance of certain financial covenants and ratios, with which the Company is presently in compliance. The new revolving credit agreement described above provides for the August 1994 and 1995 subordinated note payments of $3.3 million each. The Company intends to satisfy future subordinated note payments in 1996 and later from funds provided by operations and/or an infusion of new equity or debt. In addition to these ongoing efforts, management believes that additional cash flows can be generated through the sale of certain remaining idle assets. The new and existing sources of financing, financing strategies discussed above and cash expected to be generated from future operations will, in management's opinion, be sufficient to fulfill all current and anticipated requirements of the Company's ongoing businesses. Moreover, any contemplated future sale of Company assets will contribute to lower borrowing levels, without any anticipated material negative impact upon operating results. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits: (28)a. First Modification of Revolving Credit Loan and Security Agreement and Term Loan Agreement (28)b. Employment Agreement between Dixon Ticonderoga Company and Gino N. Pala (28)c. Employment Agreement between Dixon Ticonderoga Company and Richard F. Joyce (b) Reports on Form 8-K: The Company filed a current report on Form 8-K, dated March 3, 1995, regarding its Shareholders Rights Plan. The rights under the plan were registered on Form 8-A filed March 15, 1995. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIXON TICONDEROGA COMPANY Dated: May 15, 1995 By: /s/ Gino N. Pala ---------------------------- Gino N. Pala Chairman of the Board, President, Chief Executive Officer and Director Dated: May 15, 1995 By: /s/ Richard A. Asta ---------------------------- Richard A. Asta Executive Vice President of Finance and Chief Financial Officer Dated: May 15, 1995 By: /s/ John Adornetto ---------------------------- John Adornetto Vice President/Corporate Controller and Chief Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows, and is qualified in its entirety by reference to such financial statements. 6-MOS SEP-30-1995 MAR-31-1995 515,528 0 18,139,343 514,609 32,538,978 53,106,669 28,809,256 16,621,162 67,458,301 31,321,684 0 3,447,966 0 0 10,722,524 67,458,301 40,764,818 40,764,818 27,063,073 27,063,073 10,766,324 0 1,594,300 1,341,121 500,604 451,158 0 0 0 451,158 .14 .14
EX-28 3 1ST MOD. LOAN AGREEMENT FIRST MODIFICATION OF REVOLVING CREDIT LOAN AND SECURITY AGREEMENT AND TERM LOAN AGREEMENT This First Modification of Revolving Credit Loan and Security Agreement and Term Loan Agreement (this "First Modifica- tion") is made as of February 10, 1995 by and among DIXON TICON- DEROGA COMPANY, a Delaware corporation ("DTC"), and DIXON TICON- DEROGA INC., an Ontario corporation ("DTI"; DTC and DTI, collec- tively, the "Borrower"), to FIRST UNION COMMERCIAL CORPORATION, a North Carolina corporation (the "Lender"). W I T N E S S E T H: WHEREAS, the Borrower has entered into a Revolving Credit Loan, Foreign Exchange and Security Agreement, dated as of May 12, 1994 (said Agreement, as it may be amended or otherwise modified from time to time, being hereinafter called the "Revolv- ing Credit Agreement"), pursuant to which Lender has extended financial accommodations to Borrower in the form of a $25,000,000 revolving line of credit, letter of credit and foreign exchange facility in accordance with, and subject to, the terms and condi- tions of the Revolving Credit Agreement; and WHEREAS, the Borrower has entered into a Term Loan Agreement, dated as of May 12, 1994 (said Agreement, as it may be amended or otherwise modified from time to time, being hereinafter called the "Term Loan Agreement"; and, together with the Revolving Credit Agreement, being hereinafter called the "Loan Agreements"), pursuant to which Lender has extended a term loan to Borrower in the principal amount of $10,000,000; and WHEREAS, the Borrower has requested the Lender to agree to certain modifications of the interest rate applicable to the Loans (as such term is defined in the Revolving Credit Agreement). NOW, THEREFORE, in consideration of the premises and the covenants and agreements hereinafter set forth, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. Capitalized terms used in this First Modification and not otherwise defined herein, shall have the meanings ascribed to them in the Revolving Credit Agree- ment. SECTION 2. DEFINITIONS. (a) Section 1 (DEFINITIONS) of the Revolving Credit Agreement is amended to add the following new definitions: "Adjusted LIBOR Rate" shall mean the LIBOR Rate plus Two and One-Half Percent (2.5%) per annum. "Adjusted Prime Rate" shall be the Prime Rate plus One-Half of One Percent (0.5%) per annum. "Eurodollar Business Day" shall mean any Business Day on which dealings in U.S. dollars deposits are con- ducted by and between banks in the London interbank market. "Interest Rate Election Notice" shall mean a notice described in section 2.5(c) hereof. "LIBOR Rate" shall mean, for any LIBOR Period, an interest rate per annum obtained by dividing (a) the rate of interest determined by the Lender to be the ar- ithmetic average (rounded upward, if necessary, to the nearest one-sixteenth (1/16) of one percentage point of the rate per annum) at which deposits in immediately available and freely transferable Dollars are offered by first class banks in the London interbank market to the Charlotte, North Carolina, offices of First Union at 10:00 a.m. (Charlotte, North Carolina, time) three (3) Eurodollar Business Days prior to the first day of such LIBOR Period for a period equal to such LIBOR Period and in an amount substantially equal to the amount of the LIBOR Loan to be outstanding during such LIBOR Period, by (b) the percentage equal to One Hundred Percent (100%) (expressed as a decimal fraction) minus the Re- serve Requirement for such LIBOR Period. Each calcula- tion by the Lender of the applicable LIBOR Rate shall be conclusive and binding for all purposes, absent manifest error. "LIBOR Loan" shall mean, at any time, any outstand- ing Loan or portion thereof that bears interest at the Adjusted LIBOR Rate at such time. "LIBOR Period" shall mean the period commencing on the date a LIBOR Loan is made and ending on the numeri- cally corresponding day in the first, second, third or sixth calendar month thereafter, except that each such LIBOR Period that commences on the last Eurodollar Busi- ness Day of a calendar month (or on any day for which there is no numerically corresponding day in the appro- priate subsequent calendar month) shall end on the last Eurodollar Business Day of the appropriate subsequent calendar month; provided that (a) no LIBOR Period may extend beyond the Commitment Termination Date, and (b) if a LIBOR Period would end on a day which is not a Eurodollar Business Day, such LIBOR Period shall be extended to the next Eurodollar Business Day unless, in the case of a LIBOR Loan, such Eurodollar Business Day would fall in the next calendar month, in which event such LIBOR Period shall end on the immediately preceding Eurodollar Business Day. "Prime Rate Loan" shall mean, at any time, any outstanding Loan or portion thereof that bears interest at the Adjusted Prime Rate at such time. "Reserve Requirement" shall mean, for any LIBOR Loan for any LIBOR Period therefor, the daily average of the stated maximum rate (expressed as a decimal) at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such LIBOR Period under Regulation D by the Lender or First Union against "Eurocurrency liabilities" (as such term is used in Regulation D), but without benefit or credit of proration, exemptions, or offsets that might otherwise be available to the Lender or First Union from time to time under Regulation D. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by the Lender or First Union against (a) any category of liabilities that includes deposits by reference to which the LIBOR Rate is to be determined; or (b) any category of extension of credit or other assets that includes LIBOR Loans. SECTION 3. INTEREST RATE ON REVOLVING CREDIT LOANS. Section 2.5 (Interest) of the Revolving Credit Agreement is delet- ed in its entirety and replaced with the following: 2.5 INTEREST. Subject to the provisions of section 13.3 below, the Borrower shall pay interest to the Lender on the principal amount of Revolving Credit Loans outstanding under this Agreement as described below. In addition to interest due and payable under subsections (a) and (b) of this section and as provided elsewhere in this Agreement, all interest accrued on any Revolving Credit Loan shall be due and payable on each date when all or any amount of the unpaid principal balance of such Revolving Credit Loan shall be due (whether by maturity, optional or mandatory prepayment, acceleration, or otherwise). (a) PRIME RATE OPTION. For Revolving Credit Loans which are Prime Rate Loans, interest shall be payable at the Adjusted Prime Rate. All changes in the rate of interest due to a change in the Prime Rate shall take effect on the same day on which the Prime Rate changes. Interest on Prime Rate Loans will be calculated on a daily basis (computed on the basis of actual days elapsed over a year of 360 days) and shall be calculated and be due and payable monthly in arrears on the first Business Day of each calendar month. (b) LIBOR OPTION. For Revolving Credit Loans which are LIBOR Loans, interest shall be payable at a rate per annum equal to the Adjusted LIBOR Rate. Inter- est on LIBOR Loans shall be due and payable monthly in arrears on the first Business Day of each calendar month, irrespective of the date upon which the applica- ble LIBOR Period ends. (c) CONVERSION OF RATE OPTIONS. On the terms and subject to the conditions of this Agreement, the Borrow- er may elect (A) at any time to convert a Revolving Credit Loan which is a Prime Rate Loan into a LIBOR Loan, or (B) at the end of any LIBOR Period with respect to a LIBOR Loan, to convert such LIBOR Loan into a Prime Rate Loan or to renew such LIBOR Loan for an additional LIBOR Period. Except as set forth in subsection (d) of this section, Loans may be renewed or converted in whole or in part. Each such election shall be made by deliv- ery to the Lender of an Interest Rate Election Notice prior to 10:00 a.m. (Charlotte, North Carolina, time) at least three (3) Eurodollar Business Days prior to the effective date of any conversion to or renewal of a LIBOR Loan and at least one (1) Business Day prior to the effective date of any conversion to a Prime Rate Loan, specifying (1) the date of conversion or renewal (which date shall be a Eurodollar Business Day, and in the case of a conversion from a LIBOR Loan to a Prime Rate Loan, the last day of the LIBOR Period therefor); and (2) the amount and type of conversion or renewal. If, within the time period required under this section 2.5(c), the Lender shall not have received an Interest Rate Election Notice from the Borrower of an election to renew a LIBOR Loan for an additional LIBOR Period, then, upon the expiration of the LIBOR Period therefor, such LIBOR Loan shall be converted automatically to a Prime Rate Loan. (d) RESTRICTIONS ON LIBOR OPTION. Notwithstanding subsection (c) above, the right of the Borrower to elect the interest rate option applicable to any Loan or Loans shall be subject to the following restrictions: (i) a continuation or conversion of a LIBOR Loan or any conversion of a Prime Rate Loan to a LIBOR Loan must be in an amount such that the ag- gregate amount of the succeeding LIBOR Loan made by the Lender is a minimum of One Million Dollars ($1,000,000), or a higher integral multiple of Five Hundred Thousand Dollars ($500,000); provid- ed, however, that (A) not more than two (2) tranc- hes of at least One Million Dollars ($1,000,000) each of Revolving Credit Loans which are LIBOR Loans may be outstanding at any time, and (B) not more than one (1) tranche of at least One Million Dollars ($1,000,000) of the Term Loan which is a LIBOR Loan may be outstanding at any time. (ii) no conversion of a Prime Rate Loan to a LIBOR Loan or continuation of a LIBOR Loan upon the expiration of the LIBOR Period therefor shall be permitted during the continuance of an Event of Default; (iii) the Borrower may not elect an interest rate option for a LIBOR Loan with a LIBOR Period extending beyond the Commitment Termination Date; (iv) only the Term Loan and advances pursu- ant to section 2.1 may be designated as LIBOR Loans; (v) anything herein to the contrary notwith- standing, if, on or prior to the determination of an interest rate for any LIBOR Loan for any peri- od: A. the Lender determines (which deter- mination shall be conclusive absent manifest error) that quotations of interest rates for the relevant deposits are not being provided by the relevant Persons in the relevant amounts or for the relevant maturities for purpose of determining the rate of interest for such LIBOR Loan under this Agreement; or B. the Lender determines (which deter- mination shall be conclusive absent manifest error) that the rate of interest referred to in the definition of LIBOR Rate upon the ba- sis of which the rate of interest on any LIBOR Loan for such period is determined does not accurately reflect the cost to the Lender incurred in the London interbank market of making or maintaining such LIBOR Loan for such period, then the Lender shall give the Borrower prompt no- tice thereof, and so long as such condition re- mains in effect, the Lender shall be under no ob- ligation to make further LIBOR Loans or to convert Prime Rate Loans into LIBOR Loans; (vi) notwithstanding any other provision of this Agreement to the contrary, upon the occur- rence and during the continuance of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, all LIBOR Loans then outstanding shall immediately and automatically be converted into Prime Rate Loans; (vii) notwithstanding any other provision in this Agreement to the contrary, in the event that the Lender determines that it is unlawful for the Lender (A) to honor its obligations to fund LIBOR Loans hereunder, or (B) to maintain such LIBOR Loans hereunder, then the Lender shall promptly notify the Borrower thereof and the Lender's obli- gation to fund LIBOR Loans and to convert any Prime Rate Loans into LIBOR Loans hereunder shall be suspended until such time as the Lender may again make and maintain LIBOR Loans, and all LIBOR Loans shall be converted into Prime Rate Loans in accordance with this subsection (c); and (viii) if any LIBOR Loans are to be convert- ed pursuant to clause (vii) of this subsection, the LIBOR Loans shall be automatically converted into Prime Rate Loans on the last day of the then current LIBOR Period for such LIBOR Loans and, unless and until the Lender gives notice to the Borrower that the circumstances specified in clause (vii) hereof which gave rise to such con- version no longer exist, all Loans which would otherwise be advanced by the Lender as LIBOR Loans shall be advanced instead as Prime Rate Loans and all Loans which would otherwise be converted into LIBOR Loans shall be converted instead into (or shall remain as) Prime Rate Loans. (e) ADDITIONAL COMPENSATION FOR LIBOR LOANS. Upon notice to the Borrower from the Lender, the Borrower shall pay to the Lender such amount as the Lender deter- mines shall be sufficient to compensate the Lender for any loss, cost or expense incurred as a result of: (i) any payment of a LIBOR Loan on a date other than the last day of the LIBOR Period for such Loan, including, but not limited to accelera- tion of the Loans by the Lender pursuant to sec- tion 13.2 hereof; or (ii) any failure by the Borrower to borrow or convert a LIBOR Loan on the date for borrowing or converting, as the case may be, specified in the relevant notice under this section 2.5; such compensation to include, without limitation, an amount equal to, if any, (X) any loss sustained by the Lender as a result of reinvesting or redeploying any amount prepaid at a rate lower than the Lender's cost of match funding such amount, calculated for the period consisting of the remainder of the relevant LIBOR period or (Y) any direct breakage or unwinding costs resulting from the liquidation of deposits that match funded any amount not borrowed for the duration of the relevant LIBOR Period. The Lender's determination of any such amounts, as specified in the Lender's notice to the Bor- rower, shall be conclusive absent bad faith or manifest error. (f) PAYMENT OF ADDITIONAL COMPENSATION. Any pay- ment or prepayment of any LIBOR Loan, in whole or in part, made otherwise than on the last day of the appli- cable LIBOR Period shall be accompanied by such sums as necessary to compensate the Lender as provided in sub- section (e) hereof, as the Lender may upon request ad- vise the Borrower; provided, however, that any estimate communicated by the Lender to the Borrower of the loss- es, costs and expenses resulting from such payment or prepayment shall not be binding upon the Lender, who will subsequently adjust the estimated amount as deter- mined pursuant to subsection (e) hereof. Each such pay- ment or prepayment shall be applied first to reimburse the Lender for any losses sustained by the Lender as provided in subsection (e) hereof. SECTION 4. INTEREST RATE ON THE TERM LOAN; NEW TERM NOTE. The interest rate provisions of the Term Note applicable to the Term Loan shall be modified to conform to the modifications made herein to the Revolving Credit Agreement in respect of Re- volving Credit Loans. Simultaneously with the execution and delivery of the this First Modification, the Borrower has executed and delivered to FUCC the "First Modified Term Note" attached hereto as Exhibit "A", which Note shall replace and become sub- stituted for the Term Note referred to in the Term Loan Agreement. SECTION 5. RATIFICATION. Except as modified hereby, the terms and conditions of the Loan Agreements and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed in all respects. SECTION 6. REPRESENTATIONS AND WARRANTIES. The Bor- rower represents warrants to, and agrees with, the Lender and for the benefit of First Union that (i) it has no defenses, set-offs, or counterclaims of any kind or nature whatsoever against the Lender or First Union with respect to the Obligations, any of the agreements among the parties hereto, including, without limita- tion, the obligations of the Borrower under the Loan Agreements, the Notes, this First Modification or any other Loan Document, or any action previously taken or not taken by the Lender with re- spect thereto or with respect to any Lien or Collateral in connec- tion therewith to secure the Obligations, and (ii) this First Modification has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed by a duly authorized officer of the Borrower, and constitutes the valid and binding obligation of the Borrower, enforceable against each entity comprising the Borrower in accordance with the terms here- of. SECTION 7. LOAN AGREEMENT REPRESENTATIONS AND WARRAN- TIES. The Borrower hereby certifies that the representations and warranties contained in the Loan Agreements continue to be true and correct and that no Event of Default, or event which with the passage of time or the giving of notice, or both, would constitute an Event of Default has occurred. SECTION 8. PAYMENT OF EXPENSES. Borrower agrees to pay, upon receipt of an invoice therefor, all fees and expenses of separate legal counsel for the Lender in connection with the preparation, negotiation or execution of this First Modification. SECTION 9. COUNTERPARTS. This First Modification may be executed in any number of counterparts which, when taken to- gether, shall constitute one original. SECTION 10. GOVERNING LAW; SEVERABILITY; DEFINED TERMS. This First Modification shall be governed by, and construed and interpreted in accordance with, the law of the State of Florida. Wherever possible, each provision of this First Modification shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this First Modification shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibi- tion or invalidity and without invalidating the remaining provi- sions of this First Modification. 11. WAIVER OF TRIAL BY JURY. Each of the Borrower and the Lender hereby knowingly, voluntarily, irrevocably and inten- tionally waives the right it may have to a trial by jury in re- spect to any action, proceeding, counterclaim or other litigation based hereon, or arising out of, under or in connection with this First Modification, the Loan Agreements or any other Loan Docu- ment, or any course of conduct, course of dealing, statements (whether oral or written) or actions of any party hereto. This provision is a material inducement of the parties to enter into this First Modification. SECTION 12. TITLES. The Section titles contained in this First Modification are and shall be without substantive meaning or content of any kind whatsoever and are not part of this First Modification. IN WITNESS WHEREOF, the parties hereto have caused this First Modification to be executed as of the date first above written. DIXON TICONDEROGA COMPANY By: /s/ Kenneth A. Baer ------------------------------- Name: Kenneth A. Baer Title: Treasurer [Corporate Seal] DIXON TICONDEROGA INC. By: /s/ Kenneth A. Baer ------------------------------- Name: Kenneth A. Baer Title: Treasurer [Corporate Seal] FIRST UNION COMMERCIAL CORPORATION By: /s/ Roanne Disalvatore ------------------------------- Name: Roanne Disalvatore Title: Vice President EXHIBIT A FIRST MODIFIED TERM NOTE Atlanta, Georgia U.S. $9,250,000.03 February 10, 1995 1. PARTIES. 1.1 Dixon Ticonderoga Company, a Delaware corporation, and Dixon Ticonderoga Inc., an Ontario corporation, jointly and severally (collectively, the "Borrower"). 1.2 First Union Commercial Corporation, a North Carolina corporation (the "Lender"). 2. DEFINED TERMS. All capitalized terms not defined in this Note shall have the definitions given to such terms in the Term Loan Agreement, or if not defined therein, the definitions given to such terms in the Revolving Credit Agreement. For purposes of this Note, in addition to the terms defined elsewhere in this Note, the following terms shall have the meanings set forth below: "LIBOR Period" shall mean the period commencing on the date any portion of the Term Loan is converted to a LIBOR Tranche and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, except that each such LIBOR Period that commences on the last Eurodollar Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Eurodollar Business Day of the appropriate subsequent calendar month; provided that (a) no LIBOR Period may extend beyond the Maturity Date, and (b) if a LIBOR Period would end on a day which is not a Eurodollar Business Day, such LIBOR Period shall be extended to the next Eurodollar Business Day unless such Eurodollar Business Day would fall in the next calendar month, in which event such LIBOR Period shall end on the immediately preceding Eurodollar Business Day. "LIBOR Rate" shall have the meaning given to such term in the Revolving Credit Agreement, except that the reference in said definition to "LIBOR Loan" is hereby replaced with "LIBOR Tranche". "LIBOR Tranche" shall mean that portion of the Term Loan, if any, accruing interest at the Adjusted LIBOR Rate. "Prime Tranche" shall mean that portion of the Term Loan, if any, accruing interest at the Adjusted Prime Rate. "Reserve Requirement" shall have the meaning given to such term in the Revolving Credit Agreement, except that the first reference in said definition to "LIBOR Loan" is hereby replaced with "LIBOR Tranche". "Revolving Credit Agreement" shall mean that certain Revolving Credit Loan, Foreign Exchange and Security Agreement dated May 12, 1994, by and among Borrower and Lender, as modified by that First Modification of Revolving Credit Loan and Security Agreement and Term Loan Agreement of even date herewith, and as hereafter modified, amended, supplemented or replaced from time to time. "Term Loan" shall mean the loan evidenced by this Note and made pursuant to the Term Loan Agreement. "Term Loan Agreement" shall mean that certain Term Loan Agreement dated May 12, 1994, by and among Borrower and Lender, as modified by the First Modification of Revolving Credit Loan and Security Agreement and Term Loan Agreement of even date herewith, and as hereafter modified, amended, supplemented or replaced from time to time. 3. BORROWER'S PROMISE TO PAY. For value received, Borrower promises to pay to the order of Lender, its successors or assigns, NINE MILLION TWO HUNDRED FIFTY THOUSAND AND THREE/100 DOLLARS ($9,250,000.03) (the "Principal"), or so much thereof as may be advanced hereunder, plus interest (the "Interest") on the Principal from time to time remaining unpaid. 4. PAYMENTS. 4.1 Subject to the provisions of Section 4.2 below, Borrower shall pay Interest to Lender on the Principal amount outstanding hereunder at a rate determined in accordance with Subsections 3.1(a) or (b) below (the "Applicable Interest Rate"). (a) PRIME RATE OPTION. Pursuant to the Prime Rate Option, interest shall accrue on the Prime Tranche at the per annum rate equal to the Adjusted Prime Rate. The Adjusted Prime Rate shall change each time the Prime Rate (as hereinafter defined) is changed. All changes in the Adjusted Prime Rate due to a change in the Prime Rate shall take effect on the same day on which the Prime Rate changes. Interest accruing on the Prime Tranche shall be calculated on a daily basis (computed on the basis of the actual number of days elapsed over a year of 360 days) and shall be due and payable monthly, in arrears, on the first Business Day of each calendar month. (b) LIBOR OPTION. Pursuant to the LIBOR Option, interest shall accrue on the LIBOR Tranche at the per annum rate equal to the Adjusted LIBOR Rate. Interest on the LIBOR Tranche shall be due and payable monthly, in arrears, on the first Business Day of each calendar month, irrespective of the date upon which the applicable LIBOR Period ends. (c) CONVERSION OF RATE OPTIONS. On the terms and subject to the conditions of this Note and the Term Loan Agreement, Borrower may elect (A) at any time to convert the Term Loan, or any portion thereof consisting of a Prime Tranche into a LIBOR Tranche, or (B) at the end of any LIBOR Period with respect to a LIBOR Tranche, to convert such LIBOR Tranche into a Prime Tranche or to renew such LIBOR Tranche for an additional LIBOR Period. Except as set forth in Subsection 4.1(d), the LIBOR Tranche and Prime Tranche of the Term Loan may be renewed or converted in whole or in part. Each such election shall be made by delivery to Lender of an Interest Rate Election Notice prior to 10:00 a.m. (Charlotte, North Carolina, time) at least three (3) Eurodollar Business Days prior to the effective date of any conversion to or renewal of a LIBOR Tranche and at least one (1) Business Day prior to the effective date of any conversion to a Prime Tranche, specifying (1) the date of conversion or renewal (which date shall be a Eurodollar Business Day, and in the case of a conversion from a LIBOR Tranche to a Prime Tranche, the last day of the LIBOR Period therefor); and (2) the amount and type of conversion or renewal. If, within the time period required under this Subsection 4.1(c), Lender shall not have received an Interest Rate Election Notice from Borrower of an election to renew a LIBOR Tranche for an additional LIBOR Period, then, upon the expiration of the LIBOR Period therefor, such LIBOR Tranche shall be converted automatically to a Prime Tranche. (d) RESTRICTIONS ON LIBOR OPTION. Notwithstanding Subsection 4.1(c) above, the right of Borrower to elect the interest rate option applicable to the Term Loan, or any portion thereof, shall be subject to the following restrictions: (i) a continuation or conversion of a LIBOR Tranche or any conversion of a Prime Tranche to a LIBOR Tranche must be in an amount such that the aggregate amount of the succeeding LIBOR Tranche, if any, made by Lender is a minimum of One Million Dollars ($1,000,000), or a higher integral multiple of Five Hundred Thousand Dollars ($500,000); provided, however, that not more than one (1) tranche of at least One Million Dollars ($1,000,000) of the Term Loan which is a LIBOR Tranche may be out- standing at any time. (ii) no conversion of a Prime Tranche to a LIBOR Tranche or continuation of a LIBOR Tranche upon the expiration of the LIBOR Period therefor shall be permitted during the continuance of an Event of Default; (iii) Borrower may not elect an interest rate option for a LIBOR Tranche with a LIBOR Period extending beyond the Maturity Date; (iv) anything herein to the contrary notwithstanding, if, on or prior to the determination of an interest rate for any LIBOR Tranche for any period: A. Lender determines (which determi- nation shall be conclusive absent manifest error) that quotations of interest rates for the relevant deposits are not being provided by the relevant Persons in the relevant amounts or for the relevant maturities for purpose of determining the rate of interest for such LIBOR Tranche under this Note; or B. Lender determines (which determi- nation shall be conclusive absent manifest error) that the rate of interest referred to in the definition of LIBOR Rate upon the basis of which the rate of interest on any LIBOR Tranche for such period is determined does not accurately reflect the cost to Lender incurred in the London interbank market of making or maintaining such LIBOR Tranche for such period, then Lender shall give Borrower prompt notice thereof, and so long as such condition remains in effect, Lender shall be under no ob- ligation to renew any LIBOR Tranche or to convert the Term Loan or any portion thereof consisting of a Prime Tranche into a LIBOR Tranche; (v) notwithstanding any other provision of this Note to the contrary, upon the occurrence and during the continuance of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, any LIBOR Tranche then outstanding shall immediately and automatically be converted into the Prime Tranche; (vi) notwithstanding any other provision in this Note to the contrary, in the event that Lender determines that it is unlawful for Lender (A) to honor its obligations to convert any portion of the Term Loan to a LIBOR Tranche or renew any previously converted LIBOR Tranche hereunder, or (B) to maintain such LIBOR Tranche hereunder, then Lender shall promptly notify Borrower thereof and Lender's obligation to convert any portion of the Term Loan to a LIBOR Tranche or renew any previously converted LIBOR Tranche or to convert the Term Loan or any portion thereof consisting of a Prime Tranche into a LIBOR Tranche hereun- der shall be suspended until such time as Lender may again make and maintain LIBOR loans, and any LIBOR Tranche shall be converted into a Prime Tranche in accordance with this Subsection 4.1(c); and (vii) if any LIBOR Tranche is to be converted pursuant to clause (vi) of this Subsection 4.1(d), the LIBOR Tranche shall be automatically converted into a Prime Tranche on the last day of the then current LIBOR Period for such LIBOR Tranche and, unless and until Lender gives notice to Borrower that the circumstances specified in clause (vi) hereof which gave rise to such conversion no longer exist, that portion of the Term Loan which would otherwise be a LIBOR Tranche shall be a Prime Tranche and that portion of the Term Loan which would otherwise be converted into a LIBOR Tranche shall be converted instead into (or shall remain as) the Prime Tranche. (e) ADDITIONAL COMPENSATION FOR LIBOR TRANCHE CONVERSION. Upon notice to Borrower from Lender, Borrower shall pay to Lender such amount as Lender determines shall be sufficient to compensate Lender for any loss, cost or expense incurred as a result of: (i) any payment of a LIBOR Tranche on a date other than the last day of the LIBOR Period for such LIBOR Tranche, including, but not limited to acceleration of the Loans by Lender pursuant to the provisions of this Note or the Term Loan Agreement; or (ii) any failure by Borrower to borrow or convert a LIBOR Tranche or any LIBOR Tranche to a Prime Tranche on the date for converting, as specified in the relevant notice under this Section 4.1; such compensation to include, without limitation, an amount equal to, if any, (X) any loss sustained by Lender as a result of reinvesting or redeploying any amount prepaid at a rate lower than Lender's cost of match funding such amount, calculated for the period consisting of the remainder of the relevant LIBOR Period or (Y) any direct breakage or unwinding costs resulting from the liquidation of deposits that match funded any amount not borrowed for the duration of the relevant LIBOR Period. Lender's determination of any such amounts, as specified in Lender's notice to Borrower, shall be conclusive absent bad faith or manifest error. (f) PAYMENT OF ADDITIONAL COMPENSATION. Any payment or prepayment of any LIBOR Tranche, in whole or in part, made otherwise than on the last day of the applicable LIBOR Period shall be accompanied by such sums as necessary to compensate Lender as provided in Subsection 4.1(e) hereof, as Lender may upon request advise Borrower; provided, however, that any estimate communicated by Lender to Borrower of the losses, costs and expenses resulting from such payment or prepayment shall not be binding upon Lender, who will subsequently adjust the estimated amount as determined pursuant to Subsection 4.1(e) hereof. Each such payment or prepayment shall be applied first to reimburse Lender for any losses sustained by Lender as provided in Subsection 4.1(e) hereof. 4.2 Upon the occurrence of an Event of Default (as hereafter defined) in this Note, Interest shall be payable at the annual rate of the Prime Rate plus four percent (4%) (the "Default Rate"). 4.3 In addition to and concurrently with the monthly payments of Interest, Borrower shall pay monthly installments of Principal in an amount equal to (a) $83,333.33 from March 1, 1995 through May 1, 1996; (b) $125,000 from June 1, 1996 through May 1, 1998; and (c) $138,888.92 from June 1, 1998 through May 1, 2001. 4.4 The entire unpaid Principal and any accumulated unpaid Interest thereon shall be due and payable on the earlier of (a) May 12, 2001, (b) the Commitment Termination Date, or (c) the date upon which the Obligations become due and payable pursuant to the Term Loan Agreement. The date upon which the earlier of (a), (b) or (c) in the foregoing sentence occurs shall be herein described as the "Maturity Date". 4.5 The term "Prime Rate" shall mean the interest rate publicly announced from time to time by First Union National Bank of North Carolina as its prime rate of interest, subject to change on a daily basis. First Union National Bank of North Carolina lends at both above and below its prime rate. The Prime Rate is a reference rate and is not necessarily the lowest or best rate the First Union National Bank of North Carolina may from time to time charge its customers. In the event First Union National Bank of North Carolina shall abolish or abandon the practice of announcing its prime rate or should the same be unascertainable, the "Prime Rate" shall mean the interest rate designated and identified as the Prime Rate published in the most recent edition of The Charlotte Edition of The Wall Street Journal in its "Money Rates" table and defined therein as the base rate on corporate loans at large U.S. money center commercial banks, and if more than one such rate is reported on any date, the higher or highest (if more than two) of such rates shall constitute the Prime Rate herein. A certificate executed and acknowledged by any officer of Lender shall be conclusive of the Prime Rate, absent manifest error. 4.6 All payments hereunder shall be made in lawful money of the United States of America. 4.7 Notwithstanding anything to the contrary contained in this Note, if at any time until payment in full of this Note the Applicable Interest Rate exceeds the highest rate of interest permissible under applicable Florida law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate, provided, however, that if at any time thereafter the Applicable Interest Rate is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Lender from the making of advances hereunder is equal to the total interest which Lender would have received had the Applicable Interest Rate been (but for the operation of this paragraph) the interest rate payable since the date of this Note. Thereafter, the interest rate payable hereunder shall be the Applicable Interest Rate unless and until the Applicable Interest Rate again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by Lender pursuant to the terms hereof exceed the amount which Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction shall make a final determination that Lender has received interest hereunder in excess of the Maximum Lawful Rate, Lender shall promptly apply such excess first to any interest due and not yet paid under this Note, then to the principal amount of this Note, then to any interest due and not yet paid under the Revolving Credit Note, then to the outstanding principal amount of the Revolving Credit Note, and thereafter shall refund any excess to Borrower. 4.8 Lender may, in determining the maximum rate of interest allowed under applicable law, as amended from time to time, take advantage of: (i) the rate of interest permitted by Florida Statutes, Chapter 665 (Florida Savings Association and Savings Bank Act), by reason of both Section 687.12 Florida Statutes ("Interest rates; parity among licensed lenders or creditors") and 12 United States Code, Sections 85 and 86, and (ii) any other law, rule, or regulation in effect from time to time, available to Lender which exempts Lender from any limit upon the rate of interest it may charge or grants to Lender the right to charge a higher rate of interest than that allowed by Florida Statutes, Chapter 687. 5. APPLICATION OF PAYMENTS. So long as no default has occurred in this Note, all payments hereunder shall first be applied to Interest, then to Principal. Upon the occurrence of an Event of Default in this Note, all payments hereunder shall first be applied to costs pursuant to Section 9.3, then to Interest and the remainder to Principal. 6. PREPAYMENT. In addition to the regularly scheduled installments of Principal required pursuant to Section 4.3 hereof, the Principal portion of this Note accruing interest at the Adjusted Prime Rate, if any, may be prepaid in whole or in part in increments of $25,000.00 without penalty, provided Borrower gives Lender not less than thirty (30) days prior written notice thereof. Any prepayment shall be accompanied by an amount equal to the Interest accrued thereon to the date of receipt of such prepayment in collected funds. Prepayments shall be applied in the inverse order of Principal payments required by this Note. 7. OTHER INSTRUMENTS. The term "Loan Documents" have the same meaning given to such term in the Term Loan Agreement, and which term shall include, but not be limited to the Mortgage and Security Agreements and Deeds of Trust (collectively, the "Mortgages") dated May 12, 1994, from Dixon Ticonderoga Company, a Delaware corporation and Dixon Ticonderoga Inc., an Ontario corporation, as mortgagors or grantors, as applicable, in favor of Lender, as mortgagee, grantee or beneficiary, as applicable, as modified or amended from time to time, encumbering certain real and personal property described therein and in the Revolving Credit Agreement. Reference is made to the provisions of the Loan Documents for a description of the further rights of the Lender. 8. PLACE OF PAYMENT. All payments hereunder shall be made at Lender's offices at 200 South Biscayne Boulevard, 11th Floor; MC: FL6090, Miami, Florida 33131, or such other place as Lender may from time to time designate in writing. 9. DEFAULT AND REMEDIES. 9.1 If any payment of Principal, Interest, or other sum due Lender hereunder or under any of the Loan Documents including, but not limited to, the Term Loan Agreement, Mortgages or Revolving Credit Agreement, is not paid as and when due, or if any other "Event of Default" occurs under any of the Loan Documents, or if any obligation of Borrower under any of the Loan Documents is not fully performed within any applicable cure period, then such event shall be an "Event of Default" hereunder. 9.2 Notwithstanding any provision in this Note or any Loan Document to the contrary, upon the occurrence of an Event of Default in this Note, the Lender, at its option, may declare the entire unpaid Principal balance of this Note, together with accrued Interest, to be immediately due and payable without notice or demand, and may avail itself of any or all of the remedies provided for in any and all of the Loan Documents. 9.3 In addition to payments of Interest and Principal, if there is a default in this Note, Lender shall be entitled to recover from Borrower all of Lender's costs of collection, including Lender's attorneys' fees, paralegals' fees and legal assistants' fees (whether for services incurred in collection, litigation, bankruptcy proceedings, appeals, or otherwise), and all other costs incurred in connection therewith. 10. LATE CHARGE. A late charge of five percent (5%) of any payment required hereunder shall be imposed on each and every payment, including the final payment due hereunder, not received by Lender within ten (10) days after it is due. The late charge is not a penalty, but liquidated damages to defray administrative and related expenses due to such late payment. The late charge shall be immediately due and payable and shall be paid by Borrower to Lender without notice or demand. This provision for a late charge is not and shall not be deemed a grace period, and Lender has no obligation to accept a late payment. Further, the acceptance of a late payment shall not constitute a waiver of any default then existing or thereafter arising in this Note. 11. WAIVERS. Borrower and any endorsers, sureties, guarantors, and all others who are, or may become liable for the payment hereof severally: (a) waive presentment for payment, demand, notice of demand, notice of non-payment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note, (b) consent to all extensions of time, renewals, postponements of time of payment of this Note or other modifications hereof from time to time prior to or after the maturity date hereof, whether by acceleration or in due course, without notice, consent or consideration to any of the foregoing, (c) agree to any substitution, exchange, addition, or release of any of the security for the indebtedness evidenced by this Note or the addition or release of any party or person primarily or secondarily liable hereon, (d) agree that Lender shall not be required first to institute any suit, or to exhaust its remedies against the undersigned or any other person or party to become liable hereunder or against the security in order to enforce the payment of this Note and (e) agree that, notwithstanding the occurrence of any of the foregoing (except by the express written release by Lender of any such person), the undersigned shall be and remain, jointly and severally directly and primarily liable for all sums due under this Note. 12. SET-OFFS. Borrower and any endorsers, sureties, guarantors, and all others who are, or who may become liable for the payment hereof, severally expressly grant to Lender a continuing first lien security interest in and authorize and empower Lender, at its sole discretion, at any time after the occurrence of a default hereunder to appropriate and, in such order as Lender may elect, apply to the payment hereof or to the payment of any and all indebtedness, liabilities and obligations of such parties to Lender or any of Lender's affiliates, whether now existing or hereafter created or arising or now owned or howsoever after acquired by Lender or any of Lender's affiliates (whether such indebtedness, liabilities and obligations are or will be joint or several, direct or indirect, absolute or contingent, liquidated or unliquidated, matured or unmatured, including, but not limited to, any letter of credit issued by First Union National Bank of Florida, a national banking association, for the account of any such parties), any and all money, general or specific deposits, or collateral of any such parties now or hereafter in the possession of Lender. 13. SUBMISSION TO JURISDICTION. Borrower, and any endorsers, sureties, guarantors and all others who are, or who may become, liable for the payment hereof severally, irrevocably and unconditionally (a) agree that any suit, action, or other legal proceeding arising out of or relating to this Note may be brought, at the option of Lender, in a court of record of the State of Florida in Dade County, in the United States District Court for the Southern District of Florida, or in any other court of competent jurisdiction; (b) consent to the jurisdiction of each such court in any such suit, action or proceeding; and (c) waive any objection which it or they may have to the laying of venue of any such suit, action, or proceeding in any of such courts. 14. MISCELLANEOUS PROVISIONS. 14.1 The term Lender as used herein shall mean any holder of this Note. 14.2 Time is of the essence in this Note. 14.3 The captions of sections of this Note are for convenient reference only, and shall not affect the construction or interpretation of any of the terms and provisions set forth in this Note. 14.4 If more than one person signs this Note, each is and shall be jointly and severally liable hereunder. 14.5 This Note shall be construed, interpreted, enforced and governed by and in accordance with the laws of the State of Florida (excluding the principles thereof governing conflicts of law), and federal law, in the event federal law permits a higher rate of interest than Florida law. 14.6 If any provision or portion of this Note is declared or found by a court of competent jurisdiction to be unenforceable or null and void, such provision or portion thereof shall be deemed stricken and severed from this Note, and the remaining provisions and portions thereof shall continue in full force and effect. 14.7 This Note may not be amended, extended, renewed or modified nor shall any waiver of any provision hereof be effective, except by an instrument in writing executed by an authorized officer of the Lender. Any waiver of any provision hereof shall be effective only in the specific instance and for the specific purpose for which given. 14.8 MODIFIED NOTE. This Note modifies, replaces and supersedes that certain Promissory Note (the "Original Note") dated as of May 12, 1994, executed by Borrower and made payable to the order of Lender, in the original principal amount of $10,000,000.00, without enlargement of the existing principal balance thereunder. It is the intention of Borrower and Lender that while this Note modifies, replaces and supersedes the Original Note, it is not in payment or satisfaction of the Original Note, but rather is the substitution of one evidence of debt for another without any intent to extinguish said debt. Should there be any conflict between the terms of the Original Note and the terms of this Note, the terms of this Note shall control. The Original Note is attached hereto and shall only be negotiated with this Note. 15. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER (BY ACCEPTANCE OF THIS INSTRUMENT) HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BORROWER AND LENDER ENTERING INTO THE SUBJECT LOAN TRANSACTION. THE PROPER FLORIDA DOCUMENTARY STAMP TAXES AND INTANGIBLE TAXES HAVE BEEN PAID ON THE ORIGINAL NOTE, AND EVIDENCE OF SUCH PAYMENT APPEARS ON THE MORTGAGE AND SECURITY AGREEMENT RECORDED IN OFFICIAL RECORDS BOOK 901, AT PAGE 466, OF THE PUBLIC RECORDS OF ST. LUCIE COUNTY, FLORIDA. THIS NOTE MODIFIES THE ORIGINAL NOTE WITHOUT ENLARGEMENT OF THE EXISTING PRINCIPAL BALANCE UNDER THE ORIGINAL NOTE, AND IS EXEMPT FROM FURTHER TAXATION PURSUANT TO SECTIONS 201.09 AND 199.145(4), FLORIDA STATUTES, AND RULE 12B- 4.054(1), F.A.C. DIXON TICONDEROGA COMPANY, a Delaware corporation By: ------------------------------- Name: Title: [CORPORATE SEAL] DIXON TICONDEROGA INC., an Ontario corporation By: -------------------------------- Name: Title: [CORPORATE SEAL] EX-28 4 EMPLOYMENT AGR - G PALA EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of January 1995 between DIXON TICONDEROGA COMPANY, a Delaware corporation (the "Company"), and GINO N. PALA (the "Executive"). BACKGROUND STATEMENTS: I. The Executive is presently employed by the Company as President and Chief Executive Officer. II. The Board of Directors of the Company (the "Board") recognizes that the Executive's contribution to the growth and success of the Company during the past several years has been substantial. The Board desires to provide for the continued employment of the Executive and to make certain changes in the Executive's employment arrangements with the Company which the Board has determined will reinforce and encourage the continued attention and dedication to the Company of the Executive as a member of the Company's management, in the best interests of the Company and its shareholders. The Executive is willing to commit himself to continue to serve the Company on the terms and conditions herein provided. III. In order to effect the foregoing, the Company and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. Accordingly, in consideration of the promises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Term. The employment of the Executive by the Company will commence on the date hereof and end on December 31, 1998, unless further extended or sooner terminated as hereinafter provided. On December 31, 1998, and on the last day of the same month each year thereafter, the term of the Executive's employment hereunder shall be automatically extended one additional year unless, prior to such date, the Company shall have delivered to the Executive or the Executive shall have delivered to the Company written notice that the term of the Executive's employment hereunder will not be extended. 2. Position and Duties. The Executive shall serve as President and Chief Executive Officer of the Company and shall have such responsibilities and authority as may from time to time be assigned to the Executive by the Board. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company. 3. Place of Performance. In connection with the Executive's employment by the Company, the Executive shall be based at the principal executive offices of the Company except for required travel on the Company's business to an extent substantially consistent with present business travel obligations. 4. Compensation and Related Matters. (a) Salary. During the period of the Executive's employment hereunder, the Company shall pay to the Executive a salary at a rate of $200,000 per annum in equal installments as nearly as practicable on the fifteenth and thirtieth days of each month. This salary may be increased from time to time in accordance with normal business practices of the Company and, if so increased, shall not thereafter during the term of this Agreement be decreased. Compensation of the Executive by salary payments shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company. The salary payments (including any increased salary payments) hereunder shall not in any way limit or reduce any other obligation of the Company hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Company to pay the Executive's salary hereunder. (b) Expenses. During the term of the Executive's employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures presently established by the Company. (c) Other Benefits. The Company shall maintain in full force and effect, and the Executive shall be entitled to continue to participate in, all of its employee benefit plans and arrangements in effect on the date hereof in which the Executive participates or plans or arrangements providing the Executive with at least equivalent benefits thereunder (including without limitation each pension and retirement plan and arrangement, supplemental pension and retirement plan and arrangement, stock option plan, life insurance and health-and-accident plan and arrangement, medical insurance plan, disability plan, survivor plan, relocation plan and vacation plan). The Company shall not make any changes in such plans or arrangements which would adversely affect the Executive's rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all executives of the Company and does not result in a proportionately greater reduction in the rights of or benefits to the Executive as compared with any other executive of the Company. The Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement made available by the Company in the future to its executives and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans and arrangements. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to paragraph (a) of this Section. Any payments or benefits payable to the Executive hereunder in respect of any calendar year during which the Executive is employed by the Company for less than the entire such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. In the event of the termination of the Executive's employment for any reason, any equity membership for the Executive in clubs paid for in whole or in part by the Company shall be sole property of the Executive. (d) Vacations. The Executive shall be entitled to the number of vacation days in each calendar year, and to compensation in respect of earned but unused vacation days, determined in accordance with the Company's vacation policy. The Executive shall also be entitled to all paid holidays given by the Company to its executives. (e) Services Furnished. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties as set forth in Section 2 hereof. (f) Company Automobile. The Company shall continue to provide the Executive with a company automobile at the Company's expense under the arrangements in place immediately prior to the date hereof. In the event of a termination of Executive's employment for any reason, the Company shall assign the lease of such automobile to the Executive, who shall thereafter be obligated to perform all payment and other obligations of the Company thereunder. 5. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. The Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties hereunder on a full-time basis for the entire period of six consecutive months, and within 30 days after written notice of termination is given (which may occur before or after the end of such six-month period) shall not have returned to the performance of his duties hereunder on a full-time basis, the Company may terminate the Executive's employment hereunder. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the failure by the Executive to substantially perform his duties hereunder (other than any such failure resulting from the Executive's incapacity due to physical or mental illness), after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise, or (C) the violation by the Executive of any of the provisions of this Agreement. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause without (i) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause, (ii) an opportunity for the Executive, together with his counsel, to be heard before Board of Directors of the Company, and (iii) delivery to the Executive of a Notice of Termination as defined in subsection (e) hereof from the Chairman of the Board of the Company finding that in the good faith opinion of the Chairman that the Executive was guilty of conduct set forth above in clause (A), (B), or (C) of the preceding sentence. (d) Termination by the Executive. The Executive may terminate his employment hereunder (i) for Good Reason (as defined below), or (ii) if his health should become impaired to an extent that makes his continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that the Executive shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request, the Executive shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of the Executive's doctor. For purposes of this Agreement, "Good Reason" shall mean (A) a Change in Control (as defined below), provided, however, that a termination by the Executive due to a Change in Control must be within 12 months after the effective date of such Change in Control, (B) failure by the Company to comply with any material provision of this Agreement which has not been cured within 15 days after notice of such noncompliance has been given by the Executive to the Board of Directors of the Company, (C) following a Change in Control (as defined below), a change by the Company by 100 miles or more of the principal location in which Executive is required to perform services, or (D) any purported termination by the Company of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection 5(e) hereof (and for purposes of this Agreement no such purported termination by the Company shall be effective). For purposes of this Agreement, a "Change in Control" shall be deemed to occur on the occurrence of any of the following events without the prior written approval of a majority of the entire Board of Directors of Employer as it exists immediately prior to such event; provided that, in the case of an event described in (1) or (3) below, such approval occurs before the time of such event and, in the case of an event described in (2) below, such approval occurs prior to the time that any other party to the event described in (2) (or any Affiliate or Associate thereof) acquires 20% or more of the Voting Power: (1) The acquisition by an entity, person or group (including any Affiliates or Associates of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of the Company entitled to exercise more than 50% of the outstanding voting power of all capital stock of the Company entitled to vote in elections of directors ("Voting Power"); (2) The effective time of (I) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 50% of the Voting Power of the surviving or resulting corporation, or (II) a transfer of a majority of the voting Power, or a Substantial Portion of the Property, of the Company other than to an entity of which the company owns at least 50% of the Voting Power. The term "Substantial Portion" means 75% or more of the aggregate book value of the assets of the Company and its Affiliates and Associates (for purposes of subparagraphs d(1) and d(2), the terms "affiliates" and "associates" shall have the same meanings as those terms are defined in Section 12b-2 under the Securities and Exchange Act of 1934); or (3) The election to the Board of Directors of the Company of directors constituting a majority of the number of directors of the Company then in office. (e) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to subsection (a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to subsection (b) above, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such 30 day period, (iii) if the Executives employment is terminated pursuant to subsection (e) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated for any other reason, the date on which the Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termina- tion notifies the other party that a dispute exists concerning the termination, the Date of Termination shall the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award, or by a final judgment, order, or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Compensation Upon Termination or During Disability. (a) Salary During Disability. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("disability period") , the Executive shall continue to receive his full salary at the rate then in effect for such period until his employment is terminated pursuant to Section 5(b) hereof, provided that payments so made to the Executive during the first 180 days of the disability period shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which were not previously applied to reduce any such payment. (b) Compensation Upon Death. If the Executive's employment is terminated by his death, the Company shall pay to the Executive's spouse, or if he leaves no spouse, to his estate, commencing on the next succeeding day which is the fifteenth day or last day of the month, as the case may be, and semimonthly thereafter on the fifteenth and last days of each month, an amount on each payment date equal to 25% of the semimonthly salary payment payable to the Executive pursuant to Section 4(a) hereof at the time of his death throughout the remainder of the then current term hereof. (c) Compensation Upon Termination for Cause. If the Executive's employment shall be terminated for Cause, the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. (d) Compensation Upon Termination for Company's Breach of Agreement or For Good Reason. If (A) in breach of this Agreement, the Company shall terminate the Executive's employment other than pursuant to Section 5(b) or 5(c) hereof or (B) the Executive shall terminate his employment for Good Reason, then (i) the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance pay to the Executive an amount equal to the product of (A) the Executive's annual salary rate in effect as of the Date of Termination, multiplied by (B) the greater of the number of years (including partial years) remaining in the term of employment hereunder or the number two, such payment to be made (X) if resulting from a termination based on a change of control of the Company, in a lump sum on or before the fifth day following the Date of Termination, or (Y) if resulting from any other cause, in substantially equal semimonthly installments on the fifteenth and last days of each month commencing with the month in which the Date of Termination occurs and continuing for six months; and (iii) the Company shall pay the Executive's Bonus for the year in which such termination takes place. For purposes of this paragraph 6(d)(iii), the term "Bonus" shall mean the amount determined by multiplying the Executive's base salary at the rate in effect at the time Notice of Termination is given by a percentage that is the average percentage of base salary that was paid (or payable) to the Executive as a bonus under any Company bonus plan or arrangement, for the three full fiscal years of the Company immediately preceding the delivery of the Notice of Termination. (e) Compensation in Case of Health Impairment. If the Executive shall terminate his employment under clause (ii) of Section 5(d) hereof, the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. (f) Employee Benefit Plans. Unless the Executive is terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of the Executive for the greater of the number of years (including partial years) remaining in the term of employment hereunder or the number three, all employee benefit plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination provided that the Executive's continued participation is possible under the general terms and provisions of such plans and programs. (g) Acceleration of Options. If upon the date of termination of Executive's employment , other than a termination by the Company for Cause, the Executive holds any options with respect to stock of Company, all such options will, regardless of whether or not they are vested, immediately become exercisable upon such date and will be exercisable for 90 days thereafter. To the extent such acceleration of exercise of such options is not permissible under the terms of any plan pursuant to which the options were granted, the Employer will pay to the Executive, in a lump sum, within 90 days after termination of employment, an amount equal to the excess, if any, of the aggregate fair market value of all stock of the Employer subject to such options, determined on the date of termination of employment, over the aggregate option price of such stock, and the Executive will surrender all such options unexercised. 7. Disclosure of Information. The Executive recognizes and acknowledges that the list of the Company's customers, as it may exist from time to time, is a valuable, special, and unique asset of the Company's business. The Executive will not, during or after the term of his employment, disclose the list of the Company's customers or any part thereof to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever. In the event of a breach or threatened breach by the Executive of the provisions of this paragraph, the Company shall be entitled to an injunction restraining the Executive from disclosing, in whole or in part, the list of the Company's customers, or from rendering any services to any person, firm, corporation, association, or other entity to whom such list, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from the Executive. 8. Inventions. All ideas, inventions, and other developments conceived by Executive, alone or with others, during the term of his employment, whether or not during working hours, that are within the scope of Company's business operations or that relate to any of Company's work or projects, are the exclusive property of Company. Executive agrees to assist Company, at its expense, to obtain patents on any such patentable ideas, inventions, and other developments, and agrees to execute all documents necessary to obtain such patents in the name of Company. 9. Restrictive Covenant. Notwithstanding anything in this Agreement to the contrary, if, during the initial term or thereafter, this Employment Agreement terminates or if Executive's employment is terminated under this Agreement, with or without cause, voluntarily or involuntarily, by either party, Executive agrees that for a period of two years after the termination of employment he shall not own, manage, operate, control, be employed by, act as an agent for, participate in, or be connected in any manner with the ownership, management, operation, or control of any business which is engaged in businesses which are or may be competitive to the business of the Company. It is the intention of the parties that the Company be given the broadest protection allowed by law with regard to the restrictions herein contained. In the event of a breach or a threatened breach by the Executive of provisions in this paragraph, the Company shall be entitled to an injunction restraining the Executive from such breach or threatened breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. This covenant on the part of the Company and Executive shall be construed as an agreement independent of any other provision of this Agreement and the existence of any claim or cause of action by the Executive against the Company whether predicated upon this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of this covenant. 10. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbe- fore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 10 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 11. Notice. For the purposes of this Agreement, notices, demands, and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Gino N. Pala ______________________________ ______________________________ If to the Company: Dixon Ticonderoga Company c/o Gino N. Pala 2600 Maitland Center Parkway, Suite 200 Maitland, Florida 32751 or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing signed by the Executive and the Company's President or such other officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Florida. 13. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. DIXON TICONDEROGA COMPANY, a Delaware corporation Attest: By: /s/ Richard F. Joyce ----------------------------- As its: Executive Vice President ------------------------- By: /s/ Laura Van Camp ---------------------------- Executive /s/ Gino N. Pala -------------------------------- Gino N. Pala EX-28 5 EMPLOYMENT AGR - R JOYCE EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 1st day of January 1995 between DIXON TICONDEROGA COMPANY, a Delaware corporation (the "Company"), and RICHARD F. JOYCE (the "Executive"). BACKGROUND STATEMENTS: I. The Executive is presently employed by the Company as Executive Vice President. II. The Board of Directors of the Company (the "Board") recognizes that the Executive's contribution to the growth and success of the Company during the past several years has been substantial. The Board desires to provide for the continued employment of the Executive and to make certain changes in the Executive's employment arrangements with the Company which the Board has determined will reinforce and encourage the continued attention and dedication to the Company of the Executive as a member of the Company's management, in the best interests of the Company and its shareholders. The Executive is willing to commit himself to continue to serve the Company on the terms and conditions herein provided. III. In order to effect the foregoing, the Company and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. Accordingly, in consideration of the promises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Term. The employment of the Executive by the Company will commence on the date hereof and end on December 31, 1998, unless further extended or sooner terminated as hereinafter provided. On December 31, 1998, and on the last day of the same month each year thereafter, the term of the Executive's employment hereunder shall be automatically extended one additional year unless, prior to such date, the Company shall have delivered to the Executive or the Executive shall have delivered to the Company written notice that the term of the Executive's employment hereunder will not be extended. 2. Position and Duties. The Executive shall serve as Executive Vice President of the Company and shall have such responsibilities and authority as may from time to time be assigned to the Executive by the Board or the Chief Executive Officer of the Company. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company. 3. Place of Performance. In connection with the Executive's employment by the Company, the Executive shall be based at the principal executive offices of the Company except for required travel on the Company's business to an extent substantially consistent with present business travel obligations. 4. Compensation and Related Matters. (a) Salary. During the period of the Executive's employment hereunder, the Company shall pay to the Executive a salary at a rate of $130,000 per annum in equal installments as nearly as practicable on the fifteenth and thirtieth days of each month. This salary may be increased from time to time in accordance with normal business practices of the Company and, if so increased, shall not thereafter during the term of this Agreement be decreased. Compensation of the Executive by salary payments shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company. The salary payments (including any increased salary payments) hereunder shall not in any way limit or reduce any other obligation of the Company hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Company to pay the Executive's salary hereunder. (b) Expenses. During the term of the Executive's employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures presently established by the Company. (c) Other Benefits. The Company shall maintain in full force and effect, and the Executive shall be entitled to continue to participate in, all of its employee benefit plans and arrangements in effect on the date hereof in which the Executive participates or plans or arrangements providing the Executive with at least equivalent benefits thereunder (including without limitation each pension and retirement plan and arrangement, supplemental pension and retirement plan and arrangement, stock option plan, life insurance and health-and-accident plan and arrangement, medical insurance plan, disability plan, survivor plan, relocation plan and vacation plan). The Company shall not make any changes in such plans or arrangements which would adversely affect the Executive's rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all executives of the Company and does not result in a proportionately greater reduction in the rights of or benefits to the Executive as compared with any other executive of the Company. The Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement made available by the Company in the future to its executives and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans and arrangements. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to paragraph (a) of this Section. Any payments or benefits payable to the Executive hereunder in respect of any calendar year during which the Executive is employed by the Company for less than the entire such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. In the event of the termination of the Executive's employment for any reason, any equity membership for the Executive in clubs paid for in whole or in part by the Company shall be sole property of the Executive. (d) Vacations. The Executive shall be entitled to the number of vacation days in each calendar year, and to compensation in respect of earned but unused vacation days, determined in accordance with the Company's vacation policy. The Executive shall also be entitled to all paid holidays given by the Company to its executives. (e) Services Furnished. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties as set forth in Section 2 hereof. (f) Company Automobile. The Company shall continue to provide the Executive with a company automobile at the Company's expense under the arrangements in place immediately prior to the date hereof. In the event of a termination of Executive's employment for any reason, the Company shall assign the lease of such automobile to the Executive, who shall thereafter be obligated to perform all payment and other obligations of the Company thereunder. 5. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the following circumstances: (a) Death. The Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties hereunder on a full-time basis for the entire period of six consecutive months, and within 30 days after written notice of termination is given (which may occur before or after the end of such six-month period) shall not have returned to the performance of his duties hereunder on a full-time basis, the Company may terminate the Executive's employment hereunder. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (A) the failure by the Executive to substantially perform his duties hereunder (other than any such failure resulting from the Executive's incapacity due to physical or mental illness), after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise, or (C) the violation by the Executive of any of the provisions of this Agreement. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause without (i) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause, (ii) an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors of the Company, and (iii) delivery to the Executive of a Notice of Termination as defined in subsection (e) hereof from the Chairman of the Board of the Company finding that in the good faith opinion of the Chairman that the Executive was guilty of conduct set forth above in clause (A), (B), or (C) of the preceding sentence. (d) Termination by the Executive. The Executive may terminate his employment hereunder (i) for Good Reason (as defined below), or (ii) if his health should become impaired to an extent that makes his continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that the Executive shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request, the Executive shall submit to an examination by a doctor selected by the Company and such doctor shall have concurred in the conclusion of the Executive's doctor. For purposes of this Agreement, "Good Reason" shall mean (A) a Change in Control (as defined below), provided, however, that a termination by the Executive due to a Change in Control must be within 12 months after the effective date of such Change in Control, (B) failure by the Company to comply with any material provision of this Agreement which has not been cured within 15 days after notice of such noncompliance has been given by the Executive to the Board of Directors of the Company, (C) following a Change in Control (as defined below), a change by the Company by 100 miles or more of the principal location in which Executive is required to perform services, or (D) any purported termination by the Company of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subsection 5(e) hereof (and for purposes of this Agreement no such purported termination by the Company shall be effective). For purposes of this Agreement, a "Change in Control" shall be deemed to occur on the occurrence of any of the following events without the prior written approval of a majority of the entire Board of Directors of Employer as it exists immediately prior to such event; provided that, in the case of an event described in (1) or (3) below, such approval occurs before the time of such event and, in the case of an event described in (2) below, such approval occurs prior to the time that any other party to the event described in (2) (or any Affiliate or Associate thereof) acquires 20% or more of the Voting Power: (1) The acquisition by an entity, person or group (including any Affiliates or Associates of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of the Company entitled to exercise more than 50% of the outstanding voting power of all capital stock of the Company entitled to vote in elections of directors ("Voting Power"); (2) The effective time of (I) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 50% of the Voting Power of the surviving or resulting corporation, or (II) a transfer of a majority of the voting Power, or a Substantial Portion of the Property, of the Company other than to an entity of which the company owns at least 50% of the Voting Power. The term "Substantial Portion" means 75% or more of the aggregate book value of the assets of the Company and its Affiliates and Associates (for purposes of subparagraphs d(1) and d(2), the terms "affiliates" and "associates" shall have the same meanings as those terms are defined in Section 12b-2 under the Securities and Exchange Act of 1934); or (3) The election to the Board of Directors of the Company of directors constituting a majority of the number of directors of the Company then in office. (e) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to subsection (a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated pursuant to subsection (b) above, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such 30 day period, (iii) if the Executive's employment is terminated pursuant to subsection (e) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated for any other reason, the date on which the Notice of Termination is given; provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award, or by a final judgment, order, or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 6. Compensation Upon Termination or During Disability. (a) Salary During Disability. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("disability period"), the Executive shall continue to receive his full salary at the rate then in effect for such period until his employment is terminated pursuant to Section 5(b) hereof, provided that payments so made to the Executive during the first 180 days of the disability period shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which were not previously applied to reduce any such payment. (b) Compensation Upon Death. If the Executive's employment is terminated by his death, the Company shall pay to the Executive's spouse, or if he leaves no spouse, to his estate, commencing on the next succeeding day which is the fifteenth day or last day of the month, as the case may be, and semimonthly thereafter on the fifteenth and last days of each month, an amount on each payment date equal to 25% of the semimonthly salary payment payable to the Executive pursuant to Section 4(a) hereof at the time of his death throughout the remainder of the then current term hereof. (c) Compensation Upon Termination for Cause. If the Executive's employment shall be terminated for Cause, the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligations to the Executive under this Agreement. (d) Compensation Upon Termination for Company's Breach of Agreement or For Good Reason. If (A) in breach of this Agreement, the Company shall terminate the executive's employment other than pursuant to Section 5(b) or 5(c) hereof or (B) the Executive shall terminate his employment for Good Reason, then (i) the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance pay to the Executive an amount equal to the product of (A) the Executive's annual salary rate in effect as of the Date of Termination, multiplied by (B) the greater of the number of years (including partial years) remaining in the term of employment hereunder or the number two, such payment to be made (X) if resulting from a termination based on a change of control of the Company, in a lump sum on or before the fifth day following the Date of Termination, or (Y) if resulting from any other cause, in substantially equal semimonthly installments on the fifteenth and last days of each month commencing with the month in which the Date of Termination occurs and continuing for six months; and (iii) the Company shall pay the Executive's Bonus for the year in which such termination takes place. For purposes of this paragraph 6(d)(iii), the term "Bonus" shall mean the amount determined by multiplying the Executive's base salary at the rate in effect at the time Notice of Termination is given by a percentage that is the average percentage of base salary that was paid (or payable) to the Executive as a bonus under any Company bonus plan or arrangement, for the three full fiscal years of the Company immediately preceding the delivery of the Notice of Termination. (e) Compensation in Case of Health Impairment. If the Executive shall terminate his employment under clause (ii) of Section 5(d) hereof, the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. (f) Employee Benefit Plans. Unless the Executive is terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of the Executive for the greater of the number of years (including partial years) remaining in the term of employment hereunder or the number three, all employee benefit plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination provided that the Executive's continued participation is possible under thegeneral terms and provisions of such plans and programs. (g) Acceleration of Options. If upon the date of termination of Executive's employment, other than a termination by the Company for Cause, the Executive holds any options with respect to stock of Company, all such options will, regardless of whether or not they are vested, immediately become exercisable upon such date and will be exercisable for 90 days thereafter. To the extent such acceleration of exercise of such options is not permissible under the terms of any plan pursuant to which the options were granted, the Employer will pay to the Executive, in a lump sum, within 90 days after termination of employment, an amount equal to the excess, if any, of the aggregate fair market value of all stock of the Employer subject to such options, determined on the date of termination of employment, over the aggregate option price of such stock, and the Executive will surrender all such options unexercised. 7. Disclosure of Information. The Executive recognizes and acknowledges that the list of the Company's customers, as it may exist from time to time, is a valuable, special, and unique asset of the Company's business. The Executive will not, during or after the term of his employment, disclose the list of the Company's customers or any part thereof to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever. In the event of a breach or threatened breach by the Executive of the provisions of this paragraph, the Company shall be entitled to an injunction restraining the Executive from disclosing, in whole or in part, the list of the Company's customers, or from rendering any services to any person, firm, corporation, association, or other entity to whom such list, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from the Executive. 8. Inventions. All ideas, inventions, and other developments conceived by Executive, alone or with others, during the term of his employment, whether or not during working hours, that are within the scope of Company's business operations or that relate to any of Company's work or projects, are the exclusive property of Company. Executive agrees to assist Company, at its expense, to obtain patents on any such patentable ideas, inventions, and other developments, and agrees to execute all documents necessary to obtain such patents in the name of Company. 9. Restrictive Covenant. Notwithstanding anything in this Agreement to the contrary, if, during the initial term or thereafter, this Employment Agreement terminates or if Executive's employment is terminated under this Agreement, with or without cause, voluntarily or involuntarily, by either party, Executive agrees that for a period of two years after the termination of employment he shall not own, manage, operate, control, be employed by, act as an agent for, participate in, or be connected in any manner with the ownership, management, operation, or control of any business which is engaged in businesses which are or may be competitive to the business of the Company. It is the intention of the parties that the Company be given the broadest protection allowed by law with regard to the restrictions herein contained. In the event of a breach or a threatened breach by the Executive of provisions in this paragraph, the Company shall be entitled to an injunction restraining the Executive from such breach or threatened breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. This covenant on the part of the Company and Executive shall be construed as an agreement independent of any other provision of this Agreement and the existence of any claim or cause of action by the Executive against the Company whether predicated upon this Agreement or otherwise shall not constitute a defense to the enforcement by the Company of this covenant. 10. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 10 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 11. Notice. For the purposes of this Agreement, notices, demands, and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Richard F. Joyce ______________________________ ______________________________ If to the Company: Dixon Ticonderoga Company c/o Gino N. Pala 2600 Maitland Center Parkway, Suite 200 Maitland, Florida 32751 or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing signed by the Executive and the Company's President or such other officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Florida. 13. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. DIXON TICONDEROGA COMPANY, a Delaware corporation Attest: By: /s/ Gino N. Pala ---------------------- As its: Chairman and CEO ------------------ By: /s/ Laura VanCamp -------------------------- Executive /s/ Richard F. Joyce ------------------------ Richard F. Joyce -----END PRIVACY-ENHANCED MESSAGE-----