-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QfQ9qgdw4kHp1+Hq5JwEFHpc/coCp18TelmuYUMYtUbsCuoTNUd+sJdOln1ZMNYp 9LXJW4Kzv+WxQZ36ZzF28g== 0000930661-97-001967.txt : 19970815 0000930661-97-001967.hdr.sgml : 19970815 ACCESSION NUMBER: 0000930661-97-001967 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEVENS INTERNATIONAL INC CENTRAL INDEX KEY: 0000817644 STANDARD INDUSTRIAL CLASSIFICATION: PRINTING TRADES MACHINERY & EQUIPMENT [3555] IRS NUMBER: 752159407 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09603 FILM NUMBER: 97660199 BUSINESS ADDRESS: STREET 1: 5500 AIRPORT FRWY CITY: FORT WORTH STATE: TX ZIP: 76117 BUSINESS PHONE: 8178313911 MAIL ADDRESS: STREET 1: PO BOX 3330 CITY: FORT WORTH STATE: TX ZIP: 76113 FORMER COMPANY: FORMER CONFORMED NAME: STEVENS GRAPHICS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 ---------------------- or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 1-9603 ------------ STEVENS INTERNATIONAL, INC. --------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2159407 ------------------------------------------------------------ (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5500 Airport Freeway, Fort Worth, Texas 76117 --------------------------------------------------- (Address of principal executive offices) (zip code) 817/831-3911 ------------ (Registrant's telephone number, including area code) --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XX No ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class Outstanding at August 8,1997 - ------------------------------- ----------------------------- Series A Stock, $0.10 Par Value 7,339,468 Series B Stock, $0.10 Par Value 2,110,634 TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements Consolidated Condensed Balance Sheets 3 December 31, 1996 and June 30, 1997 (unaudited) Consolidated Condensed Statements of Operations 4 Three and Six months ended June 30, 1997 and 1996 (unaudited) Consolidated Condensed Statements of 5 Stockholders' Equity December 31, 1996 and Six months ended June 30, 1997 (unaudited) Consolidated Condensed Statements of Cash Flows 6 Six months ended June 30, 1997 and 1996 (unaudited) Notes to Consolidated Condensed Financial Statements 7 (unaudited) Item 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security 14 Holders Item 6. Exhibits and Reports on Form 8-K 14 2 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1996 JUNE 30, 1997 ----------------- ------------- (unaudited) C> ASSETS Current assets: Cash........................................................... $ 3,338 $ 183 Temporary investments.......................................... -- 1,360 Trade accounts receivable, less allowance for losses of $4,225 and $3,496 in 1996 and 1997, respectively.............. 11,777 7,025 Costs and estimated earnings in excess of billings on long-term contracts........................................... 4,263 2,547 Inventory (Note 3)............................................. 14,169 14,197 Refundable income taxes........................................ 2,464 68 Other current assets........................................... 2,095 485 Assets held for sale (Note 6)................................. 14,250 -- --------- -------- Total current assets............................... 52,356 25,865 Property, plant and equipment.................................... 17,957 16,618 Other assets, net................................................ 7,104 6,842 --------- -------- $ 77,417 $ 49,325 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable......................................... $ 9,834 $ 4,502 Billings in excess of costs and estimated earnings on long-term contracts........................................... 1,544 203 Other current liabilities...................................... 11,697 9,531 Customer deposits.............................................. 2,064 1,470 Advances from affiliates....................................... 950 950 Current portion of long-term debt (Note 4).................... 37,743 25,700 --------- -------- Total current liabilities.......................... 63,832 42,356 Long-term debt................................................... 113 58 Deferred pension costs........................................... 2,576 2,576 Commitments and contingencies Stockholders' equity: Preferred stock, $0.10 par value, 2,000,000 shares authorized, none issued and outstanding Series A common stock, $0.10 par value, 20,000,000 shares authorized, 7,340,000 shares issued and outstanding at December 31, 1996 and June 30, 1997................................................. 734 734 Series B common stock, $0.10 par value, 6,000,000 shares authorized, 2,111,000 shares issued and outstanding at December 31, 1996 and June 30, 1997................................................. 211 211 Additional paid-in-capital..................................... 39,844 39,844 Foreign currency translation adjustment........................ (167) (324) Excess pension liability adjustment............................ (1,466) (1,466) Retained earnings (deficit).................................... (28,260) (34,664) --------- -------- Total stockholders' equity..................................... 10,896 4,335 --------- -------- $ 77,417 $ 49,325 ========= ========
See notes to consolidated condensed financial statements. 3 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1997 1996 1997 -------- ------- ------- -------- Net sales............................ $18,732 $ 7,311 $41,345 $ 16,091 Cost of sales........................ 16,680 7,883 35,474 15,712 ------- ------- -------- ----------- Gross profit (loss).................. 2,052 (572) 5,871 379 Selling, general and administrative expenses............................ 4,446 1,846 9,291 4,753 Restructuring charge................. 1,000 -- 1,000 -- ------- ------- -------- ----------- Operating income (loss).............. (3,394) (2,418) (4,420) (4,374) Other income (expense): Interest income...................... 24 3 38 15 Interest expense..................... (1,026) (805) (1,957) (1,869) Lawsuit settlement expense (Note 5).. (700) -- (700) -- Other, net........................... (198) (185) (315) (176) ------- ------- -------- ----------- (1,900) (987) (2,934) (2,030) ------- ------- -------- ----------- Income (loss) before income taxes.... (5,294) (3,405) (7,354) (6,404) Income tax (expense) benefit......... 1,553 -- 2,528 -- ------- ------- -------- ----------- Net income (loss).................... $(3,741) $(3,405) $(4,826) $ (6,404) ======= ======= ======= ======== Net income (loss) per common share (Note 7)............................ $(0.40) $(0.36) $(0.51) $(0.68) ======= ======= ======= ======== Weighted average number of shares of common and common stock equivalents outstanding during the periods (Note 7)............................ 9,451 9,451 9,451 9,451 ======= ======= ======= ========
See notes to consolidated condensed financial statements. 4 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) (AMOUNTS IN THOUSANDS)
SHARES AMOUNT -------- ---------- Series A Stock Balance, December 31, 1996............................ 7,340 $ 734 Conversion of Series B stock to Series A stock........ -- -- -------- -------- Balance, June 30, 1997................................ 7,340 $ 734 ======== ======== Series B Stock Balance, December 31, 1996............................ 2,111 $ 211 Conversion of Series B stock to Series A Stock........ -- -- -------- -------- Balance, June 30, 1997................................ 2,111 $ 211 ======== ======== Additional Paid-In Capital Balance, December 31, 1996............................ $ 39,844 -------- Balance, June 30, 1997................................ $ 39,844 ======== Foreign Currency Adjustment Balance, December 31, 1996............................ $ (167) Translation Adjustments............................... (157) -------- Balance, June 30, 1997................................ $ (324) ======== Pension Liability Adjustment Balance, December 31, 1996............................ $ (1,466) -------- Balance, June 30, 1997................................ $ (1,466) ======== Retained Earnings (Deficit) Balance, December 31, 1996............................ $(28,260) Net (loss) for six months ended June 30, 1997......... (6,404) -------- Balance, June 30, 1997................................ $(34,664) ======== Stockholders' Equity at June 30, 1997................... $ 4,335 ========
See notes to consolidated condensed financial statements. 5 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------- 1996 1997 -------- --------- Cash provided by operations: Net (loss)............................................... $(4,826) $ (6,404) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization............................ 2,761 1,588 Deferred and refundable taxes............................ (2,661) -- Lawsuit settlement expense............................... 700 -- Other.................................................... (327) (157) Changes in operating assets and liabilities: Trade accounts receivable................................ 4,339 4,752 Contract costs in excess of billings..................... 5,608 375 Inventory................................................ (2,530) (28) Refundable income taxes.................................. -- 2,396 Other assets............................................. (838) 1,746 Trade accounts payable................................... (720) (5,332) Other liabilities........................................ (1,116) (2,760) ------- -------- Total cash provided by (used in ) operating activities..... 390 (3,824) ------- -------- Cash provided by (used in ) investing activities: Additions to property, plant and equipment............... (679) (27) Deposits and other....................................... 113 -- Disposal of Bernal Division.............................. -- 14,298 ------- -------- Total cash provided by (used in) investing activities...... (566) 14,271 ------- -------- Cash provided by (used in) financing activities: Net proceeds from (repayments of) long-term debt......... (3,489) (12,242) Increase in current portion of long-term debt............ 3,568 -- ------- -------- Total cash provided by (used in) financing activities...... 79 (12,242) ------- -------- Decrease in cash and temporary investments................. (97) (1,795) Cash and temporary investments at beginning of period...... 814 3,338 ------- -------- Cash and temporary investments at end of period............ $ 717 $ 1,543 ======= ======== Supplemental disclosure of cash flow information: Cash paid (received) during the period for: Interest............................................... $ 1,525 $ 532 Income taxes........................................... 90 (2,311)
See notes to consolidated condensed financial statements. 6 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated condensed balance sheet as of June 30, 1997, the consolidated condensed statement of stockholders' equity for the period ended June 30, 1997, the consolidated condensed statements of operations for the three and six months ended June 30, 1997 and 1996, and the consolidated condensed statements of cash flows for the six month periods then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position as of June 30, 1997 and the results of operations for the three and six months ended June 30, 1997 and 1996 and the cash flows for the six months ended June 30, 1997 and 1996 have been made. The December 31, 1996 consolidated condensed balance sheet is derived from the audited consolidated balance sheet as of that date. Complete financial statements for December 31, 1996 and related notes thereto are included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K"). The above financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information included in the 1996 Form 10-K. The results of operations for the three and six months ended June 30, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. 2. The Company designs, manufactures, markets and services web-fed packaging and printing systems and related equipment for its customers in the packaging industry and in the specialty/commercial and banknote and security segments of the printing industry. The Company also markets and manufactures high-speed image processing systems primarily for use in the banknote and security printing industry. In addition, the Company is a worldwide leader in the manufacture of platen die cutting and creasing equipment. The Company manufactures equipment capable of converting and printing, among other items, food and beverage containers, liquid container cartons, banknotes, postage stamps, lottery tickets, direct mail inserts, personal checks and business forms. The Company has the technological and engineering expertise to combine any of the four major printing methods (offset, flexography, rotogravure and intaglio) together with cutters and creasers and product delivery systems into a single system. Complete press systems are capable of multiple color and multiple size printing and perform such related functions as numbering, punching, perforating, slitting, cutting, creasing, folding and stacking. The presses can be custom engineered for non-standard form size and special auxiliary functions. 7 3. Inventories consist of the following:
December 31, June 30, 1996 1997 ------------ ------------ (Amounts in thousands) Finished product $ 5,205 $ 2,569 Work in progress 4,026 3,538 Raw materials 4,938 8,090 ------- ------- $14,169 $14,197 ======= =======
4. For a description of the restructured bank credit facility and Senior Subordinated Notes at August 1, 1997, see "Liquidity and Capital Resources". Substantially all assets of the Company continue to be pledged as collateral on the Company's credit facilities. The senior and senior subordinated debt is classified as a current liability and is recorded net of unamortized debt issue costs of $0.4 million at June 30, 1997. 5. The Company has been the subject of lawsuits, from time to time, with respect to the Company's inability to pay certain vendors on a timely basis. To date, most of such actions have been settled, but there can be no assurance that the Company, if named a defendant in such actions in the future, will be able to settle such claims in the future. In addition, the Company is subject to various claims, including product liability claims, which arise in the ordinary course of business, and is a party to various legal proceedings that constitute ordinary routine litigation incidental to the Company's business. A successful product liability claim brought against the Company in excess of its product liability coverage could have a material adverse effect upon the Company's business, operating results and financial condition. In management's opinion, other than with respect to collection lawsuits, the Company has adequate legal defenses and/or insurance coverage in respect to each of these legal actions and does not believe that they will materially affect the Company's operations, liquidity, or financial position. See "Legal Proceedings" herein and in the 1996 Form 10-K. 6. In March 1997, the Company sold substantially all of the assets of its Bernal Division ("Bernal") including the product technology and related intangibles to Bernal International, Inc., a new company formed for the asset purchase. The cash proceeds were approximately $15 million, and in addition, the purchaser assumed certain liabilities of Bernal approximating $5 million, including the accounts payable. This transaction resulted in a $12 million permanent reduction of availability under the Company's bank credit agreement. For the year ended December 31, 1996, Bernal contributed sales of approximately $17.8 million and approximately $0.7 million income before interest, corporate charges and taxes, of which $10.6 million in sales and $1.0 million in income before interest, corporate charges and taxes were recorded in the first six months of 1996. The loss on the sale of Bernal net assets of approximately $3.5 million was reflected in the 1996 results of operations. 8 7. Due to accumulated losses, there are no recoverable income taxes for the three and six months ended June 30, 1997. The benefit of recoverable income tax expense for the three and six months ended June 30, 1996 was $1,553,000 and $2,528,000, respectively, which was principally related to reductions in currently payable taxes. 8. Earnings (loss) per common share for 1997 and 1996 are based upon the weighted average number of shares of common and common stock equivalents (stock options, when dilutive) outstanding during the periods. Since the Series A and Series B stock have identical dividend and participation rights in the Company's earnings, they have been considered to be comparable in the calculation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996 Sales The Company's sales for the six months ended June 30, 1997 decreased by - ----- $25.3 million (or 61.1%) compared to sales in the same period in 1996 due primarily to sales decreases in the packaging systems divisions ($14.7 million), specialty web products division ($9.6 million) and banknote printing equipment division ($0.8 million) offset by increases in sales at the French service and repair division ($0.2 million). Sales and gross profit in 1997 include $0.7 million in proceeds from the sale of certain press system contract rights. The Company sold these rights in lieu of a long repossession and resale process. The packaging systems divisions decrease included $10.6 million of Bernal sales which division was sold by the Company in the first quarter of 1997. Gross Profit The Company's gross profit for the six months ended June 30, 1997 - ------------ decreased by $5.5 million compared to gross profit in the same period in 1996 due primarily to decreased sales volume for packaging systems and specialty web products. Gross profit margin for 1997 decreased to 2.4% of sales as compared to 14.2% for 1996. This decrease in gross profit margin in 1997 was due primarily to absorption of fixed costs over a lower volume of sales and costs incurred in completing the Automatic Currency Examination ("ACE") system for the Bank of England Printing Works. Sales and gross profit in 1997 include $0.7 million in proceeds from the sale of certain press system contract rights. The Company sold these rights in lieu of a long repossession and resale process. Selling, General and Administrative Expenses The Company's selling, general and - -------------------------------------------- administrative expenses decreased by $4.5 million (or 48.8%) for the six months ended June 30, 1997 compared to the same period in 1996 due to cost reduction efforts at corporate headquarters and at all divisions in connection with the reduced volume of sales, the sale of Bernal, and a reduction in the allowance for losses on collection of trade accounts receivable in the 1997 period. Selling, general and administrative expenses for the six months ended June 30, 1997 were 29.5% of sales compared to 22.5% of sales for the same period in 1996 due to the decrease in sales in 1997 described above. 9 Other Income (Expense) The Company's interest expense decreased by $0.1 - ---------------------- million for the six months ended June 30, 1997 compared to the same period in 1996 due to the reduced borrowings in 1997 resulting from the application of Bernal sale proceeds to pay down bank indebtedness, offset by an increased cost of borrowing in 1997. Interest income was approximately the same for the six months ended June 30, 1997 as compared to interest income in the same period in 1996. COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1996 Sales The Company's sales for the three months ended June 30, 1997 decreased by - ----- $11.4 million (or 61%) compared to sales in the same period in 1996 due primarily to sales decreases in the packaging systems divisions ($7.3 million), specialty web products division ($3.4 million) and banknote printing equipment division ($0.6 million) offset by increases in sales at the French service and repair division ($0.1 million). The packaging systems divisions decrease included $6.2 million of Bernal sales which division was sold by the Company in the first quarter of 1997. Gross Profit (Loss) The Company's gross profit (loss) for the three months - ------------------- ended June 30, 1997 decreased by $2.6 million compared to gross profit in the same period in 1996 due primarily to decreased sales volume for packaging systems and specialty web products. Gross profit margin for 1997 decreased to (-7.8%) of sales as compared to 11.0% for 1996. This decrease in gross profit margin in 1997 was due primarily to absorption of fixed costs over a lower volume of sales and cost incurred in completing the ACE system. Selling, General and Administrative Expenses The Company's selling, general and - -------------------------------------------- administrative expenses decreased by $2.6 million (or 58.5%) for the three months ended June 30, 1997 compared to the same period in 1996 due to cost reduction efforts at corporate headquarters and at all divisions in connection with the reduced volume of sales, the sale of Bernal, and a reduction in the allowance for losses on collection of trade accounts receivable in the 1997 period. Selling, general and administrative expenses for the three months ended June 30, 1997 were 25.2 % of sales compared to 23.7% of sales for the same period in 1996 due to the decrease in sales in 1997 described above. Other Income (Expense) The Company's interest expense decreased by $0.2 - ---------------------- million for the three months ended June 30, 1997 compared to the same period in 1996 due to the reduced borrowings in 1997 resulting from the application of the Bernal sale proceeds to pay down bank indebtedness, offset by an increased cost of borrowing in 1997. Interest income decreased slightly for the three months ended June 30, 1997 as compared to interest income in the same period in 1996. TAX MATTERS The Company's effective state and federal income tax rate ("effective tax rate") was 0% and 29.3% for the three months and 0% and 34.4% for the six months ended June 30, 1997 and 1996, respectively. Due to continuing losses in 1997, there are no recoverable tax benefits for the three and six months ended June 30, 1997. The 1996 effective tax rate was due to recoverable taxes in 1996 and certain research and experimental expenditure tax credits that were recorded in March 1996. 10 LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY AND CAPITAL RESOURCES As a result of its cash collections and the sale of Bernal (see Note 6 of Notes to Consolidated Condensed Financial Statements), the Company was able to make principal payments on its bank credit facility of $2 million and $15 million in January and March, 1997, respectively. These transactions and normal working capital advances decreased the Company's net direct bank borrowings from $23.1 million at December 31, 1996 to $10.8 million at June 30, 1997. The Company requires capital primarily to fund its ongoing operations, to service its existing debt and to pursue its strategic objectives including new product development and penetration of international markets. The Company's working capital needs typically increase because of a number of factors, including the duration of the manufacturing process and the relatively large size of most orders. Net cash provided by (used in) operating activities (before working capital requirements) was ($4.97) and ($4.35) million for the six months ended June 30, 1997 and 1996, respectively. Working capital provided cash of $1.15 and $4.74 million for the six months ended June 30, 1997 and 1996, respectively. The Company's working capital needs increase during periods of sales growth because of a number of factors, including the duration of the manufacturing process and the relatively large size of most orders. During periods of sales decline such as 1996 and the first six months of 1997, the Company's working capital provides cash as receivables are collected and inventory is utilized. In August 1997, the Company, its bank lender and the holders ("Note Holders") of the Company's Senior Subordinated Notes due June 30, 2000 ("Senior Subordinated Notes") entered into agreements providing for the modification of the bank credit facility and the agreement governing the Senior Subordinated Notes. These agreements provided for the waiver of all prior defaults; revised financial covenants, including a minimum net worth requirement of $2 million; certain limitations on permitting refinancings of the bank credit facility; payment of $100,000 in interest on the Senior Subordinated Notes in August, 1997, with an additional payment of $200,000 in interest in December, 1997, and $1.03 million in interest and fees added to principal of the Senior Subordinated Notes and due on June 30, 2000; and an increase in the interest rate under the bank credit facility to 2.5% over the bank's prime rate of interest. Substantially all of the assets of the Company continue to serve as collateral for the indebtedness evidenced by the bank credit facility and the Senior Subordinated Notes. In addition, the modifications contemplate sales of certain assets of the Company in order to further reduce bank indebtedness, subject to approval of the bank, prior to December 31, 1997 and May 31, 1998. At June 30, 1997, the Company's indebtedness was comprised primarily of a bank credit facility due December 31, 1997 and the Company's Senior Subordinated Notes due June 30, 2000. In addition, the Company's Chairman has loaned the Company $950,000 as described below. As of June 30, 1997, there was outstanding $15.3 million in Senior Subordinated Notes, bearing interest at the rate of 10.5% per annum, with principal payments of $7.2 million being due on June 30, 1998, $4.0 million due on June 30, 1999, and a final payment of $5.1 million at maturity, including $1.03 million in interest and fees per the August 1997 agreement with the Note Holders. The Senior 11 Subordinated Notes are classified as currently payable since the Company has not completed the sale of certain assets being offered for sale. Under its credit facility at June 30, 1997 and under the August 1997 modification discussed earlier, the Company's maximum borrowings were limited to a borrowing base formula, which could not exceed $14.7 million in the form of direct borrowings and letters of credit. As of June 30, 1997 there was $10.8 million in direct borrowings and $0.1 million in standby letters of credit outstanding under the bank credit facility, with additional availability for such borrowings of $0.4 million as determined by the borrowing base formula. At June 30, 1997, $10.8 million of the Company's bank borrowings were at the lender's prime rate of interest (8.50%) plus 1.75%, or a total of 10.25% interest. The amounts borrowed under the credit facility have been used for working capital. As indicated above, effective August 1, 1997 the interest rate on the bank credit facility increased to 2.5% over the lender's prime rate. The borrowings under the bank credit facility and Senior Subordinated Notes agreement are subject to various restrictive covenants related to financial ratios as well as limitations on capital expenditures and additional indebtedness. The Company is not allowed to pay dividends. With the sale of Bernal, and assuming that one of several strategic, financial alternatives, principally the additional sale of assets, among others presently being pursued by the Company is consummated, management believes that cash flow from operations will be adequate to fund its existing operations and repay scheduled indebtedness over the next 12 months. There can be no assurance that future sales of assets, if any, can be successfully accomplished on terms acceptable to the Company. Under current circumstances, the Company's ability to continue as a going concern depends upon the further redeployment of assets and the sale of certain assets by December 31, 1997, and a return to profitable operations. If the Company is unsuccessful in these efforts, it may be unable to comply with the covenants in its debt agreements, as well as other obligations, making it necessary to undertake such other actions as may be appropriate to preserve asset values. In addition, the Company may incur, from time to time subject to the approval of the bank and Note Holders, additional short- and long-term bank indebtedness (under its existing credit facility or otherwise) and may issue, in public or private transactions, its equity and debt securities to provide additional funds necessary for the continued pursuit of the Company's operational strategies. The availability and terms of any such sources of financing will depend on market and other conditions. There can be no assurance that such additional financing will be available or, if available, will be on terms and conditions acceptable to the Company. In 1996, the Company's Chairman and Chief Executive Officer loaned the Company $950,000 for its short-term cash requirements which is to be mandatorily repaid from proceeds of the Banque de France receivable (approximately $1.7 million). The Chairman has agreed with the Company's bank not to seek repayment until after December 31, 1997. Although the Banque de France receivable has been collected, as of June 30, 1997, this loan from the Chairman had not been repaid. The success of the Company's plans will continue to be impacted by its ability to achieve timely deliveries, final acceptance of the ACE system by the Bank of England, improved terms of domestic 12 orders, and timely implementation of cost reduction measures. While the Company believes it is making significant progress in these areas, there can be no assurance that the Company will be successful in these endeavors. Backlog and Orders The Company's backlog of unfilled orders at June 30, 1997 - ------------------ was approximately $13.8 million compared to $20.7 million at December 31, 1996, a decrease of (33%). The backlog decrease included $5.5 million of specialty web and $2.3 million of packaging equipment as compared to year-end 1996, offset by small changes in the Company's other divisions. The backlog at June 30 in each of the preceding five years has ranged from a low of $27.4 million in 1996 to a high of $65.0 million in 1995. The reduction in backlog is the result of a reduced order flow in 1997 and 1996. Orders for the six months ended June 30, 1997 were $9.4 million compared to $29.8 for the comparable period in 1996, a decrease of $20.4 million, including a $7.9 million decrease due to the sale of Bernal, while shipments decreased $25.2 million. The Company believes the reduced order flow is the result of fluctuations in the flow of major printing and packaging system orders, certain product performance issues, and in part to liquidity problems faced by the Company. As a result, the Company is continuing to adjust its rate of future production and accompanying costs to match this reduced order flow. When sales are recorded under the completed contract method of accounting, the Company normally experiences a six to nine month lag between the time new orders are booked and the time they are reflected in sales and results of operations. Larger orders, which are accounted for using the percentage of completion method of accounting, are reflected in sales and results of operations as the project progresses through the manufacturing cycle. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In 1996, the Company filed a suit seeking damages and injunctive relief against Paul W. Bergland, a former vice-president, for, among other things, theft of trade secrets, fraud, breach of contract, and breach of a confidential relationship. Discovery is ongoing. On March 3, 1997, Bergland filed his original answer and a counterclaim. ConverTek, Inc., a corporation in which Bergland claims an ownership interest, has joined the suit as a counter claimant against the Company. The counterclaim alleges claims for defamation, tortious interference with prospective business relationships and breach of contract against the Company. It also seeks a declaratory judgment declaring that the confidential information agreement and agreement not to compete signed by Bergland are unenforceable. The Company denies all liability and intends to prosecute its claims and defend the counterclaims vigorously. 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its 1997 Annual Meeting of Stockholders (the "Meeting") on May 22, 1997. At the Meeting, the stockholders of the Company considered and voted upon the following matters, with the results indicated: (1) The following directors, constituting all of the directors of the Company, were elected to serve as directors for the ensuing year:
Series A Nominees Votes For Votes Withheld ----------------- --------- -------------- John W. Stodder 3,961,740 95,915 Edgar H. Schollmaier 3,962,890 94,765 Series B Nominees ----------------- Paul I. Stevens 1,812,220 85 Richard I. Stevens 1,812,220 85 Constance I. Stevens 1,812,220 85 Robert H. Brown, Jr. 1,812,220 85 James D. Cavanaugh 1,812,220 85 Michel A. Destresse 1,812,220 85
(2) The stockholders of the Company ratified the selection of Deloitte & Touche as the Company's independent accountants to audit the Company's financial statements for the 1997 fiscal year by the following vote: Abstentions / Votes For Votes Against Broker Non-Votes --------- ------------- ---------------- 5,833,435 17,800 18,725 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ----------------------------- 3.1 Second Amended and Restated Certificate of Incorporation of the Company. (1) 3.2 Bylaws of the Company, as amended. (2) 4.1 Specimen of Series A Common Stock Certificate. (3) 4.2 Specimen of Series B Common Stock Certificate. (4) 10.1 Sixth Amendment to Amended and Restated Senior Subordinated Note Agreement and Waiver by and between Stevens International, Inc., Aetna Life Insurance Company, The Mutual Life Insurance Company of New York, and MONY Life Insurance Company of America, dated July 31, 1997. (*) 10.2 Fifth Amendment to Credit Agreement by and between Bank of America Texas, N.A., Stevens International, Inc., PMC Liquidation, Inc., and Printing and Packaging Equipment Finance Corporation, dated July 31, 1997. (*) 14 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ----------------------------- 10.3 Second Amendment to Amended and Restated Subordination and Intercreditor Agreement by and between Stevens International, Inc., PMC Liquidation, Inc., Printing and Packaging Equipment Finance Corporation, Aetna Life Insurance Company, The Mutual Life Insurance Company of New York, MONY Life Insurance Company of America, Bank of America Texas, N.A., and The Bank of New York, dated July 31, 1997. (*) 11.1 Computation of Net Income per Common Share. (*) 27.1 Financial Data Schedule. (*) - ------------------------ * Filed herewith. (1) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (No. 33-15279) and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (No. 33-24486) and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's report on Form 8-A filed August 19, 1988 and incorporated herein by reference. (b) The Registrant filed a Current Report on Form 8-K dated March 18, 1997 to report the sale of Bernal under Item 2. Acquisition or Disposition of Assets. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Stevens International, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STEVENS INTERNATIONAL, INC. Date: August 11, 1997 By: /s/ Paul I. Stevens ------------------------ Paul I. Stevens Chief Executive Officer and Acting Chief Financial Officer 16 EX-10.1 2 SIXTH AM. TO AMENDED SENIOR SUBORDINATED NOTE AGR EXHIBIT 10.1 SIXTH AMENDMENT TO AMENDED AND RESTATED SENIOR SUBORDINATED NOTE AGREEMENT AND WAIVER ------------------------------------------------------ THIS SIXTH AMENDMENT TO AMENDED AND RESTATED SENIOR SUBORDINATED NOTE AGREEMENT AND WAIVER (this "Amendment and Waiver"), dated as of July 31, 1997, -------------------- is executed by and among STEVENS INTERNATIONAL, INC., a Delaware corporation, f/k/a Stevens Graphics Corporation ("Company"), and AETNA LIFE INSURANCE ------- COMPANY, THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, AND MONY LIFE INSURANCE COMPANY OF AMERICA (each such insurance company, together with its successors and assigns, being hereinafter referred to individually as a "Purchaser," and --------- collectively as the "Purchasers"), and each corporation listed on the signature ---------- pages hereof under the heading "Guarantors" (each such corporation, together with any other person or entity that guarantees payment of the hereinafter defined Notes being hereinafter referred to individually as a "Guarantor," and --------- collectively as the "Guarantors"). ---------- RECITALS: A. The Company, the Purchasers, and the Guarantors heretofore entered into that certain Amended and Restated Senior Subordinated Note Agreement (as amended, the "Note Agreement") dated as of March 27, 1992, as amended by First -------------- Amendment and Waiver dated as of July 8, 1992, Second Amendment and Waiver dated as of June 30, 1993, Third Amendment and Waiver dated as of August 5, 1993, Fourth Amendment and Waiver dated as of April 26, 1994 and Fifth Amendment and Waiver dated August 16, 1995, pursuant to which the Purchasers purchased from the Company 12% Senior Subordinated Notes of the Company in an aggregate principal amount of $26,000,000.00 due December 31, 2000 (such notes, together with all extensions, renewals, and modifications thereof, and all replacements and substitutions therefor, being hereinafter referred to as the "Notes"). ----- B. Zerand-Bernal Group, Inc., Hamilton-Stevens Group, Inc., and Stevens Securities Systems International, Inc., have merged with the Company, and the Company is the surviving entity. C. Pursuant to the Note Agreement, the Guarantors guaranteed to Purchasers the payment and performance of the Notes and all other amounts payable by the Company under the Note Agreement. D. The Company has requested that Purchasers waive the Company's noncompliance with certain provisions of the Note Agreement described herein as the Specified Defaults (hereinafter defined) and restructure the indebtedness evidenced by the Notes, and the Purchasers have agreed to do so upon the terms and conditions set forth below. E. The Company, Guarantors and Purchasers now desire to amend the Note Agreement as herein set forth. NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I --------- Definitions ----------- Section 1.1 Definitions. Capitalized terms used in this Amendment and ----------- Waiver, to the extent not otherwise defined herein, shall have the same meanings as in the Note Agreement, as amended hereby. ARTICLE II ---------- Amendments ---------- Section 2.1 Amendment to Required Payments. Effective as of the date ------------------------------ hereof, Section 2.1 of the Note Agreement is hereby amended in its entirety to read as follows: Section 2.1. Required Payments. On July 31, 1997, the principal ----------------- balance of the Notes is acknowledged to be $15,260,939.40. A principal payment on the Notes in the aggregate amount of $7,200,000 shall be due and payable on July 31, 1998, and a principal payment on the Notes in the aggregate amount of $4,000,000 shall be due and payable on June 30, 1999. In addition, a final principal payment of $5,296,940.55 [$4,060,939.40 plus the remaining Past Due Interest (as set forth in Section 2.4 below)], together with a fee in the amount of $200,668.95, shall be due and payable on June 30, 2000. Subject to Section 2.4 below, the Company shall pay accrued and unpaid interest on the Notes at the times, in the amounts, and in the manner specified in the Notes. The entire outstanding principal of and accrued and unpaid interest on the Notes shall be due and payable on June 30, 2000. The Purchasers shall not have any obligation to extend, renew, or restructure the Notes at maturity (whether at stated maturity, by acceleration, or otherwise). The Company's obligation to make the payments required by this Section 2.1 shall not be reduced by any payment pursuant to Section 2.2(a), 2.2(b) or 2.2(c), except as specifically provided in such subsections. Section 2.2 Amendment to Prepayments. Effective as of the date hereof, ------------------------ the Purchasers hereby waive the requirements of Section 2.2(b) of the Note Agreement which require the Company to pay a Make-Whole Premium in connection with certain prepayments of the Notes. Section 2.3 Amendment to Payments. Effective as of the date hereof, --------------------- Section 2.4 of the Note Agreement is hereby amended in its entirety to read as follows: Section 2.4. Interest Payments on the Notes. Interest on the Notes at the ------------------------------ rate of 10 1/2% (the "Past Due Interest") has accrued but has not been paid by ----------------- the Company during the period beginning October 1, 1996, and ending on July 31, 1997. The Company agrees to pay the Past Due Interest by making (a) an interest payment in the amount of $100,000 on August 1, 1997, and (b) an interest payment in the amount of $200,000 on December 31, 1997. Effective July 31, 1997, the remaining Past Due Interest in the amount of $1,035,332.20 shall be capitalized and added to the principal amount of the Notes. Accrued and unpaid interest on the Notes from July 31, 1997, through June 30, 1998, shall be due and payable on July 31, 1998, and thereafter all accrued and unpaid interest on the Notes shall be due and payable on the last day of each calendar quarter commencing September 30, 1998, until and including June 30, 2000. Effective July 31, 1997, the rate of interest which accrues on the unpaid principal balance of the Notes shall accrue at the rate set forth in the Notes. Section 2.4 Amendment to Financial and Business Information. Effective as ----------------------------------------------- of the date hereof, Section 3.1 of the Note Agreement is hereby amended to add the following subsections (k), (l), (m) and (n): (k) Status Reports -- upon the 15th and the 30th day of each calendar -------------- month, a report regarding the status of the Company's efforts to sell/*/ which report shall be in form and substance satisfactory to the Purchasers and which report shall be accompanied by such other information as the Purchasers may reasonably request; (l) Appraisals -- as soon as available, and in any event within 30 ---------- days after the receipt thereof, copies of all appraisals received or obtained by the Company of assets, divisions, and/or locations of the Company and its Subsidiaries which are currently held for sale or contemplated to be held for sale; (m) Notice of Judgments -- monthly, a status report with respect to ------------------- any judgments, arbitration awards or settlement agreements, describing the nature and amount of judgment or other award and the action that the Company proposes to take with respect thereto. (n) Reports Under Senior Credit Agreement -- contemporaneously with ------------------------------------- delivery thereof to Senior Lenders, copies of all reports and financial information delivered to Senior Lenders. Section 2.5 Amendment to Senior Debt Covenant. Effective as of the date --------------------------------- hereof, Section 4.2(a) of the Note Agreement is hereby amended in its entirety to read as follows: (a) The Company and its Operating Subsidiaries may remain liable with respect to the Senior Debt, as the same shall be reduced from time to time in accordance with the terms of the Intercreditor Agreement, and any Permitted Refinancing thereof which occurs prior to the sale of/*/ of the Company, and thereafter the - --------------- /*/ A portion of this document has been filed separately by paper with the Securities and Exchange Commission pursuant to an application for confidential treatment. Company and its Operating Subsidiaries may incur Senior Debt in an amount to be negotiated by the Company and the Purchasers upon negotiation of an Intercreditor Agreement between the provider of such Senior Debt and the Purchasers upon terms and conditions mutually satisfactory to all such Persons; Section 2.6 Amendment to Funded Debt Covenant. Effective as of the date --------------------------------- hereof, Section 4.2(d) of the Note Agreement is hereby amended in its entirety to read as follows: (d) the Company and its Operating Subsidiaries may remain liable with respect to existing unsecured Funded Debt, and may become liable on new unsecured Funded Debt with the prior written consent of the Purchasers; Section 2.7 Amended to Subordinated Funded Debt Covenant. Effective as of -------------------------------------------- the date hereof, Section 4.3(c) of the Note Agreement is hereby amended in its entirety to read as follows: (c) the Company and its Operating Subsidiaries may remain liable with respect to existing unsecured Subordinated Funded Debt and may become liable on new Subordinated Funded Debt with the prior written consent of the Purchasers; and Section 2.8 Deletion of Consolidated Pre-Tax Interest Coverage Covenant. ----------------------------------------------------------- Effective as of the date hereof, Section 4.5 of the Note Agreement is hereby deleted in its entirety. Section 2.9 Amendment to Net Worth Covenant. Effective as of the date ------------------------------- hereof, Section 4.6 of the Note Agreement is hereby amended in its entirety as follows: 4.6 Net Worth. --------- The Company will at all time maintain a Consolidated Net Worth of at least $2,000,000, calculated at the end of each fiscal quarter of the Company. Section 2.10 Additional Asset Sale Covenant. Effective as of the date ------------------------------ hereof, the following Section 4.8A is hereby added following Section 4.8 of the Note Agreement: 4.8A Agreement to Sale of Divisions. (i) On or before December 31, ------------------------------ 1997, the Company hereby agrees that it will effect sales of/*/ The Net Cash Proceeds/*/ shall be applied in accordance with the provisions of the Intercreditor Agreement until the Senior Debt is repaid in full, and thereafter all Net Cash Proceeds from any and all sales or other dispositions of assets (other than sales of inventory and other receipts in the ordinary course of business) shall be paid to the Purchasers to be applied to the Notes in the direct order of maturity, notwithstanding anything to the contrary in Section 4.8 of the Note Agreement. - --------------- /*/ A portion of this document has been filed separately by paper with the Securities and Exchange Commission pursuant to an application for confidential treatment. (ii) On or before May 31, 1998, the Company hereby agrees that it will effect the sale of/*/ The Net Cash Proceeds of such sale, /*/ shall be applied as set forth in subsection 4.8A(i) above. Section 2.11 Amendment to Defaults. Effective as of the date hereof, --------------------- Sections 5.1(a), (b) and (c) of the Note Agreement are hereby amended in their entirety to read as follows: (a) Principal, Premium or Interest Payments -- failure to pay any --------------------------------------- principal or interest on any Note when the payment is due or failure to pay any Premium on any Note on the date such payment is due, provided that any -------- payment made after its due date shall also include additional interest on the overdue amount (to the extent permitted by applicable law) at the rate of 14% per annum; (b) Breach of Particular Covenants -- failure to comply with any ------------------------------ covenant contained in Section 4; (c) Other Breaches -- failure by the Company or any Operating -------------- Subsidiary to comply with any other provision of this Agreement, any of the Collateral Documents, or any other Subordinated Document (other than covenants to pay the Notes or interest or Premium thereon); Section 2.12 Amendment to Terms Defined. Effective as of the date hereof, -------------------------- the following definitions set forth in Section 6.1 of the Note Agreement are amended to read as follows: Permitted Refinancing means any extension, renewal, refinancing, or --------------------- replacement of the Senior Debt outstanding under the Senior Credit Agreement (whether in a single transaction or a series of transactions) and any number of subsequent extensions, renewals, refinancings or replacements of Senior Debt; provided that (a) the maximum credit available to the Company and the Operating Subsidiaries under any Permitted Refinancing shall not exceed the maximum amount available under the refinanced facility, (b) the maximum non-default rate of interest charged on amounts outstanding under a Permitted Refinancing shall not exceed the "prime" rate announced from time to time by Citibank, N.A. plus two and one-half percent (2.5%), (c) such shall not involve fees and expenses to be paid by the Company or its Subsidiaries in excess of the fees and expenses customarily charged by commercial banks in comparable transactions with companies similarly situated, provided, further, that any lender or lenders that -------- ------- provide a Refinancing must agree to become a party to the Intercreditor Agreement and the Company must pay all reasonable fees and expenses (including attorneys' and financial advisors' fees) incurred by the Subordinated Lenders in connection with any Refinancing; provided, further, -------- ------- that no Refinancing shall be permitted after the sale/*/ - --------------- /*/ A portion of this document has been filed separately by paper with the Securities and Exchange Commission pursuant to an application for confidential treatment. if the Net Cash Proceeds thereof shall repay in full the Senior Debt, in which case the provisions of Section 4.2(a) of the Note Agreement shall be applicable to any Senior Debt incurred thereafter. Senior Agent means Bank of America Texas, N.A., in its capacity as ------------ Senior Lender; from and after April 26, 1994, there is only a single Senior Lender and no Agent therefor under the Senior Credit Agreement. Senior Credit Agreement means that certain Credit Agreement dated as ----------------------- of May 16, 1995, between the Company and Bank of America Texas, N.A., as the same may be amended, modified, or restated from time to time. Section 2.13 Amendment to Attachments. Effective as of the date hereof, ------------------------ (a) Attachment B to the Note Agreement is hereby amended to read in the form attached hereto as Attachment B, and (b) all references in Attachment D to the Note Agreement to financial statements of the Company are amended to be references to the financial statements most recently delivered to Purchasers prior to the date hereof. Section 2.14 Amendment to Intellectual Property Security Agreement. ----------------------------------------------------- Effective as of the date hereof, Schedules A, B and C to the Intellectual Property Security Agreement (as defined in the Collateral Agreement) are amended to read in the form attached hereto as Attachment E. Section 2.15 Amendment to Pledge, Assignment and Security Agreement. ------------------------------------------------------ Effective as of the date hereof, Schedule 1 to the Pledge, Assignment and Security Agreement of the Company dated as of March 27, 1992, is amended to read in the form attached hereto as Attachment D. Section 2.16 Waivers. (a) Subject to the terms and conditions hereof, ------- Purchasers hereby waive, the Specified Defaults (hereinafter defined); provided, -------- however, that (a) Purchasers agree to waive the Specified Defaults only on the - ------- condition that the Company, the Guarantors, and all other liable parties hereby waive any requirements of notice and cure periods with respect to any and all future defaults or events of default which may occur under the Note Agreement and (b) Purchasers' waiver of the Specified Default and their rights and remedies as a result of the occurrence thereof shall not constitute and shall not be deemed to constitute a waiver of any other Event of Defaults, whether arising as a result of further violations of any provision of the Note Agreement previously violated by Company, or a waiver of any rights and remedies arising as a result of such other Events of Default. As used herein, "Specified --------- Defaults" shall mean (i) the failure of Company to comply with Section 2.1 of - -------- the Note Agreement with respect to the principal payments due June 30, 1996 and June 30, 1997, (ii) the failure of Company to comply with Section 2.1 of the Note Agreement and the provisions of the Notes with respect to quarterly interest payments due from the period beginning October 1, 1996, through the date of this Amendment and Waiver, (iii) the Event of Default specified in Section 5.1(g) of the Note Agreement (an Event of Default under the Senior Credit Agreement) and (iv) the failure of Company to comply with the covenants set forth on Attachment C hereto. (b) In consideration of Purchasers' waiver of the Specified Defaults and certain other good and valuable consideration, Company and each Guarantor hereby expressly acknowledges and agrees that it does not have any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Purchaser or any grounds or cause for reduction, modification or subordination of the obligations under the Note Agreement or any liens or security interests of any Purchaser or the Collateral Agent. To the extent Company or any Guarantor may possess any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, Company and each Guarantor hereby waives, and hereby releases each Purchaser and the Collateral Agent from, any and all of such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. Company hereby acknowledges and agrees that as of July 31, 1997, the outstanding principal balance of the Notes equals $15,260,939.40, accrued but unpaid interest thereunder equals $1,335,332.20, and the fee due and payable to Purchasers equals $200,668.95 (which fee shall be added to the principal amount of the Notes as of July 31, 1997). ARTICLE III ----------- Conditions Precedent -------------------- Section 3.1 Conditions. The effectiveness of this Amendment and Waiver is ---------- subject to the satisfaction of the following conditions precedent: (a) Purchasers shall have received all of the following, each dated (unless otherwise indicated) the date of this Amendment and Waiver, in form and substance satisfactory to Purchasers: (1) Resolutions. Resolutions of the Board of Directors of ----------- Company and each Guarantor certified by its Secretary or an Assistant Secretary which authorize the execution, delivery, and performance by such Person of this Amendment and Waiver and the other Subordinated Documents to which such Person is or is to be a party hereunder; (2) Incumbency Certificate. A certificate of incumbency ---------------------- certified by the Secretary or an Assistant Secretary of Company and each Guarantor certifying the names of the officers of such Person authorized to sign this Amendment and Waiver and each of the other Subordinated Documents to which such Person is or is to be a party hereunder (including the certificates contemplated herein) together with specimen signatures of such officers; (3) Articles of Incorporation. The articles of incorporation of ------------------------- Company and each Guarantor certified by the appropriate government official of the state of incorporation of such Person within thirty (30) days prior to the date of this Amendment and Waiver; (4) Bylaws. The bylaws of Company and each Guarantor certified ------ by the Secretary or an Assistant Secretary of such Person; (5) Governmental Certificates. Certificates of the appropriate ------------------------- government officials of the state of incorporation of Company and each Guarantor as to the existence and good standing of such Person, each dated within thirty (30) days prior to the date of this Amendment and Waiver; (6) Opinion of Counsel. A favorable opinion of Jackson & ------------------ Walker, L.L.P., legal counsel to Company and Guarantors, in form and substance satisfactory to Purchasers and their counsel; and (7) Additional Information. Purchasers shall have received such ---------------------- additional documents, instruments and information as Purchasers or its legal counsel, Winstead Sechrest & Minick P.C., may request. (b) The Company shall have paid to the Purchasers accrued and past due interest on the Notes in the amount of $100,000. (c) The Company shall have paid to the Collateral Agent and the Purchasers all reasonable fees and expenses heretofore incurred or to be incurred by the Purchasers in connection with the negotiation, execution and delivery of this Amendment and Waiver and all other documents relating thereto, including without limitation the following amounts which were due and owing as of June 30, 1997: Zolfo Cooper LLC $ 9,075.69 Emmet, Marvin & Martin LLP $ 1,000.00 (Counsel to The Bank of New York, as Collateral Agent) The Bank of New York $12,000.00 (annual administrative fees 12/96 through 12/97) Winstead Sechrest & Minick P.C. $17,580.32 ---------- Total Amount Due: $39,656.01 ---------- (d) The Company, the Senior Agent, the Purchasers and others shall have entered into a Second Amendment to the Amended and Restated Subordination and Intercreditor Agreement, in form and substance satisfactory to the Purchasers, including without limitation (i) an amendment to the definition of Senior Debt therein to provide that same shall reduce dollar-for-dollar as Senior Debt is repaid with the Net Cash Proceeds of asset sales, and (ii) an amendment to the standstill provisions thereof satisfactory to the Purchasers. (e) The Company and all of its Subsidiaries covenant to execute and deliver to the Collateral Agent and the Purchasers such modifications of the existing Collateral Documents as the Collateral Agent, the Purchasers, and their counsel shall deem reasonably necessary to preserve and protect the liens and security interests of the Collateral Agent and the Purchasers in the Collateral within thirty (30) days of the effective date hereof. (f) The Company shall execute and deliver to the Purchasers all documents necessary to grant the Purchasers a lien on the stock of the Company's French Subsidiary, which stock is owned by the Company and currently pledged as security for the Senior Debt. (g) An amendment to the Senior Credit Agreement shall have been executed by all parties thereto, all conditions to its effectiveness shall have been satisfied, and the Purchasers shall have been provided with a true and correct copy of such document and shall be reasonably satisfied with the terms thereof. (h) The Company shall have executed and delivered to the Purchasers the Notes in the forms attached hereto as Attachments B-1, B-2, and B-3. The holders of the existing Notes shall mark them to reflect that they have been restated. (i) The Company shall deliver to the Purchasers copies of all appraisals previously received or obtained by the Company of assets, divisions, and/or locations of the Company and its Subsidiaries which are currently held for sale or contemplated to be held for sale. (j) Except as set forth on Attachment A hereto, the representations and warranties contained herein and in all other Subordinated Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof. (k) After giving effect to this Amendment and Waiver, no Event of Default shall have occurred and be continuing and no event or condition shall have occurred that with the giving of notice or lapse of time or both would be an Event of Default. (l) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and Waiver and all documents, instruments, and other legal matters incident thereto shall be satisfactory to Purchasers and their legal counsel, Winstead Sechrest & Minick P.C. ARTICLE IV ---------- Ratifications, Representations and Warranties --------------------------------------------- Section 4.1 Ratifications. The terms and provisions set forth in this ------------- Amendment and Waiver and Waiver shall modify and supersede all inconsistent terms and provisions set forth in the Note Agreement and except as expressly modified and superseded by this Amendment and Waiver, the terms and provisions of the Note Agreement and the other Subordinated Documents are ratified and confirmed and shall continue in full force and effect. Company, Guarantors, and Purchasers agree that the Note Agreement as amended hereby and the other Subordinated Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. Section 4.2 Representations and Warranties. Company hereby represents and ------------------------------ warrants to Purchasers that (i) the execution, delivery and performance of this Amendment and Waiver and any and all other Subordinated Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of Company and will not violate the articles of incorporation or bylaws of Company, (ii) except as described on Attachment A hereto, the representations and warranties contained in the Note Agreement, as amended hereby, and any other Subordinated Document are true and correct on and as of the date hereof as though made on and as of the date hereof, (iii) after giving effect to this Amendment and Waiver, no Event of Default has occurred and is continuing and no event or condition has occurred that with the giving of notice or lapse of time or both would be an Event of Default, and (iv) except for the Specified Defaults, Company is in full compliance with all covenants and agreements contained in the Note Agreement as amended hereby. ARTICLE V --------- Miscellaneous ------------- Section 5.1 Survival of Representations and Warranties. All ------------------------------------------ representations and warranties made in this Amendment and Waiver or any other Subordinated Document including any Subordinated Document furnished in connection with this Amendment and Waiver shall survive the execution and delivery of this Amendment and Waiver and the other Subordinated Documents, and no investigation by Purchasers or any closing shall affect the representations and warranties or the right of Purchasers to rely upon them. Section 5.2 Reference to Agreement. Each of the Subordinated Documents, ---------------------- including the Note Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Note Agreement as amended hereby, are hereby amended so that any reference in such Subordinated Documents to the Note Agreement shall mean a reference to the Note Agreement as amended hereby. Section 5.3 Expenses of Purchasers. As provided in the Note Agreement, ---------------------- Company agrees to pay on demand, all reasonable costs and expenses incurred by Purchasers in connection with the preparation, negotiation, and execution of this Amendment and Waiver and the other Subordinated Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including without limitation the reasonable costs and fees of Purchasers' legal counsel and financial advisors, and all costs and expenses incurred by Purchasers in connection with the enforcement or preservation of any rights under the Note Agreement, as amended hereby, or any other Subordinated Document, including without limitation the reasonable costs and fees of Purchasers' legal counsel and financial advisors. Section 5.4 Severability. Any provision of this Amendment and Waiver held ------------ by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and Waiver and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND WAIVER AND ALL OTHER -------------- SUBORDINATED DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 5.6 Successors and Assigns. This Amendment and Waiver is binding ---------------------- upon and shall inure to the benefit of Purchasers, Company, and Guarantors and their respective successors and assigns, except neither Company nor any Guarantor may assign or transfer any of their respective rights or obligations hereunder without the prior written consent of Purchasers. The Purchasers may sell participations in or assign this Amendment and Waiver, the Note Agreement and the Subordinated Documents, and may exchange financial information about the Company and the Guarantors with actual or potential participants or assignees, provided that such potential participants and assignees agree to keep non-public information regarding Company and the Guarantors confidential. If a participation is sold or the loan is assigned, the purchaser will have the right to set-off against the Company. Section 5.7 Counterparts. This Amendment and Waiver may be executed in ------------ one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Telecopies of signatures shall be binding and effective as originals. Section 5.8 Effect of Waiver. No consent or waiver, express or implied, ---------------- by Purchasers to or for any breach of or deviation from any covenant, condition or duty by Company or any Guarantor shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty. Section 5.9 Headings. The headings, captions, and arrangements used in -------- this Amendment and Waiver are for convenience only and shall not affect the interpretation of this Amendment and Waiver. Section 5.10 Non-Application of Chapter 15 of Texas Credit Code. The -------------------------------------------------- provisions of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas Statutes, Article 5069-15) are specifically declared by the parties not to be applicable to this Amendment and Waiver or any of the Subordinated Documents or the transactions contemplated hereby. Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT AND WAIVER AND ALL OTHER ---------------- INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT AND WAIVER EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT AND WAIVER, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. Executed as of the date first written above. Company: ------- STEVENS INTERNATIONAL, INC. By: /s/ PAUL I. STEVENS Name: Paul I. Stevens Title: Chairman & CEO Guarantors: ---------- PMC LIQUIDATION, INC. By: /s/ GEORGE A. WIEDERAENDERS Name: George A. Wiederaenders Title: Treasurer PRINTING & PACKAGING EQUIPMENT FINANCE CORPORATION By: /s/ GEORGE A. WIEDERAENDERS Name: George A. Wiederaenders Title: Secretary - Treasurer Purchasers: ---------- AETNA LIFE INSURANCE COMPANY By: /s/ PETER C. NILSEN Name: Peter C. Nilsen Title: Investment Manager THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By: /s/ PETER W. OLIVER Name: Peter W. Oliver Title: Managing Director MONY LIFE INSURANCE COMPANY OF AMERICA By: /s/ PETER W. OLIVER Name: Peter W. Oliver Title: Authorized Agent EX-10.2 3 FIFTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.2 FIFTH AMENDMENT --------------- TO -- CREDIT AGREEMENT ---------------- This Fifth Amendment to Credit Agreement (this "Amendment") is entered into --------- effective as of the 31st day of July, 1997, by and between Bank of America Texas, N.A. (the "Bank") and Stevens International, Inc., formerly known as ---- Stevens Graphics Corporation, a Delaware corporation (the "Borrower"), and PMC -------- Liquidation, Inc. and Printing and Packaging Equipment Finance Corporation (individually a "Guarantor" and together, the "Guarantors"). --------- ---------- Borrower is the surviving corporation of the several mergers between Borrower, on the one hand, and each of Zerand-Bernal Group, Inc., a Delaware corporation, Hamilton-Stevens Group, Inc., a Delaware corporation, and Stevens Securities Systems International, Inc., a Delaware corporation. Each of the mergers is evidenced by the respective Certificate of Ownership and Merger, dated December 21, 1995, signed by the Borrower, and filed with the Office of the Secretary of State of the State of Delaware on December 22, 1995. REFERENCE: ---------- Reference is made to the Credit Agreement (as amended, the "Credit ------ Agreement") dated as of May 16, 1995 by and between Bank and Borrower, as - --------- amended by that certain First Amendment to Credit Agreement entered into effective as of August 15, 1995, by and between Bank and Borrower, as further amended by that certain Second Amendment to Credit Agreement entered into effective as of December 29, 1995, by and between Bank and Borrower, as further amended by that certain Third Amendment to Credit Agreement entered into effective as of May 13, 1996, as further amended by that certain Agreement and Fourth Amendment dated as December 31, 1996, as further amended by that certain First Amendment to Agreement and Fourth Amendment to Credit Agreement dated as of February 28,1997, as further amended by that certain Second Amendment to Agreement and Fourth Amendment to Credit Agreement dated as of March 17, 1997, as further amended by that certain Third Amendment to Agreement and Fourth Amendment to Credit Agreement dated as of May 1, 1997, and as further amended by that certain Fourth Amendment to Agreement and Fourth Amendment to Credit Agreement dated as of July 1, 1997. RECITALS: --------- Bank and Borrower desire to amend certain existing terms of the Credit Agreement and to add additional terms and conditions to the Credit Agreement to restructure the existing revolving line of credit. FIFTH AMENDMENT-PAGE 1 AGREEMENTS: ----------- NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS -------------- 1.1 Additional Definitions. Article 1 of the Credit Agreement is hereby ----------------------- amended as follows: The term "Borrowing Base Advance Cap" is amended to mean at any time -------------------------- an amount equal to the lesser of: (a) $11,800,000.00; or (b) the sum of: (i) 80% of the amount of Eligible Accounts; plus (ii) the lesser of (A) $4,500,000.00; or (B) 25% of the amount of Eligible Inventory, plus (iii) $7,637,000.00. The term "Note" is amended to mean that certain Revolving Credit Note ---- dated April 26, 1994 executed by Borrower payable to the order of Bank One, Milwaukee, National Association ("Bank One"), in the original -------- principal amount of $20,000,000.00, which was assigned to Bank pursuant to that certain Master Assignment of Note and Security Documents executed by Bank One in favor of Bank, dated May 22, 1995, as amended by that certain Amended and Restated Master Note dated May 16, 1995, executed by Borrower and payable to the order of Bank, in the amount of $22,000,000.00, as amended by that certain Second Amended and Restated Master Note: Reference Rate Related dated August 15, 1995, executed by Borrower and payable to the order of Bank, in the amount of $27,000,000.00, and as further amended by the certain Note and Liens Modification Agreement of even date herewith by and between Borrower and Bank (the "Modification Agreement"). ---------------------- The term "Reference Rate" is amended to mean the rate of interest -------------- publicly announced from time to time by Bank of America National Trust and Savings Association ("BofA NT&SA"), in San Francisco, California, as its ---------- Reference Rate. The Reference Rate is set by BofA NT&SA based on various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. Bank may price loans to its customers at, above, or below the Reference Rate. Any change in the Reference shall take effect at the opening of business on the date specified FIFTH AMENDMENT-PAGE 2 in the public announcement of a change in the BofA NT&SA. Interest will be calculated on the basis of a 360-day year and actual days elapsed, which results in more interest than if a 365-day year were used. The term "Revolving Line of Credit Rate" is amended to mean a floating ----------------------------- rate per annum equal to the Reference Rate plus 2.50%. 1.2. Section 2.1., of the Credit Agreement is hereby restated in its ------------ entirety to read as follows: (a) During the availability period described below, the Bank will provide the Revolving Line of Credit to the Borrower. The Borrower agrees that it will use the proceeds of each advance under the Revolving Line of Credit only for working capital purposes and for capital expenditures permitted by Section 9.4 of the Credit Agreement, and will not use the proceeds of any advance to retire or repay any indebtedness for borrowed money. The amount of the Revolving Line of Credit is an initial amount of up to the lesser of (i) $14,730,000.00 or (ii) the Borrowing Base plus $2,930,000 (the "Commitment"). The amount of the Revolving Line of Credit ---------- available for advances outstanding at any time including amounts paid under any Letter of Credit is an amount of up to the lesser of (i) $11,800,000.00, or (ii) the Borrowing Base Advance Cap. The amount of the Revolving Line of Credit available for issuances of letters of credit outstanding at any time is in an initial amount of $2,930,000.00. The Commitment and the amount available for issuances of letters of credit shall decrease by $70,000.00 on the last day of each calendar month. (b) The Borrower agrees not to permit the outstanding principal balance of the Revolving Line of Credit to exceed the lesser of (i) $11,800,000.00 or (ii) the Borrowing Base Advance Cap. The Borrower agrees not to permit the outstanding principal balance of the Revolving Line of Credit plus the outstanding amounts of all letters of credit, including amounts drawn on letters of credit and not yet reimbursed, to exceed the then effective Commitment. If such amounts outstanding exceed the foregoing limitations, the Borrower will immediately pay the excess to the Bank upon the Bank's demand. The Bank may apply payments received from the Borrower under this Section to the obligations of the Borrower to the Bank in the order and the manner as the Bank, in its discretion, may determine. 1.3 In Section 2.2. of the Credit Agreement, the term "Expiration Date," ------------ --------------- is amended to mean December 31, 1997. 1.4 Section 2.5 of the Credit Agreement is amended by restating subsection ----------- (a) thereof in its entirety as follows: (a) Borrower will pay interest on August 8, 1997, and then on the last day of each calendar month thereafter until payment in full of any principal outstanding under this line of credit. FIFTH AMENDMENT-PAGE 3 1.5 Article 3 of the Credit Agreement, Fees and Expenses, is hereby --------- ----------------- amended by the addition of the following provisions: 3.7 Loan Restructure Fees: Borrower agrees to pay Bank the following --------------------- fees: (i) a commitment fee in the amount of $74,000.00 on August 4, 1997; and (ii) an audit and field examination fee of $18,339.87 on August 4, 1997. 1.6 Section 8.9 of the Credit Agreement, is amended by adding the ----------- following Subsection (e). (e) Borrower shall deliver to Bank, at the time such notice is given to the holders of the Subordinated Debt, a copy of each notice given to or required to be given to the holders of the Subordinated Debt. 1.7 The first sentence of Section 9.1. of the Credit Agreement is hereby ------------ deleted in its entirety and replaced with the following: To maintain, as of the end of each fiscal quarter, on a consolidated basis, a ratio of total liabilities not subordinated to tangible net worth not exceeding 2.50:1.00. 1.8 Section 9.2. of the Credit Agreement is hereby deleted in its entirety ------------ and replaced with the following: 9.2 Quick Ratio. To maintain, as of the end of each fiscal ----------- quarter, on a consolidated basis, a ratio of current assets, minus inventory, to current liabilities (excluding payments of principal on the Revolving Line of Credit) of at least .025:1.00. 1.9 Section 9.4 of the Credit Agreement is amended by substituting the ----------- dollar amount $2,200,000.00 for the dollar amount $5,000,000.00. 1.10 Section 11.6. of the Credit Agreement is hereby deleted in its ------------- entirety and replaced with the following: 11.6 Judgments; Garnishments. Any judgments or arbitration ----------------------- awards are entered against the Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of Eight Hundred Thousand Dollars ($800,000) or more, and such judgment or settlement is not paid, stayed or released within thirty (30) days of becoming final; or any garnishment or similar attachment of funds is instituted or entered against the Borrower (or any guarantor) involving a claim or claims in an aggregate amount of Seventy-Five Thousand Dollars ($75,000) or more. FIFTH AMENDMENT-PAGE 4 1.11 A Section 11.14 is added to the Credit Agreement to read as follows: ------------- 11.14 Failure to Deliver Or Perform Under Intercreditor ------------------------------------------------- Agreement. The Bank shall not have received by August 15, 1997 an --------- Intercreditor Agreement in form and content acceptable to Bank in its discretion, fully executed and delivered by each of Paul Stevens and the Borrower whereby Borrower and Paul Stevens agree that no payments shall be made on any debt of the Borrower to Paul Stevens prior to January 1, 1998, or Borrower shall make any payment prohibited by the terms of such Intercreditor Agreement. 1.12 Application of Proceeds from Sale of Assets other than from Inventory --------------------------------------------------------------------- in the Ordinary Course of Business. Notwithstanding anything to the contrary - ----------------------------------- contained in any of the Loan Documents, all proceeds of any sale of assets by the Borrower other than inventory in the ordinary course of business must be applied to reduction of the balance of the revolving line of credit, and the Commitment shall be permanently reduced by the amount of proceeds received by Bank. The Bank may allocate the reduction of the Commitment to, at the Bank's option, all or any part of either or both of the line of credit facility or the within-line facility for letters of credit. All sales of assets, except for inventory in the ordinary course of business shall require the prior approval of Bank, to be granted or withheld in its sole discretion. 2. CONDITIONS PRECEDENT ----------------------- The effectiveness of this Amendment is expressly conditioned upon satisfaction of the following, each in form and content acceptable to Bank: 2.1 Amendment to Intercreditor Agreement. The Intercreditor Agreement ------------------------------------- must be amended to the satisfaction of Bank, and such amendment must be delivered to the Bank. 2.2 Amendments to Subordinated Debt. The Subordinated Debt must be -------------------------------- restructured to the satisfaction of Bank in its discretion. 2.3 Corporate Documents and Legal Opinions. Appropriate corporate -------------------------------------- documentation, including borrowing resolutions and an opinion of counsel to Borrower and to Guarantors, must be delivered to the Bank. 2.4 The Modification Agreement. The executed Modification Agreement must -------------------------- be delivered to the Bank. 2.5 Payment of Expenses. Payment of all reasonable costs and expenses, ------------------- including, without limitation, legal fees and expenses, incurred by the Bank in connection with the Credit Agreement to date must be made by the Borrower to Bank. FIFTH AMENDMENT-PAGE 5 2.6 The Master Amendment. A fully executed Third Master Amendment to -------------------- Security Documents dated of even date herewith, executed by Borrower, Guarantors and Bank, must be delivered to the Bank. 2.7 Notice of Final Agreement. A fully executed Notice of Final Agreement -------------------------- in compliance with Section 26.02 of the Texas Business and Commerce Code must be delivered to the Bank. 2.8 Other Documentation. Such other documents as the Bank may request -------------------- must be delivered to the Bank. 3. MISCELLANEOUS. ------------------ 3.1 Representations. Borrower represents and warrants that the execution, --------------- delivery and performance by Borrower of this Amendment and the Credit Agreement as amended hereby have been duly authorized by all necessary corporate action and that this Amendment and the Credit Agreement as amended hereby are legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally, or by general principles of equity limiting the availability of certain remedies. 3.2 Ratifications. The terms and provisions set forth in this Amendment ------------- shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. Borrower and Bank agree that the Credit Agreement as amended hereby shall continue to be legal, valid, binding and enforceable in accordance with its terms and that the amounts outstanding under the Revolving Line of Credit or obligations under the Credit Agreement and are secured by the Collateral described in Article 4 of the Credit Agreement . 3.3 Governing Law. This Amendment shall be governed by and construed in ------------- accordance with the laws of the State of Texas. 3.4 Counterparts. This Amendment may be executed in any number of ------------ counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. 3.5 Definitions. Capitalized terms used in this Amendment and not ----------- otherwise defined in this Amendment shall have the meanings given them in the Credit Agreement. 3.6 WAIVER OF JURY TRIAL. BORROWER, EACH OF THE UNDERSIGNED GUARANTORS -------------------- (THE "GUARANTORS") AND THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS FOURTH AMENDMENT, FIFTH AMENDMENT-PAGE 6 THE CREDIT AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. BORROWER, EACH OF THE GUARANTORS AND BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS FOURTH AMENDMENT, THE CREDIT AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. 3.7 RELEASES. BORROWER AND EACH GUARANTOR FULLY, COMPLETELY AND FOREVER -------- RELEASES THE BANK AND ITS PRESENT AND FORMER AFFILIATES, SUBSIDIARIES, AGENTS, ATTORNEYS, APPRAISERS, CONSULTANTS, EMPLOYEES, OFFICERS, DIRECTORS, STOCKHOLDERS, SUCCESSORS AND ASSIGNS ("OTHER RELEASED PARTIES") FROM ANY ---------------------- DEMANDS, CLAIMS AND CAUSES OF ACTION EXISTING AS OF THE DATE HEREOF, WHETHER KNOWN OR UNKNOWN, WHETHER FOR KNOWN OR UNKNOWN DAMAGES OR ANY OTHER RELIEF, INCLUDING, BUT NOT LIMITED TO, DEMANDS, CLAIMS, CAUSES OF ACTION OR DAMAGES DIRECTLY OR INDIRECTLY RELATING TO OR BASED ON: (a) ANY AND ALL TRANSACTIONS RELATING TO THE CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS AS AMENDED FROM TIME TO TIME, INCLUDING, WITHOUT LIMITATION, ANY LOSS, EXPENSES AND/OR DETRIMENT OF ANY KIND OR CHARACTER GROWING OUT OF OR IN ANY WAY RESULTING FROM THE ACTS OR OMISSIONS OF LENDER OR THE OTHER RELEASED PARTIES; (b) ANY LOSS, COST OR DAMAGE IN CONNECTION WITH ANY BREACH OF FIDUCIARY DUTY, FRAUD, BREACH OF A DUTY OF GOOD FAITH AND FAIR DEALING, BREACH OF CONFIDENCE, BREACH OF FUNDING COMMITMENT, IMPAIRMENT OF COLLATERAL, VIOLATIONS OF THE BANK TYING ACT (12 U.S.C. (S) 1971, ET SEQ.), UNDUE INFLUENCE, DURESS, ECONOMIC COERCION, CONFLICT OF INTERESTS, NEGLIGENCE, BAD FAITH, MALPRACTICE, INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS, TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE, BREACH FIFTH AMENDMENT-PAGE 7 OF CONTRACT, DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, OR CONSPIRACY; AND (C) ANY OTHER CLAIM BASED ON CONTRACT, TORT, COMMON LAW, OR ANY RIGHT CREATED BY A STATUTE OR REGULATION PROMULGATED BY ANY GOVERNMENT AGENCY. THE ABOVE LISTING OF DEMANDS, CLAIMS AND CAUSES OF ACTION RELEASED IS NOT EXCLUSIVE OR EXHAUSTIVE. IT IS THE EXPRESS INTENTION OF THE BORROWER AND GUARANTORS TO RELEASE AND FORGIVE THE BANK OF ALL DEMANDS, CLAIMS AND CAUSES OF ACTION FROM THE PAST AND HAVE A FRESH START FROM THIS DAY FORWARD. BORROWER AND EACH GUARANTOR, ON BEHALF OF THEMSELVES AND THEIR SUCCESSORS AND ASSIGNS, COVENANT AND AGREE NOT TO SUE, INSTITUTE, OR COOPERATE IN THE INSTITUTION, COMMENCEMENT, FILING, OR PROSECUTION OF ANY SUIT, ADMINISTRATIVE PROCEEDING, DEMAND, CLAIM OR CAUSE OF ACTION ARISING FROM ANY ASPECT OF THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS, AS AMENDED, WHETHER ASSERTED INDIVIDUALLY OR DERIVATIVELY OR IN ANY CAPACITY AGAINST BANK OR THE OTHER RELEASED PARTIES. FURTHERMORE, BORROWER AND EACH GUARANTOR REPRESENT AND WARRANT THAT THEY HAVE NOT ASSIGNED, AND WILL NOT HEREAFTER ASSIGN, ANY OF THEIR ALLEGED CLAIMS OR CAUSES OF ACTION, OF ANY KIND OR NATURE WHATSOEVER, AGAINST THE BANK OR THE OTHER RELEASED PARTIES TO ANY PERSON OR ENTITY, SO THAT NO OTHER PARTY IS IN A POSITION TO ASSERT ANY SUCH CLAIM OR CAUSE OF ACTION. 3.8 Ratification of Security Documents. Borrower and each Guarantor agree ---------------------------------- that those certain security documents (as heretofore amended, the "Security -------- Documents"), which are more fully described in Exhibit A attached to that - --------- certain Master Amendment to Security Documents, dated May 16, 1995, executed by Guarantors and Borrower in favor of the Bank, are in full force and effect as of the date hereof. Borrower and each Guarantor hereby ratify the rights, titles, liens and security interests under the Security Documents existing in favor of Bank. 3.9 Successors and Assigns. This Amendment, the Credit Agreement and all ---------------------- documents executed in connection with or as security for the Credit Agreement (the "Security Documents") are binding on the Borrower's and the Bank's ------------------ successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or assign this Amendment, the Credit Agreement and the Security Documents, and may exchange financial information about the Borrower with actual or potential participants or assignees, provided that such potential participants and assignees agree to keep non-public information regarding Borrower confidential. If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower. 3.10. Ratification of Guaranties. The Guarantors agree that that --------------------------- certain Business Loan Continuing Guaranty, dated May 16, 1995 (the "Guaranty"), -------- executed by the Guarantors in favor of the Bank, shall remain in full force and effect and shall continue to be the legal, valid and binding obligation FIFTH AMENDMENT-PAGE 8 of the Guarantors enforceable against Guarantors in accordance with its terms. Furthermore, the Guarantors hereby agree and acknowledge that (a) the obligations, indebtedness and liabilities arising in connection with this Agreement constitute "Debt," as such term is defined in the Guaranty, (b) as of the date hereof, the Guaranty is not subject to any claims, defenses or offsets, (c) nothing contained in this Agreement shall adversely affect any right or remedy of Bank under the Guaranty, and (d) the execution and delivery of the Agreement shall in no way reduce, impair or discharge any obligations of the Guarantors pursuant to the Guaranty. IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be duly executed as of the day and year first above written. BANK OF AMERICA TEXAS, N.A. STEVENS INTERNATIONAL, INC., formerly known as Stevens Graphics Corporation By: By: ------------------------------ Name: Name: Title: ------------------------------ Title: ----------------------------- Executed for the purposes of acknowledging and agreeing to the provisions of Sections 3.6, 3.7, 3.8 and 3.9 hereof. GUARANTORS PMC LIQUIDATION, INC. formerly known as Post Machinery Company, Inc. By: Name: Title: FIFTH AMENDMENT-PAGE 9 PRINTING & PACKAGING EQUIPMENT FINANCE CORPORATION By: Name: Title: FIFTH AMENDMENT-PAGE 10 EX-10.3 4 SECOND AM. TO SUBORDINATION AND INTERCREDITOR AGR EXHIBIT 10.3 SECOND AMENDMENT TO AMENDED --------------------------- AND RESTATED SUBORDINATION AND ------------------------------ INTERCREDITOR AGREEMENT ----------------------- This Second Amendment to Amended and Restated Subordination and Intercreditor Agreement (this "Second Amendment") is entered into effective as ---------------- of the 31st day of July, 1997, among Stevens International, Inc., PMC Liquidation, Inc., Printing & Packaging Equipment Finance Corporation, Aetna Life Insurance Company, The Mutual Life Insurance Company of New York, MONY Life Insurance Company of America, Bank of America Texas, N.A., and The Bank of New York, as Collateral Agent. WHEREAS, Stevens International, Inc., formerly known as Stevens Graphics Corporation (the "Company"), Hamilton-Stevens Group, Inc., PMC Liquidation, ------- Inc., formerly known as Post Machinery Co., Inc. ("PMC"), Zerand-Bernal Group, --- Inc., Printing & Packaging Equipment Finance Corporation ("PPEF"), Stevens ---- Securities Systems International, Inc., Bank One, Milwaukee, National Association ("Bank One"), Aetna Life Insurance Company ("Aetna"), The Mutual -------- ----- Life Insurance Company of New York ("Mutual"), MONY Life Insurance Company of America ("MONY"; MONY, Mutual, and Aetna being hereinafter called the ----------------------------------------------------------- "Purchasers"), and NationsBank of Texas, N.A. as Collateral Agent for the - ------------ Purchasers ("NationsBank") entered into that certain Amended and Restated ----------- Subordination and Intercreditor Agreement dated as of April 26, 1994, as amended by First Amendment to Amended and Restated Subordination and Intercreditor Agreement dated as of August __, 1995 (the "Intercreditor Agreement"; ----------------------- capitalized terms used in this Second Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Intercreditor Agreement, as amended hereby); WHEREAS, Bank of America Texas, N.A. ("Senior Lender") has succeeded to the ------------- rights and obligations of Bank One under the Intercreditor Agreement; WHEREAS, Zerand-Bernal Group, Inc., Hamilton-Stevens Group, Inc. and Stevens Securities Systems International, Inc. have merged with the Company, and the Company is the surviving entity; WHEREAS, The Bank of New York as Collateral Agent ("Collateral Agent") has ---------------- replaced NationsBank as Collateral Agent for the holders of the Subordinated Debt; WHEREAS, Senior Lender and the Company have restructured the Senior Debt, as evidenced by the Fifth Amendment to Credit Agreement dated as of July 31, 1997 (the "Fifth Amendment"), a copy of which is attached hereto as Exhibit A; --------------- --------- WHEREAS, the Purchasers have restructured the Subordinated Debt, as evidenced by the Sixth Amendment to Amended and Restated Senior Subordinated Note Agreement and Waiver dated as of July 31, 1997 (the "Sixth Amendment"), a --------------- copy of which is attached hereto as Exhibit B; --------- WHEREAS, the Purchasers desire to consent to the Senior Debt restructure by the Senior Lender, and the Senior Lender desires to consent to the Subordinated Debt restructure by the Purchasers; WHEREAS, the parties hereto desire to amend the Intercreditor Agreement as set forth herein. NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt of which is acknowledged and agreed to by each of the parties hereto, Senior Lender, the Company, the Purchasers, PMC, and PPEF agree as follows: 1. The Purchasers acknowledge and agree that the Subordinated Debt is and shall continue to be subordinate and junior in right of payment to all Senior Debt under the terms set forth in the Intercreditor Agreement. 2. Effective as of the date hereof, the definition of Senior Debt in Section 1 of the Intercreditor Agreement is hereby amended to read as follows: "Senior Debt means all present and future obligations, indebtedness ----------- and liabilities of the Company or any Guarantor arising under or pursuant to the Bank Credit Agreement, any Permitted Refinancing, all other agreements or financing arrangements with Senior Lender, all interest accruing pursuant to the aforementioned agreements and arrangements, all attorneys' fees, costs, expenses or other fees incurred in the enforcement and collection thereof and any and all renewals, extensions, increases, and amendments thereto and includes, without limitation, all obligations of the Company under (i) that certain Credit Agreement entered into effective as of August 15, 1995, by and between Senior Lender and the Company, as such Credit Agreement has been amended from time to time, including, without limitation, as amended by the Fifth Amendment and (ii) each of the other Loan Documents (as defined in the Credit Agreement), as such Loan Documents have been amended from time to time; provided that the aggregate principal -------- amount of such Senior Debt (excluding attorneys' fees, costs, expenses, other fees, or any indemnified amounts) shall not exceed the sum of $14,730,000 less all amounts repaid and irrevocably received by Senior Lender on or after July 31, 1997, on the Senior Debt, dollar-for-dollar, as Net Proceeds from any sale, transfer, disposition, or settlement of all or any part of the Collateral or Proceeds thereof (whether by voluntary dispositions or through Lien Enforcement Actions), but excluding sales of inventory or other receipts in the ordinary course of business." 3. Each of the Purchasers consents to the Fifth Amendment; and Senior Lender consents to the Sixth Amendment. 4. Effective as of the date hereof, Section 2.2(c)(i) of the Intercreditor Agreement is amended to read as follows: "(i) of 60 days after written notice of such default shall have been given to the Company and Senior Lender or to each holder of at least ten percent (10%) of the principal amount of the Subordinated Debt outstanding as certified by the Company in its most recent certification thereof to the holders of the Senior Debt, as the case may be; provided that only one such notice shall be given pursuant to this Section 2.2(c)(i) in any 12 consecutive months; provided further that, the holders of the Senior Debt shall be justified in relying upon the most recent certification by the Company with respect to the holders of the Subordinated Debt, and the notices required hereunder shall not be ineffective or invalidated as a result of any such information provided by the Company being inaccurate or incomplete; or". 5. Effective as of the date hereof, Section 4.2 of the Intercreditor Agreement is hereby amended to add at the end thereof the following sentence: "Nothing in this Intercreditor Agreement shall prohibit the holders of the Subordinated Debt and/or the Collateral Agent from giving the thirty (30) day notice required by this Section during any blockage period described in Section 2.2(c) hereof." 6. All references in the other Senior Documents and Subordinated Documents are hereby modified and amended wherever necessary to reflect the modifications to the Intercreditor Agreement referenced in Sections 1 through 5 above, and all references therein to the "180 day period specified in Section 2.2(c)(i)" shall mean references to the "60 day period specified in Section 2.2(c)(i)." 7. Set forth below are the addresses of the Company, Senior Lender, Aetna, Mutual, MONY and Collateral Agent for purposes of notices under the Intercreditor Agreement: The Company: Stevens International, Inc. 5500 Airport Freeway Fort Worth, Texas 76117 Senior Lender: Bank of America Texas, N.A. Bank of America Arizona 101 N. 1st Avenue Phoenix, AZ 85003 Aetna: Aetna Life Insurance Company Corporate Bond Research, RTAA 151 Farmington Avenue Hartford, CT 06156 Mutual: The Mutual Life Insurance Company of New York 1740 Broadway New York, NY 10019 MONY: MONY Life Insurance Company of America 1740 Broadway New York, NY 10019 Collateral Agent: The Bank of New York as Collateral Agent Insurance Trust and Escrow Unit, 12 East 101 Barclay Street New York, NY 10288 Attn: Sharia Jones-Bey 8. The Purchasers represent and warrant as follows: (a) to their knowledge and belief all presently existing defaults and events of default under the Subordinated Debt have been waived as of the date of this Second Amendment; (b) the restructuring of the Subordinated Debt has been entered into by the Company and the Purchasers, and true and correct copies of the documents evidencing such restructuring have been delivered to Senior Lender; and (c) the Purchasers are the present owners and holders of all of the right, title and interest in and to the Subordinated Debt. 9. The Senior Lender represents and warrants that to its knowledge and belief all presently existing defaults and events of default under the Senior Debt other than the breach by virtue of the $950,000 loan made by Paul Stevens to the Company in April 1996, have been waived as of the date of this Second Amendment. 10. Except as set forth herein, the Intercreditor Agreement shall continue in full force and effect according to its original provisions. 11. This Second Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 12. No waiver or modification, discharge or amendment of this Second Amendment will be valid in the absence of the written and signed consent of the party against which enforcement of such is sought. 13. This Second Amendment, together with the other documents and instruments referenced herein, contains the entire agreement between the parties relating to the transaction contemplated hereby. All prior or contemporaneous agreements, understandings, representations and statements, whether written or oral, are merged herein. 14. This Agreement shall be construed in accordance with the applicable laws of the State of Texas and applicable federal law. In the event of a dispute involving this Agreement or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent in Dallas County, Texas. 15. This Agreement may be executed in one or more counterparts, all of which when taken together shall be deemed to be one original. EXECUTED effective for all purposes as of the 31st day of July, 1997. SENIOR LENDER: ------------- BANK OF AMERICA TEXAS, N.A. By: /s/ JAY DENNEY Name: Jay Denney Its: COMPANY: ------- STEVENS INTERNATIONAL, INC., a Delaware corporation, formerly known as Stevens Graphics Corporation, successor-by- merger to Hamilton-Stevens Group, Inc., Zerand-Bernal Group, Inc. and Stevens Securities Systems International, Inc. By: /s/ PAUL I. STEVENS Name: Paul I. Stevens Its: Chairman & CEO PURCHASERS: ---------- AETNA LIFE INSURANCE COMPANY By: /s/ PETER C. NILSEN Name: Peter C. Nilsen Its: Investment Manager THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By: /s/ PETER W. OLIVER Name: Peter W. Oliver Its: Managing Director MONY LIFE INSURANCE COMPANY OF AMERICA By: /s/ PETER W. OLIVER Name: Peter W. Oliver Its: Authorized Agent PPEF: ---- PRINTING & PACKAGING EQUIPMENT FINANCE CORPORATION By: /s/ GEORGE A. WIEDERAENDERS Name: George A. Wiederaenders Its: Secretary - Treasurer PMC: --- PMC LIQUIDATION, INC., formerly known as Post Machinery Co., Inc. By: /s/ GEORGE A. WIEDERAENDERS Name: George A. Wiederaenders Its: Treasurer COLLATERAL AGENT: ---------------- THE BANK OF NEW YORK AS COLLATERAL AGENT By: /s/ SHARIA JONES-BEY Name: Sharia Jones-Bey Its: Assistant Treasurer EX-11.1 5 COMPUTATIONS OF NET INCOME EXHIBIT 11.1 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES COMPUTATIONS OF NET INCOME (LOSS) PER COMMON SHARE (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1997 1996 1997 ------- ------- ------- ------- PRIMARY AND FULLY DILUTED: WEIGHTED AVERAGE SHARES OUTSTANDING................ 9,451 9,451 9,451 9,451 ASSUMED EXERCISE OF SERIES A AND B STOCK OPTIONS (TREASURY STOCK METHOD).......................... -- -- -- -- ------- ------- ------- ------ TOTAL COMMON SHARE EQUIVALENTS..................... 9,451 9,451 9,451 9,451 ======= ======= ======= ====== NET INCOME (LOSS).................................. $(3,741) $(3,405) $(4,826) $(6,404) ======= ======= ======= ====== PER SHARE AMOUNTS -- PRIMARY AND FULLY DILUTED: NET INCOME (LOSS).................................. $ (0.40) $ (0.36) $ (0.51) $ (0.68) ======= ======= ======= ======
-17- EX-27.1 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 JUN-30-1997 183 1,360 10,521 3,496 14,197 25,865 39,679 23,061 49,325 42,356 58 0 0 945 3,332 49,325 16,091 16,091 15,712 20,465 176 0 1,854 (6,404) 0 0 0 0 0 (6,404) (0.68) (0.68)
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