-----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, QYMEbA+J/gfTTxHpYGGgCatxTWWeC/a/2jyIIcZr2GsgB8WVN4kmQhXDmrCx3dyI cOEdDLCI7HiL2Pan5eb1PA== 0000950123-97-002828.txt : 19970401 0000950123-97-002828.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950123-97-002828 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAXAR CORP CENTRAL INDEX KEY: 0000075681 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 135670050 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09493 FILM NUMBER: 97569995 BUSINESS ADDRESS: STREET 1: 105 CORPORATE PARK DRIVE CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 914697-6800 MAIL ADDRESS: STREET 1: 275 N MIDDLETOWN ROAD CITY: PEARL RIVER STATE: NY ZIP: 10965 FORMER COMPANY: FORMER CONFORMED NAME: PACKAGING SYSTEMS CORP DATE OF NAME CHANGE: 19870401 10-K405 1 FORM 10-K/ANNUAL REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to COMMISSION FILE NUMBER 0-5610 PAXAR CORPORATION ----------------- (Exact name of registrant as specified in its charter) NEW YORK 13-5670050 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 105 CORPORATE PARK DRIVE, WHITE PLAINS, NEW YORK 10604 ------------------------------------------------------ (Address of principal executive offices) 914-697-6800 ------------ (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which Common Stock. registered par value $.10 per share New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None -------------------------------------- (Title of Class) 1 2 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. X _ Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant as of March 20, 1997 was approximately $447,206,977. On such date, the closing price of the Registrant's Common Stock, as quoted on the New York Stock Exchange was $19.875. The Registrant had 28,360,533 shares of Common Stock outstanding as of March 20, 1997. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Annual Report on Form 10-K is herein incorporated by reference from the Registrant's Definitive Proxy Statement to be filed with the Securities and Exchange Commission with respect to the Registrant's Annual Meeting of Shareholders scheduled to be held on April 24, 1997. 2 3 PART I ITEM 1: DESCRIPTION OF BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Paxar Corporation ("Paxar" or the "Company") is a fully integrated manufacturer and distributor of label systems, bar code systems, labels, tags and related supplies and services for apparel manufacturers and retailers. The Company's products are manufactured in North and South America, Europe and Asia and distributed in over 50 countries. Label systems, consisting mainly of hot-stamp printers and related supplies and services, are sold to Company customers for in-plant label printing. Bar code systems, consisting of electronic printers and related supplies, print data on labels and tags to provide accurate product, inventory and point of sale information for integration with sophisticated data systems. Labels and tags are attached to apparel by manufacturers and retailers to identify and promote their products, allow automated data collection and provide brand identification and consumer information such as size, fabric content and care instructions. Labels are attached to garments early in the manufacturing process and must withstand all production processes and remain legible through washing and dry cleaning by the end user. To a limited extent, the Company's products also include tags and labels for sheets, towels, pillow cases and other white goods. In May 1994, the Company acquired the corporate capital of Collitex S.r.l. ("Collitex") and the corporate capital of Astria S.r.l. ("Astria"), two related Italian companies in the woven label business. The Collitex and Astria acquisition provided the Company with European-based woven label manufacturing capability. In October 1994, the Company acquired the corporate capital of Orvafin S.r.l. ("Orvafin"), an Italian company engaged in the production and distribution of inks and coated fabrics for labeling systems. The Orvafin acquisition provided the Company with additional manufacturing capacity for these products as well as access to a complementary distribution network. In January 1996, the Company acquired all of the outstanding stock of Brian Pulfrey Limited ("Brian Pulfrey"). Brian Pulfrey is located in Nottingham, England where it manufactures printed labels and tags. In addition, Brian Pulfrey sells woven labels and operates a service bureau for quick response to its customer's needs for labels and tags with variable information. The acquisition of Brian Pulfrey is expected to enhance the Company's goal of replicating its United States capabilities as a one-stop source for apparel and textile identification products in Europe. Acquisition of Monarch Marking Systems, Inc. In June 1995, the Company acquired a 49.5% equity interest in Monarch Marking Systems, Inc. ("Monarch") through Monarch Holdings, Inc. ("Holdings"), a joint venture between the Company and Odyssey Partners, L.P. ("Odyssey"), formed to acquire all of the outstanding capital stock of Monarch. The Company acquired its equity interest in Holdings for $15 million. Thomas Loemker, a Director of the Company and the then Chairman of the Board of Monarch, acquired a 1% equity interest in Holdings, and Odyssey acquired the remaining 49.5% equity interest in Holdings. The equity interests of the Company and Odyssey were subsequently reduced to 49% as a result of the issuance of shares of Holdings common stock to John W. Paxton, Monarch's Chief Executive Officer. Monarch manufactures, markets and distributes (i) tabletop label dispensers and handheld, mechanical labeling guns ("IPS labelers") which print pressure-sensitive (i.e., adhesive-backed) price and other identification labels and affix them onto merchandise for retailers, and (ii) electronic bar code printers ("AIS printers"), which are used in a wide range of retail and industrial applications, including inventory management and distribution systems. Monarch also manufactures and markets supplies used in both its IPS labelers and AIS printers and provides extensive service to its installed base of machines. Monarch is a leading manufacturer and marketer of retail price marking equipment and supplies in the United States. Monarch also sells its products directly and through distributors in 75 other countries. Monarch had net sales of $259.2 million and net income of $8.4 million for the year ended December 31, 1996. 3 4 On March 3, 1997, the Company acquired Odyssey's equity interest in Holdings for (i) $94,083,750 in cash, (ii) a promissory note in the amount of $5,907,559 at an annual interest rate of 4.88%, payable on January 2, 1998 secured by a letter of credit issued by Fleet Bank, N.A. and (iii) five year warrants (the "Warrants") to purchase (A) 1,000,000 shares of the Company's common stock, par value $.10 (the "Common Stock"), at an exercise price of $17.50 per share (subject to adjustment in certain events) and (B) 200,000 shares of Common Stock at an exercise price of $21.875 per share (subject to the adjustment in certain events). The Company financed the cash portion of the purchase price with the proceeds of a term loan under a $280 million credit facility with Fleet Bank N.A. and Wachovia Bank of Georgia, N.A., as lead lenders. The Company granted Odyssey certain registration rights with respect to the Warrants and shares of Common Stock purchasable upon exercise of the Warrants. Immediately following the closing of the acquisition, the Company caused Holdings to be merged with and into the Company, and as a result of the merger, Monarch became a wholly-owned subsidiary of the Company. In connection with the merger, Messrs. Loemker and Paxton each received 125,229 shares of Common Stock in exchange for their equity interests in Holdings, and employees of Holdings received incentive stock options to purchase an aggregate of 995,575 shares of Common Stock (including options to purchase 500,918 shares granted to Mr. Paxton) pursuant to the Company's 1990 Employee Stock Option Plan in exchange for outstanding options to purchase Holding's common stock. On March 13, 1997, Monarch commenced a cash tender offer for its $100,000,000 principal amount 12.5% Senior Notes due 2003 (the "Monarch Notes"). The offer expires on April 10, 1997. The redemption price will be $1,137.50 for each $1,000 of principal of the Monarch Notes, and the Company will pay a consent payment of $30 per $1,000 of principal of the Monarch Notes to each holder that consents to certain amendments to the Indenture under which the Monarch Notes were issued. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS In 1996, the Company engaged in only one industry segment: the design, development, manufacture and sale of apparel and textile identification materials. Whether the end-use product is manufactured by the Company or the Company provides the customer with the bar code or label system and related supplies is dependent upon the individual customer preference or need. The Company believes that all of its products and services, including printed and woven labels, in-plant bar code and label systems, coated fabrics and ink foils fall within one class of similar products and services, in that the end-use product is similar. All products are marketed and sold through a centralized distribution system in the United States, with a similar centralized distribution systems in Europe. (c) NARRATIVE DESCRIPTION OF BUSINESS PAXAR Products The Company is vertically integrated in its major product lines which permits it to better serve its customers, control quality, reduce costs and speed delivery of products. It designs and builds most of its systems equipment and develops most of the operating software and all of the application software for its systems. The Company also formulates coatings and inks, coats fabrics, weaves narrow label fabrics, dyes and finishes fabrics and designs and prints tags and labels. Tag and Label Systems The Company's tag and label systems consist primarily of bar code tag systems and hot-stamp label printers. These systems include complete hardware and software packages that enable customers to print, cut and batch large volumes of labels and tags in their plants. The sale of a system to a customer generally results in ongoing sales of inks, fabrics, tags and other supplies to the customer. In 1996 and 1995, tag and label systems, supplies and related services accounted for approximately 50% and 54%, respectively, of the Company's sales. Manufacturers may use both a hot-stamp printing system and a bar code system, since the systems provide complementary functions. 4 5 Bar Code Systems The Company has experienced substantial growth in its bar code systems business in the United States. Such systems have not reached the same stage of widespread use in Europe. Apparel retailers require bar coded tags on their products to permit more accurate tracking of the products in stores which, in turn, allows retailers to better monitor consumer demand and more effectively control inventories. Paxar's bar code tags and in-plant bar coding systems enable manufacturers to accommodate retailers' demands in a rapid and cost-effective manner. Bar codes consist of a series of lines or bars printed on a contrasting background. By varying the width of the bars and the spaces between bars, the bar code is encoded with information to identify an item, which enables the user's data system to provide the user with relevant information about that item, such as its location, cost, selling price and manufacturer. Bar codes are read by a fixed or hand-held scanning device, which transmits information to data collection systems, including computers, electronic cash registers and portable data collection devices. The Company has specialized in producing clearly readable and accurate tags, from which a variety of bar code readers can capture accurate data. The bar code tag systems manufactured by the Company include personal computers, electronic bar code printers, thermal ink, pre-printed tag stock and supporting software. The printers are controlled by computers and print variable information on tags, including bar codes and garment sizes. Data can be input to the bar code printer through simple stand-alone keyboards with a built-in display, personal computers with Paxar's application software or downloading from the manufacturer's central computer. Hot-Stamp Printing Systems Hot-stamp printing systems include hot-stamp printers, fabrics, inks and printing accessories, which are used by manufacturers for in-plant printing of care labels and labels that carry brand logo, size and other information for the retail customer. Such systems provide manufacturers with the flexibility to imprint labels quickly in response to production order specifications. Tags and Labels The Company designs and produces tags and woven and printed labels in its various manufacturing facilities in the United States, England, Italy and Hong Kong and ships them to domestic and foreign manufacturers. The Company's labels are printed on a wide range of fabrics and other materials. Its woven labels consist of jacquard, multi-color labels woven on broad looms and needle looms. They are primarily used to build brand identification for apparel and to provide information to consumers. The Company's multi-color printed labels are printed on coated fabrics and narrow woven fabrics using various types of high-speed equipment and are used primarily for product identification and consumer information on apparel. These labels are produced in large runs with few changes. Merchandise tags are multi-color printed tags and bar code price tags used primarily for promotion and customer information and inventory control. Sales and Marketing The Company employs salespersons who are compensated on a salary and bonus basis. These salespersons are located in leased offices across the United States, at the Company's Canadian branch, and at subsidiary companies in the United Kingdom, Germany, Belgium, Italy, Poland, Spain, Mexico, Hong Kong and Singapore. In addition, there are non-exclusive manufacturer's representatives located throughout the United States who sell the Company's products on a commission basis, as well as international and export distributors and commission agents, located in Europe, Africa, the Far East and Latin America. Sales promotion activities include direct mail campaigns, publication of brochures, participation in trade shows, publicity and advertising principally in trade journals. The business of the Company is not highly seasonal in nature. Sources and Availability of Raw Materials The Company purchases fabrics, inks, chemicals, yarns and other raw materials from major suppliers located throughout the United States and abroad. The Company believes that such materials are in good supply and are available from multiple sources. 5 6 Patents, Trademarks and Licenses The Company relies upon trade secrets and confidentiality to protect the proprietary nature of its technology. The Company owns a trademark for the name FASCO in the United States and in certain foreign countries. The Company holds certain patents and trademarks which the Company does not deem to be material to its operations. Working Capital Practices The Company does not engage in unusual practices regarding inventories, receivables or other items of working capital. Customers The Company has more than 10,000 customers, including major retailers and apparel manufacturers such as Levi Strauss, Sears, J.C. Penney, The Limited, Liz Claiborne, Fruit-of-the-Loom, Sara Lee, Jockey, Land's End, The Lee Co. and L.L. Bean. For the fiscal year ended December 31, 1996, Levi Strauss represented approximately 11% of the Company's total sales. Backlog The Company's total backlog of orders at December 31, 1996 was approximately $20.8 million, as compared with $15.7 million at December 31, 1995. Management estimates that more than fifty percent (50%) of annual sales consist of orders which the Company typically fills within one month of receipt. The balance of orders are for products which are ordered to individual customer specifications and are for delivery within two to six months. Competitive Conditions The Company competes in both the domestic and international markets by means of price, product quality, innovation and customer services. The Company competes with a large number of independent, often family-owned, companies and a division of a large corporation. This large corporation possesses greater financial resources than the Company. Environmental Compliance Environmental aspects of the Company's business are regulated primarily by the ordinances of the localities where the Company's properties are situated. See "Item 3 - Legal Proceedings." Employees As of December 31, 1996, the Company employed worldwide 2,095 persons. Approximately 202 production persons of the Company in several locations in the United States are covered by four different union contracts, which expire at various times from July 1997 to October 1998. The Company has no recent history of material labor disputes. The Company believes that it has good employee relations. MONARCH MARKING SYSTEMS Principal Products and Services Monarch's products consist of Identification and Pricing Solutions ("IPS") labelers, Automated Identification Systems ("AIS") printers and the related supplies for these systems. Monarch also generates revenue by providing maintenance services on its products. IPS Labelers Monarch's labelers are tabletop or portable, handheld mechanical labelers that print one to three lines of alphanumeric information in a variety of print types and sizes. These products, which are made of highly durable molded plastic parts, have multiple applications including merchandise pricing, promotional labeling and component identification. Monarch manufactures models ranging from simple labelers that print one line of alphanumeric text with few characters to larger labelers that print three lines of alphanumeric text with more than thirty characters. Monarch also manufactures a broad range of supplies utilized with these labelers. AIS Printers Monarch's AIS family of bar code machines consists of tabletop, handheld and portable thermal transfer and direct thermal printers. Thermal transfer printers create an image by applying an electrically heated printhead onto a 6 7 ribbon that releases ink onto labeling stock. Thermal transfer printers produce excellent image quality which can be used with a wide variety of papers. Direct thermal printers create an image by applying an electrically heated printhead directly to specially treated paper that changes color when heated. Direct thermal technology is preferable for the customer whose needs are for a smaller less expensive printing system, where image durability is less critical, and who does not require specialty labeling stock such as plastics or metal foils. Pursuant to the rules of the Securities and Exchange Commission, Monarch is required to file an Annual Report on Form 10-K for the fiscal year ended December 31, 1996 ("Monarch's 1996 Form 10-K"). For additional information concerning Monarch and its business, see Monarch's 1996 Form 10-K. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Certain financial information for operations in the United States, Europe and Asia is set forth below.
YEARS ENDED DECEMBER 31 1996 1995 1994 ---- ---- ---- (IN THOUSANDS) Sales to unaffiliated customers: United States - Domestic $ 130,672 $ 130,371 $ 117,647 - Export 9,873 8,359 9,347 Europe 53,151 42,653 26,685 Asia 26,132 20,053 12,933 --------- --------- --------- $ 219,828 $ 201,436 $ 166,612 ========= ========= ========= Operating income: United States - Domestic $ 18,500 $ 18,012 $ 15,364 - Export 1,370 2,347 2,570 Europe 7,735 6,912 3,372 Asia 7,237 4,993 3,126 --------- --------- --------- 34,842 32,264 24,432 Corporate expenses (8,473) (9,127) (6,451) --------- --------- --------- $ 26,369 $ 23,137 $ 17,981 ========= ========= ========= Assets employed United States and Export $ 116,605 $ 96,054 $ 75,803 Europe 46,109 47,591 43,807 Asia 19,445 13,495 9,093 --------- --------- --------- $ 182,159 $ 157,140 $ 128,703 ========= ========= =========
United States assets employed are used to manufacture products sold to domestic U.S. customers, export customers and in certain situations to non-U.S. intercompany customers. 7 8 ITEM 2: PROPERTIES The Company utilizes the following facilities as of the date hereof:
SQUARE OWNED/ LEASE LOCATION FOOTAGE LEASED EXPIRATION USED FOR -------- ------- ------ ---------- -------- White Plains, New York 29,538 Leased 2003 Executive and Administrative Offices Month- Sayre, Pennsylvania 36,000 Leased to-Month Manufacturing Sayre, Pennsylvania 58,000 Owned Administrative and Manufacturing Orangeburg, New York 60,000 Owned Manufacturing Milan, Italy 1,937 Leased 1998 Office space Milan, Italy 3,767 Leased 1997 Warehouse Ancarano, Italy 86,368 Owned Administrative and Manufacturing Pero, Italy 2,691 Leased 2000 Warehouse Carpi, Italy 18,837 Leased 2004 Manufacturing Nottingham, England 17,000 Owned Administrative and Manufacturing Runcorn, England 37,237 Leased 2005 Administrative and Manufacturing Runcorn, England 23,131 Leased 2011 Manufacturing Paterson, New Jersey 53,833 Owned Administrative and Manufacturing Hillsville, Virginia 39,144 Owned Manufacturing Lenoir, North Carolina 120,000 Owned Administrative and Manufacturing Lenoir, North Carolina 17,180 Leased 1997 Warehouse Lenoir, North Carolina 11,600 Leased 1997 Warehouse Warsaw, Poland 1,800 Leased 1998 Administrative and Manufacturing Lohne, West Germany 8,910 Leased 2002 Warehouse and office space Vandalia, Ohio 40,590 Leased 2001 Administrative and Manufacturing Troy, Pennsylvania 60,000 Owned Unoccupied Canton, North Carolina 32,665 Owned Manufacturing Rock Hill, South Carolina 56,000 Owned Manufacturing
8 9
SQUARE OWNED/ LEASE LOCATION FOOTAGE LEASED EXPIRATION USED FOR -------- ------- ------ ---------- -------- Santa Catarina, Brazil 13,000 Leased 1998 Administrative and Manufacturing Hong Kong 26,536 Leased 1998 Administrative and Manufacturing Hong Kong 12,542 Leased 1997 Administrative and Manufacturing Hong Kong 6,862 Leased 1998 Administrative and Manufacturing
In addition to the facilities described above, the Company has, as of March 1, 1997, twelve sales offices located in San Francisco, CA; Mission Viejo, CA; Greensboro, NC; Paletine, IL; Dallas, TX; New York, NY; Canton, GA; Singapore; Montreal, Canada; Mexico City, Mexico; Barcelona, Spain; and Ghent, Belgium. These offices are subject to leases expiring between 1997 and 2001. The Company believes that its facilities are adequate to maintain its existing business activities. ITEM 3: LEGAL PROCEEDINGS The Company is one of numerous parties to a consent order with the U.S. Environmental Protection Agency (the "EPA") that provides for the clean up of alleged contamination of a site in Carlstadt, New Jersey. In August 1989, the Company was also joined as one of a large number of defendants in a related action brought by potentially responsible parties in the United States District Court for the District of New Jersey. Management of the Company believes that its potential liability in connection with the clean up and litigation relating to the Carlstadt site and two other sites will not have a material adverse effect on the financial condition or the results of operations of the Company. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the shareholders of the Company during the fourth quarter of the fiscal year ended December 31, 1996. 9 10 PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS (a) The Company's Common Stock has been traded on the New York Stock Exchange using the symbol "PXR." The following table sets forth the 1996 and 1995 high and low sales prices of the Company's Common Stock as reported on the New York Stock Exchange for the periods indicated, as adjusted to reflect any stock splits or stock dividends effectuated by the Company.
CALENDAR YEAR 1996 SALES PRICES HIGH LOW ---- --- First Quarter 13 1/4 8 7/8 Second Quarter 14 3/4 12 1/4 Third Quarter 17 15 Fourth Quarter 18 3/4 15 1/2 CALENDAR YEAR 1995 First Quarter 8 1/8 6 1/8 Second Quarter 12 3/4 7 3/4 Third Quarter 12 7/8 9 1/4 Fourth Quarter 12 1/4 9 1/8
(b) As of February 27, 1997, there were approximately 994 record holders of the Company's Common Stock. (c) The Company has never paid any cash dividends on its Common Stock and has no present intention of doing so. The Company intends to retain all of its earnings for use in its business. 10 11 ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data as of and for the five-year period ended December 31, 1996 have been derived from the Company's Consolidated Financial Statements audited by Arthur Andersen LLP, independent public accountants. This data should be read in conjunction with Consolidated Financial Statements and related Notes for the year ended December 31, 1996, and the Management's Discussion and Analysis of Financial Condition and Results of Operations. All data, except employee and per share data, are in thousands.
1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- OPERATING RESULTS Sales $219,828 $201,436 $166,612 $138,847 $132,556 Gross profit 81,495 73,024 59,219 50,622 47,557 Operating income 26,369 23,137 17,981 14,950 14,706 Net income 21,804 15,709 11,601 9,358 8,374 Earnings per share (a) $0.77 $0.56 $0.42 $0.34 $0.33 FINANCIAL CONDITION Working capital $ 49,334 $ 46,679 $ 38,972 $ 30,213 $ 28,235 Current ratio 2.7 2.9 2.6 2.7 3.0 Property, plant and equipment, net $ 59,657 $ 53,856 $ 50,047 $ 36,215 $ 28,269 Total assets 182,159 157,140 128,703 85,493 72,756 Long-term debt 19,937 23,121 13,796 718 2,107 Shareholders' equity 119,920 95,196 77,853 62,457 52,801 Debt as a percent of total capital 14.3% 19.5% 15.0% 1.1% 3.8% FINANCIAL STATISTICS Gross margin as a percent of sales 37.1% 36.3% 35.6% 36.5% 35.9% SG&A as a percent of sales 25.1% 24.8% 24.8% 25.7% 24.8% Operating income as a percent of sales 12.0% 11.5% 10.8% 10.8% 11.1% Net income as a percent of sales 9.9% 7.8% 7.0% 6.7% 6.3% Effective income tax rate 25.2% 28.9% 32.0% 35.3% 39.8% Return on shareholders' equity 20.3% 18.2% 16.5% 16.2% 21.5% OTHER DATA EBITDA(b) $ 36,087 $ 31,275 $ 24,762 $ 19,760 $ 18,446 Operating cash flow 25,706 23,052 16,443 11,671 7,583 Capital expenditures 13,804 12,328 11,218 11,937 9,228 Depreciation and amortization 9,718 8,138 6,781 4,810 3,740 Stock dividends 25% 25% 25% 25% 25% Additional stock dividend - - - - 25% Cash dividends None None None None None Number of employees 2,095 1,923 1,891 1,477 1,492 Weighted average shares outstanding (a) 28,414 28,028 27,423 27,224 25,266 Shares outstanding (a) 28,029 27,760 27,431 26,864 26,744 Book value per share (a) $ 4.28 $ 3.43 $ 2.84 $ 2.32 $ 1.97
(a) Retroactively adjusted to reflect stock dividends. (b) Earnings before interest, taxes, depreciation and amortization. 11 12 ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS: The following table shows each element of the income statement as a percent of sales for the years indicated:
1996 1995 1994 ---- ---- ---- Sales 100.0% 100.0% 100.0% Cost of sales 62.9 63.7 64.4 ----- ----- ----- Gross margin 37.1 36.3 35.6 Selling, general and administrative expenses 25.1 24.8 24.8 ----- ----- ----- Operating income 12.0 11.5 10.8 Equity in net income of affiliate 1.9 0.3 -- Interest expense, net (0.6) (0.8) (0.5) ----- ----- ----- Income before taxes 13.3 11.0 10.3 Taxes on income 3.4 3.2 3.3 ----- ----- ----- Net income 9.9% 7.8% 7.0% ===== ===== =====
1996 COMPARED WITH 1995 Sales in 1996 increased by 9% over 1995 reaching a record $219.8 million. Domestic sales increased slightly; European sales increased $10.4 million or 25%; and Far East sales increased $6.1 million or 30%. Total non-U.S. and export sales were $89.2 million in 1996 or 41% of consolidated sales, up from $71.1 million or 35% in 1995. In 1996, the Company's apparel identification products business grew 14% and its apparel systems business grew 4%, as compared with 1995. The gross profit for the year ended December 31, 1996 increased to $81.5 million compared to $73.0 million for the year ended December 31, 1995, an increase of 12%. The gross margin increased to 37.1% for the year 1996 compared to 36.3% for the year 1995. Selling, general and administrative expenses ("SG&A") increased to $55.1 million for the year ended December 31, 1996, compared to $49.9 million for the 1995 period, an increase of 11%. As a percent of sales, SG&A was 25.1% for the year 1996 compared to 24.8% for the year 1995. Operating income increased to $26.4 million (12% of sales) for the year ended December 31, 1996 compared to $23.1 million (11.5% of sales) for the year ended December 31, 1995. Equity in net income of affiliate was $4.1 million for the year ended December 31, 1996, reflecting the Company's investment in Monarch Marking Systems, Inc. ("Monarch"), effective June 1995. (See Note 3 of Notes to the Consolidated Financial Statements.) Interest expense, net, decreased to $1.4 million for the year ended December 31, 1996 from $1.6 million in 1995. Income before taxes increased to $29.1 million (13.3% of sales) for the year ended December 31, 1996 as compared with $22.1 million (11% of sales) for the year ended December 31, 1995. The increase in pretax profit for the year ended December 31, 1996 compared to the year ended December 31, 1995 is summarized as follows: 12 13
(in millions) Sales increase, net of increased SG&A expenses $ 1.6 Improvement in gross margin 1.7 Increased equity in net income of affiliate 3.5 Decreased interest expense, net 0.2 ----- Total increase $ 7.0 =====
The effective income tax rate was 25% for the year ended December 31, 1996 compared to 29% for the year ended December 31, 1995. The overall effective tax rate is impacted by many factors including different statutory rates on foreign income. The lower tax rate is attributable primarily to the significant increase in equity in the net income of affiliate, a large portion of which is excluded from tax expense. The tax rate is below the U.S. statutory Federal income tax rate of 35% due to lower rates on income derived from foreign sources, particularly from Hong Kong and in Italy where the companies acquired in 1994 received special tax abatement incentives which expire through 1999. Net income for the year ended December 31, 1996 increased 39% to $21.8 million (9.9% of sales) from $15.7 million (7.8% of sales) in 1995. Earnings per share was $0.77 in 1996, up from $0.56 in 1995. 1995 COMPARED WITH 1994 Sales in 1995 increased by 21% over 1994 reaching a record $201.4 million. Domestic sales increased $12.7 million or 11%; European sales increased $16.0 million or 60%; and Asian sales increased $7.1 million or 55%. Total non-U.S. and export sales were $71.1 million in 1995 or 35% of consolidated sales, up from $49.0 million or 29% in 1994. Acquisitions made in 1994 contributed $19.4 million in 1995 and $8.9 million in 1994 to European sales. In 1995, the Company's apparel identification products business grew 20% and its systems business grew 22%, as compared with 1994. The gross profit for the year 1995 increased to $73.0 million compared to $59.2 million for 1994, an increase of 23%. The gross margin increased to 36.3% for the year 1995 compared to 35.6% for the year 1994. Selling, general and administrative ("SG&A") expenses increased to $49.9 million for the year 1995, compared to $41.2 million for the 1994 period, an increase of 21%. As a percent of sales, SG&A was 24.8% for the years 1995 and 1994. Operating income increased 29% to $23.1 million (11.5% of sales) for the year 1995 compared to $18.0 million (10.8% of sales) for the year 1994. Equity in net income of affiliate was $592,000 for the year ended December 31, 1995, reflecting the Company's investment in Monarch effective June 1995. (See Note 3 of Notes to Consolidated Financial Statements.) Interest expense, net increased to $1.6 million in 1995 compared to $0.9 million in 1994. The increase was attributable to higher levels of bank borrowings arising from the acquisitions in May and October 1994 and the $15.0 million invested in Monarch. Income before taxes increased to $22.1 million (11% of sales) for the year 1995, as compared with $17.1 million (10.3% of sales) for the year 1994. The increase in pretax profit for the year 1995 compared to the year 1994 is summarized as follows: 13 14
(in millions) Sales increase, net of increased SG&A expenses $ 4.0 Improvement in gross margin 1.1 Equity in net income of affiliate 0.6 Increased interest expense, net (0.7) ----- Total increase $ 5.0 =====
The effective income tax rate was 29% for the year ended December 31, 1995 compared to 32% for the year 1994. The overall effective tax rate is impacted by many factors including different statutory rates on foreign income. The lower rate is mainly attributable to lower rates on income derived from foreign sources, particularly from Hong Kong and in Italy where the companies acquired in 1994 receive special tax abatement incentives which expire from 1996 through 1999. Net income for the year ended December 31, 1995 increased 35% to $15.7 million (7.8% of sales) from $11.6 million (7% of sales) in 1994. Earnings per share was $0.56 in 1995, up from $0.42 in 1994. LIQUIDITY AND CAPITAL RESOURCES: The table below presents summary cash flow information for the years indicated:
(in millions) 1996 1995 1994 ---- ---- ---- Net cash provided by operating activities $ 25.7 $ 23.1 $ 16.4 Net cash used by investing activities (21.7) (31.0) (28.4) Net cash provided (used) by financing (2.8) 8.2 14.5 ------- ------- ------- activities Total change in cash (a) $ 1.2 $ 0.3 $ 2.5 ======= ======= =======
(a) Before exchange rate effects. OPERATING ACTIVITIES Cash provided by operating activities continues to be the Company's primary source of funds to finance operating needs and internal growth opportunities. The net cash provided by operating activities increased to $25.7 million in 1996, up $2.6 million or 12% as compared to 1995. Cash provided in 1995 was $23.1 million, an increase of $6.6 million or 40% from $16.4 million in 1994. Depreciation and amortization was $9.7 million in 1996 compared to $8.1 million in 1995. The increase is due mainly to increased capital expenditures and increased amortization of goodwill as a result of 1996 acquisitions. INVESTING ACTIVITIES In 1996, cash provided by operating activities was used to fund capital expenditures of $13.8 million. Other than projects for employee safety and environmental improvement, all new capital projects are carefully analyzed and are required to make a positive contribution on a net present value basis, generating an attractive internal rate of return on invested capital. Capital expenditures were $12.3 million in 1995. On January 22, 1996, the Company, through its United Kingdom subsidiary, purchased the outstanding capital stock of Brian Pulfrey Ltd. (See Note 2 of Notes to the Consolidated Financial Statements.) 14 15 On June 29, 1995, the Company invested $15.0 million in a new company jointly formed by Paxar Corporation and Odyssey Partners L.P., to acquire Monarch Marking Systems, Inc. ("Monarch"). (See Note 3 of Notes to the Consolidated Financial Statements.) On May 2, 1994, the Company acquired Collitex, S.r.l. and Astria S.r.l. ("the Collitex Group") for a total purchase price of approximately $14.1 million. (See Note 2 of Notes to the Consolidated Financial Statements.) On March 3, 1997, the Company acquired the 49% equity interest of Odyssey Partners, L.P. in Monarch Holdings, Inc. ("Holdings") for (i) $94,083,750 in cash, (ii) a promissory note in the amount of $5,907,559 at an annual interest rate of 4.88%, payable on January 2, 1998 secured by a letter of credit issued by Fleet Bank, N.A. and (iii) five year warrants (the "Warrants") to purchase (A) 1,000,000 shares of the Company's common stock, par value $.10 (the "Common Stock"), at an exercise price of $17.50 per share (subject to adjustment in certain events) and (B) 200,000 shares of Common Stock at an exercise price of $21.875 per share (subject to the adjustment in certain events). The Company financed the cash portion of the purchase price with the proceeds of a term loan under a $280 million credit facility with Fleet Bank, N.A. and Wachovia Bank of Georgia, N.A., as lead lenders. Immediately following the closing of the acquisition, the Company caused Holdings to be merged with and into the Company, and as a result of the merger, Monarch became a wholly-owned subsidiary of the Company. For additional information concerning the acquisition and merger, see Item 1(a): "Description of Business - Acquisition of Monarch Marking Systems, Inc." On March 13, 1997, Monarch commenced a cash tender offer for its $100,000,000 principal amount 12.5% Senior Notes due 2003 (the "Monarch Notes"). The offer expires on April 10, 1997. The redemption price will be $1,137.50 for each $1,000 of principal of the Monarch Notes, and the Company will pay a consent payment of $30 per $1,000 of principal of the Monarch Notes to each holder that consents to certain amendments to the Indenture under which the Monarch Notes were issued. The Company intends to continue its growth, in part by acquisitions of other complementary or related businesses, and believes that further acquisitions outside the United States would be of important strategic value. FINANCING ACTIVITIES The table below shows the components of total capital for the years indicated:
(in millions) 1996 1995 1994 ---- ---- ---- Long-term debt $ 19.9 $ 23.1 $ 13.8 Shareholders' equity 119.9 95.2 77.9 -------- -------- ------- Total capital $ 139.8 $ 118.3 $ 91.7 ======== ======== ======= Long-term debt as a percent of total capital 14.3% 19.5% 15.0% ======== ======== =======
Long-term debt decreased by $3.2 million during 1996 to $19.9 million from $23.1 million in 1995. At December 31, 1996, long-term debt as a percent of total capital was 14.3% as compared to 19.5% at December 31, 1995. In addition, on May 16, 1996, the Company raised $8.0 million by the sale of Economic Development Revenue Bonds issued by the State of South Carolina. The Company was reimbursed $3.2 million for qualified expenses and the balance of $4.9 million is invested primarily in short-term U.S. treasury securities. The bonds, which will mature in 15 years, will be used to finance the construction of the Rock Hill, South Carolina, manufacturing facility, as well as future expansion of and improvements to the project. On June 18, 1996, the Company amended and restated its revolving credit agreement, allowing it to borrow up to $60 million. At December 31, 1996, there was $49.8 million available under the revolving credit agreement and the Company was in compliance with all provisions thereof. This credit facility was terminated on March 3, 1997. 15 16 On March 3, 1997, the Company entered into a 6-year $280 million credit facility with Fleet Bank, N.A. and Wachovia Bank of Georgia, N.A., as lead lenders, consisting of a $140 million term loan facility and a $140 million revolving credit facility. Borrowings under the term loan and revolving credit facilities bear interest at rates referenced to the LIBOR rate (with applicable margins varying in accordance with Registrant's attainment of specified financial tests) or the Prime Rate (as defined) and are guaranteed by the domestic subsidiaries of the Company (other than Monarch) and a pledge of the stock of Monarch. As of March 25, 1997, borrowings under the term loan and revolving credit facilities were $105,000,000 and $3,500,000, respectively, and the amount available was $35,000,000 and $136,500,000, respectively. ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial information required by Item 8 is included elsewhere in this report. (See Part IV, Item 14). ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ON FINANCIAL DISCLOSURE None. 16 17 PART III ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders scheduled to be held on April 24, 1997. ITEM 11: EXECUTIVE COMPENSATION Incorporated herein by reference to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders scheduled to be held on April 24, 1997. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders scheduled to be held on April 24, 1997. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference to the Company's Definitive Proxy Statement with respect to the Company's Annual Meeting of Shareholders scheduled to be held on April 24, 1997. 17 18 PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) DOCUMENTS 1. FINANCIAL STATEMENTS - Report of Independent Public Accountants F-1 Consolidated Balance Sheets December 31, 1996 and 1995 F-2 Consolidated Statements of Income Years ended December 31, 1996, 1995 and 1994 F-3 Consolidated Statements of Shareholders' Equity Years ended December 31, 1996, 1995 and 1994 F-4 Consolidated Statements of Cash Flows Years ended December 31, 1996, 1995 and 1994 F-5 Notes to Consolidated Financial Statements F-6 to F-17 2. FINANCIAL STATEMENT SCHEDULE - Schedule II - Valuation and Qualifying Accounts F-18 Notes: All other schedules called for under Regulation S-X are not submitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto. Separate financial statements of the Registrant have been omitted because the Registrant is primarily an operating company. All subsidiaries included in the consolidated financial statements are totally owned, and none of the subsidiaries have indebtedness which is not guaranteed by the Registrant. 3. EXHIBITS 3.1 Amended and Restated Certificate of Incorporation. (G) 3.2 By-Laws (A) 4.1 Warrant Agreement for "A" Warrants between the Registrant and Odyssey Partners, L.P. dated March 3, 1997. (K). 4.2 Odyssey Partners, L.P. Certificate for 1,000,000 Warrants dated March 3, 1997. (K). 4.3 Warrant Agreement for "B" Warrants between the Registrant and Odyssey Partners, L.P. dated March 3, 1997. (K). 4.4 Odyssey Partners, L.P. Certificate for 200,000 Warrants dated March 3, 1997. (K). 10.1 Lease, dated October 1, 1974, for executive offices of Registrant in Pearl River, New York. (A) 10.2 Employment Agreement, dated as of December 16, 1986, between Registrant and Arthur Hershaft. (C). 10.3 Employment Agreement, dated February 13, 1989, between Registrant and Victor Hershaft. (D). 10.4 Stock Purchase Agreement, by and between Arthur Hershaft and Registrant, dated as of December 19, 1989. (E). 10.5 Registrant's 1981 Incentive Stock Option Plan. (B). 10.6 Registrant's 1990 Employee Stock Option Plan. (F). 18 19 10.7 Amended and Restated Stock Purchase Agreement, by and between Arthur Hershaft and the Registrant. (G). 10.8 Multi-Currency Revolving Credit Agreement, dated March 30, 1994 (H). 10.9 Omnibus Purchase and Sale Agreement dated June 6, 1995 by and between Pitney Bowes Inc., Monarch Marking Systems, Inc., Pitney Bowes Marking Systems Ltd., Pitney Bowes International Holdings Inc., Pitney Bowes France S.A. and Monarch Acquisition Corp. (I). 10.10 Stockholders' Agreement dated June 29, 1995 among Monarch Acquisition Corp., Paxar Corporation and Odyssey Partners, L.P. (I). 10.11 Stock Purchase Agreement dated as of December 20, 1996 between the Registrant and Odyssey Partners, L.P. (J). 10.12 Amendment No. 1 to Stock Purchase Agreement dated as of March 3, 1997 between the Registrant and Odyssey Partners, L.P. (K). 10.13 Agreement and Plan of Merger dated as of March 3, 1997 by and among the Registrant, Monarch Holdings, Inc., Thomas Loemker and John W. Paxton. (K). 10.14 Note dated as of March 3, 1997 between the Registrant and Odyssey Partners, L.P. (K). 10.15 Letter of Credit dated as of March 3, 1997 issued by Fleet Bank in favor of Odyssey Partners, L.P., for the account of the Registrant. (K). 10.16 Registration Rights Agreement dated as of March 3, 1997 between the Registrant and Odyssey Partners, L.P. (K). 10.17 Credit Agreement dated March 3, 1997. 11.1 Statement re Computation of Per Share Earnings. 21.1 List of Subsidiaries of Registrant. 23.1 Consent of Independent Public Accountants. 27.1 Financial Data Schedule -------- (A) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1980. 19 20 (B) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985. (C) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987. (D) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (E) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (F) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (G) Incorporated herein by reference from Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (H) Incorporated herein by reference from Exhibits to the Registrant's Current Report on Form 8-K dated March 30, 1994. (I) Incorporated herein by reference from Exhibits to Registrant's Current Report on Form 8-K dated June 29, 1995. (J) Incorporated herein by reference from Exhibits to Registrant's Current Report on Form 8-K dated December 20, 1996. (K) Incorporated herein by reference from Exhibits to Registrant's Current Report on Form 8-K dated March 3, 1997. (b) REPORTS ON FORM 8-K On January 3, 1997, the Registrant filed a Report on Form 8-K dated December 20, 1996, reporting that it had entered into an agreement to acquire the 49% equity interest of Odyssey Partners, L.P. in Monarch Holdings, Inc. (Item 2). 20 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PAXAR CORPORATION By: /s/ Arthur Hershaft - ----------------------------- Arthur Hershaft Chairman of the Board of Directors, and Chief Executive Officer Dated: March 31, 1997 21 22 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Arthur Hershaft - ---------------------------------- Arthur Hershaft Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) Dated: March 31, 1997 By: /s/ Victor Hershaft - ---------------------------------- Victor Hershaft President and Chief Operating Officer Director Dated: March 31, 1997 By: /s/ Jack Becker - ---------------------------------- Jack Becker Director Dated: March 31, 1997 By: /s/ Robert T. Puopolo - ---------------------------------- Robert T. Puopolo Director Dated: March 31, 1997 By: /s/ David E. McKinney - ---------------------------------- David E. McKinney Director Dated: March 31, 1997 By: /s/ Thomas R. Loemker - ---------------------------------- Thomas R. Loemker Director Dated: March 31, 1997 By: /s/ Joseph Fetzner - ---------------------------------- Joseph Fetzner Vice President Controller (Principal Financial and Accounting Officer) Dated: March 31, 1997 By: /s/ Leo Benatar - ---------------------------------- Leo Benatar Director Dated: March 31, 1997 By: /s/ Robert G. Laidlaw - ---------------------------------- Robert Laidlaw Director Dated: March 31, 1997 By: /s/ Sidney Merians - ---------------------------------- Sidney Merians Director Dated: March 31, 1997 By: /s/ Walter W. Williams - ---------------------------------- Walter W. Williams Director Dated: March 31, 1997 22 23 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Paxar Corporation: We have audited the accompanying consolidated balance sheets of Paxar Corporation (a New York corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Paxar Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as whole. The schedule listed in the index of financial statements is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements taken as a whole and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Stamford, Connecticut February 10, 1997 F-1 23 24 PAXAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 DECEMBER 31, 1995 ----------------- ----------------- (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ASSETS Current assets: Cash $ 4,816 $ 3,466 Short-term investments 1,857 3,219 Receivables, less allowance for doubtful accounts of $751 in 1996 and $585 in 1995 36,870 31,321 Inventories 30,681 29,322 Other current assets 3,478 3,082 Deferred income taxes 574 527 --------- --------- Total current assets 78,276 70,937 --------- --------- Property, plant and equipment, at cost 98,517 83,918 Accumulated depreciation (38,860) (30,062) --------- --------- Net property, plant and equipment 59,657 53,856 --------- --------- Long-term investments 4,911 -- Investment in affiliate 20,129 15,969 Goodwill 18,412 15,802 Other assets 774 576 --------- --------- $ 182,159 $ 157,140 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Due to banks $ 1,699 $ 2,991 Current maturities of long-term debt 612 529 Accounts payable and accrued liabilities 23,616 19,143 Accrued taxes on income 3,015 1,595 --------- --------- Total current liabilities 28,942 24,258 --------- --------- Long-term debt 19,937 23,121 Deferred income taxes 11,858 11,136 Other liabilities 1,502 3,429 Shareholders' equity: Preferred Stock, $0.01 par value, 5,000,000 shares authorized, none issued and outstanding -- -- Common Stock, $0.10 par value, 100,000,000 shares authorized, 28,029,211 and 22,207,820 shares issued and outstanding in 1996 and 1995, respectively 2,803 2,221 Paid-in capital 38,312 36,723 Retained earnings 78,239 57,002 Foreign currency translation adjustments 566 (750) --------- --------- Total shareholders' equity 119,920 95,196 --------- --------- $ 182,159 $ 157,140 ========= =========
See Notes to Consolidated Financial Statements F - 2 24 25 PAXAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 1995 1994 ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Sales $ 219,828 $ 201,436 $ 166,612 Cost of sales 138,333 128,412 107,393 --------- --------- --------- Gross profit 81,495 73,024 59,219 Selling, general and administrative expenses 55,126 49,887 41,238 --------- --------- --------- Operating income 26,369 23,137 17,981 Equity in net income of affiliate 4,132 592 -- Interest expense, net (1,365) (1,628) (921) --------- --------- --------- Income before taxes 29,136 22,101 17,060 Taxes on income 7,332 6,392 5,459 --------- --------- --------- Net income $ 21,804 $ 15,709 $ 11,601 ========= ========= ========= Weighted average shares outstanding 28,414 28,028 27,423 ========= ========= ========= Earnings per share $ 0.77 $ 0.56 $ 0.42 ========= ========= =========
See Notes to Consolidated Financial Statements F - 3 25 26 PAXAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FOREIGN CURRENCY COMMON STOCK PAID-IN RETAINED TRANSLATION SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS ------ ------ ------- -------- ----------- BALANCE, DECEMBER 31, 1993 13,754,323 $1,375 $31,945 $ 30,493 $(1,356) Net income -- -- -- 11,601 -- Stock split 3,473,958 347 -- (352) -- Tax benefit from exercise of stock options -- -- 207 -- -- Stock issued - acquisitions 225,000 23 2,737 -- -- Exercise of stock options 77,320 8 249 -- -- Employee Stock Purchase Plan 25,460 3 294 -- -- Translation adjustments -- -- -- -- 279 ---------- ------ ------- -------- ------- BALANCE, DECEMBER 31, 1994 17,556,061 $1,756 $35,432 $ 41,742 $(1,077) Net income -- -- -- 15,709 -- Stock split 4,427,860 443 -- (449) -- Tax benefit from exercise of stock options -- -- 53 -- -- Exercise of stock options 173,147 17 536 -- -- Employee Stock Purchase Plan 50,752 5 702 -- -- Translation adjustments -- -- -- -- 327 ---------- ------ ------- -------- ------- BALANCE, DECEMBER 31, 1995 22,207,820 $2,221 $36,723 $ 57,002 $ (750) Net income -- -- -- 21,804 -- Stock split 5,581,905 558 -- (567) -- Tax benefit from exercise of stock options -- -- 57 -- -- Exercise of stock options 196,019 20 839 -- -- Employee Stock Purchase Plan 43,467 4 693 -- -- Translation adjustments -- -- -- -- 1,316 ---------- ------ ------- -------- ------- BALANCE, DECEMBER 31, 1996 28,029,211 $2,803 $38,312 $ 78,239 $ 566 ========== ====== ======= ======== =======
See Notes to Consolidated Financial Statements F - 4 26 27 PAXAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1996 1995 1994 ---- ---- ---- OPERATING ACTIVITIES: Net income $ 21,804 $ 15,709 $ 11,601 -------- -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,718 8,138 6,781 Deferred income taxes 675 1,021 2,398 Equity in net income of affiliate (4,132) (592) -- Changes in assets and liabilities, net of businesses acquired in 1996 and 1994: Receivables (4,981) (2,441) (1,811) Inventories (1,129) (2,277) (2,511) Other current assets (195) (302) (51) Accounts payable and accrued liabilities 4,483 1,197 (268) Taxes on income 1,390 796 (547) Other liabilities (1,927) 1,803 851 -------- -------- -------- 3,902 7,343 4,842 -------- -------- -------- Net cash provided by operating activities 25,706 23,052 16,443 -------- -------- -------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (13,804) (12,328) (11,218) Investment in affiliate -- (15,377) -- Acquisitions, excluding $2,760 of stock issued in 1994, net of cash acquired (4,242) (2,226) (15,957) Decrease (increase) in short-term investments 1,362 (1,854) (1,365) Purchase of long-term investments (4,911) -- -- Other (96) 876 129 -------- -------- -------- Net cash used in investing activities (21,691) (30,909) (28,411) -------- -------- -------- FINANCING ACTIVITIES: Increase (decrease) in short-term debt (1,209) (2,465) 2,853 Additions to long-term debt 21,690 21,603 22,163 Reductions in long-term debt (24,874) (12,278) (11,271) Exercise of stock options/Stock Purchase Plan 1,613 1,313 761 Cash paid in lieu of fractional shares (9) (6) (5) -------- -------- -------- Net cash (used in) provided by financing activities (2,789) 8,167 14,501 -------- -------- -------- OTHER ACTIVITIES: Effect of exchange rate changes on cash 124 20 (134) -------- -------- -------- Increase in cash 1,350 330 2,399 Cash, at beginning of year 3,466 3,136 737 -------- -------- -------- Cash, at end of year $ 4,816 $ 3,466 $ 3,136 ======== ======== ========
See Notes to Consolidated Financial Statements F - 5 27 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation: The consolidated financial statements include those of Paxar Corporation (the "Company") and its wholly-owned subsidiaries. The effects of all significant intercompany transactions have been eliminated. Short-term investments: Short-term investments consist of foreign lending institution and government bonds pledged as collateral against foreign debt, as well as certain other foreign financial institution commercial paper. Inventories: Inventories are stated at the lower of cost or market. The cost of all U.S. inventories of $19,127 and $20,273 as of December 31, 1996 and 1995, respectively, is determined using the last-in, first-out (LIFO) method. The cost of all foreign inventories of $11,554 and $9,049 as of December 31, 1996 and 1995, respectively, is determined using the first-in, first-out (FIFO) method. Property, plant and equipment: Property, plant and equipment is stated at cost, and is depreciated by the straight-line method over the estimated useful lives of the assets. Upon retirement or other disposition, the cost and accumulated depreciation are removed from the asset and accumulated depreciation accounts, and the net gain or loss is reflected in income. Beginning with 1993 additions, the Company adopted the composite method of depreciation, and accordingly, the cost of property retired or disposed, reduced by net salvage proceeds, will be charged against accumulated depreciation and no gain or loss will be recognized. Expenditures for maintenance and repairs are charged against income as incurred. Significant expenditures for betterments and renewals are capitalized. Income taxes: Deferred tax assets and liabilities are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The classification of deferred tax assets and liabilities corresponds with the classification of the underlying assets and liabilities giving rise to the temporary difference. Revenue recognition: Revenue is recognized when title passes to the customer, generally upon shipment. Earnings per share: Primary earnings per share is based on the weighted average number of shares of common stock and common stock equivalents outstanding during each year. Earnings per share for 1996, 1995 and 1994 includes the dilutive effect (536,000, 400,000 and 310,000 shares, respectively) of outstanding stock options. Primary and fully diluted earnings per share are the same. Earnings per share for 1995 and 1994 have been adjusted to reflect additional shares issued in connection with the stock dividends declared in 1996 (Note 10). Financial instruments: All financial instruments of the Company are carried at cost, which approximates fair value, with the exception of interest rate swaps. During 1995, the Company entered into a notional value interest rate swap transaction to manage its exposure to interest rate fluctuations. At December 31, 1996, the Company has an interest rate swap with a notional amount of F - 6 28 29 $15 million, which it uses to convert variable rates based on 1-month London Interbank Offered Rate to a fixed interest rate of 6.45% on certain of its revolving bank debt. The remaining duration of the swap is approximately 18 months. Net receipts or payments under the agreement are recognized as an adjustment to interest expense. Fair value estimates of the interest rate swap are based on the difference in the present value of variable rate future receipts and fixed rate future payments. At December 31, 1996, the net fair value of the Company's interest rate swap was a loss of approximately $91. Goodwill: Goodwill represents the excess of the cost of acquired companies over the sum of identifiable net assets. Goodwill is being amortized on a straight-line basis over periods up to 40 years. Subsequent to acquiring goodwill, the Company continually evaluates whether events and circumstances, including anticipated future operating results, indicate the remaining estimated useful life of goodwill may warrant revision. Based upon its most recent analysis, the Company believes that no material impairment of goodwill exists at December 31, 1996. Amortization charged to operations amounted to $509, $434 and $377 for 1996, 1995 and 1994 respectively. Foreign currency translation: Assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. Results of operations are translated using the average exchange rate prevailing throughout the period. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are included in shareholders' equity as foreign currency translation adjustments. Gains and losses resulting from foreign currency transactions are included in net income and were not significant in the past three years. Use of Estimates: The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to use certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain reclassifications have been made to prior year amounts to conform to the current year presentation. NOTE 2: BUSINESS ACQUISITIONS In January 1996, the Company, through its United Kingdom subsidiary, purchased the outstanding capital stock of Brian Pulfrey Limited ("Pulfrey"). The total purchase price, net of cash acquired, was approximately $4.2 million. Pulfrey manufactures printed labels and tags principally for U.K. apparel and retail companies. The acquisition did not have a material effect on the Company's financial statements. On May 2, 1994, the Company acquired, through its wholly-owned subsidiaries, ownership of Collitex, S.r.l. and its affiliates ("the Collitex Group"), an Italian company. The total purchase price, net of cash acquired, was approximately $14.1 million, which included issuance of 195,313 shares of the Company's common stock valued at $7.18 per share (share amounts adjusted for subsequent stock split) and $2.2 million due in April 1997, including $1.5 million of additional consideration, based upon the Collitex Group's earnings performance during the 1994-96 period. On October 10, 1994, the Company acquired, through its wholly-owned subsidiaries, Orvafin S.r.l. and its affiliates ("Orvac"), an Italian company. The total purchase price, net of cash acquired, was approximately $6.1 million, which included issuance of 195,313 shares of the Company's common stock, valued at $6.96 per share (share amounts adjusted for subsequent stock split) and $761 which was paid in October 1995. F - 7 29 30 These acquisitions have been accounted for as purchases with assets acquired and liabilities assumed recorded at their estimated fair values at the date of acquisition. The excess of the purchase price and transaction costs over the fair value of net assets acquired is recorded as goodwill. The operating results of the Collitex Group and Orvac are included in the accompanying consolidated statements of income beginning May, 1994 and October, 1994, respectively. The following unaudited proforma results of operations assumes the acquisitions occurred at the beginning of 1994. These proforma results do not purport to be indicative of the results of operations which may result in the future.
Year ended December 31, 1994 ----------------- (Unaudited) Sales $175,643 Net income $ 12,753 Earnings per share $ 0.46
NOTE 3: INVESTMENT IN AFFILIATE On June 29, 1995, the Company invested $15 million in a new joint venture company, which simultaneously acquired Monarch Marking Systems, Inc. and related companies ("Monarch"). Monarch manufactures and markets marking equipment and supplies in the U.S., United Kingdom, Germany, France, Mexico, Canada, Hong Kong and Australia, and sells and distributes marking equipment and supplies in 75 other countries around the world. The Company's investment, which represents a 49% interest (initially 49.5%), is being accounted for using the equity method. As of December 31, 1996, the Company's investment in Monarch represents the initial investment, together with related costs and expenses, plus the Company's equity in Monarch's net income for the period June 29, 1995 to December 31, 1996. As discussed in Note 15, in December 1996, the Company entered into agreements to acquire the 51% interest in Monarch it did not already own. The following unaudited proforma results of operations assume the investment and acquisition occurred at the beginning of 1994, and include the proforma results of the Collitex and Orvac acquisitions discussed in Note 2 above. In the 1995 period, Monarch's results include $6.1 million of non-recurring charges for adjustments to operating items and accordingly, the proforma results shown below reflect the Company's share of these charges. These proforma results do not purport to be indicative of the results of operations which may result in the future.
Year ended Year ended December 31, 1995 December 31, 1994 ----------------- ----------------- (Unaudited) Sales $201,436 $175,643 Net income $ 14,537 $ 14,771 Earnings per share $ 0.52 $ 0.54
F - 8 30 31 Following is condensed financial information for Monarch.
Year ended Period from June 29, 1995 to Income Statement Data: December 31, 1996 December 31, 1995 ----------------- ----------------- Net revenues $259,245 $128,123 -------- -------- Gross profit $111,972 $ 49,115 -------- -------- Net income $ 8,432 $ 1,209 -------- --------
Balance Sheet Data: December 31, December 31, 1996 December 31, 1995 ----------------- ----------------- Current assets $104,001 $107,203 Non-current assets 86,353 86,642 -------- -------- $190,354 $193,845 ======== ======== Current liabilities $ 45,844 $ 57,877 Long-term debt 100,000 100,000 Other long-term liabilities 5,333 6,014 Shareholders' equity 39,177 29,954 -------- -------- $190,354 $193,845 ======== ========
Monarch's ability to pay dividends is restricted under the terms of its revolving bank credit agreement. NOTE 4: INVENTORIES The components of inventories are set forth below:
Dec. 31, 1996 Dec. 31, 1995 Raw materials $17,359 $16,603 Work-in-process 3,589 2,850 Finished goods 9,733 9,869 ----- ----- $30,681 $29,322 ======= =======
If all inventories were reported on a FIFO basis, inventories would be approximately $1,644 and $1,070 higher at December 31, 1996 and 1995, respectively. F - 9 31 32 NOTE 5: PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment is set forth below:
Dec. 31, 1996 Dec. 31, 1995 ------------- ------------- Machinery and equipment $ 77,351 $ 65,328 Buildings and building improvements 19,716 17,148 Land 1,450 1,442 -------- -------- 98,517 83,918 Accumulated depreciation (38,860) (30,062) -------- -------- $ 59,657 $ 53,856 ======== ========
Estimated useful lives are principally: Buildings and building improvements 10 to 40 years Machinery and equipment 10 years NOTE 6: DUE TO BANKS A summary of amounts due to banks is set forth below:
Dec. 31, 1996 Dec. 31, 1995 ------------- ------------- Bank overdraft $1,586 $1,623 Foreign bank loan (a) -- 1,355 Other foreign 113 13 ------ ------ $1,699 $2,991 ====== ======
(a) The foreign bank loan represents a borrowing incurred in October 1994 to finance a portion of the acquisition of Orvac. The loan accrued interest at the lending bank prime rate (11.75% at December 31, 1995). The average outstanding debt for the year ended 1995 was $1.7 million, with an average interest rate of 11.9%. NOTE 7: LONG-TERM DEBT A summary of long-term debt is set forth below:
Dec. 31, 1996 Dec. 31, 1995 ------------- ------------- Unsecured revolving bank facility (a) $10,233 $20,900 Economic Development Revenue Bonds due 2011 8,000 -- Secured and unsecured loans on foreign property, plant and machinery (c) 1,950 2,309 Other 366 441 ------- ------- 20,549 23,650 Less current maturities 612 529 ------- ------- $19,937 $23,121 ======= =======
Maturities of long-term debt for the five years subsequent to December 31, 1996 are: $612, $676, $428, $178, $10,381 and $8,274 thereafter. F - 10 32 33 (a) The unsecured revolving bank facility provides for a maximum of $60 million of borrowings and expires in 2001. On borrowings under this revolver, the Company has the option of electing the lending bank prime rate (8.25% and 8.50% at December 31, 1996 and 1995, respectively) or the London Interbank Offered Rate plus .35% - .65% (6.1% and 6.4% at December 31, 1996 and 1995, respectively), depending on the fixed charge coverage ratio of the Company at the date of the borrowings, as defined by the credit agreement. At December 31, 1996 and 1995, there was $49.8 million and $22.1 million available under this facility. There is an annual commitment fee of .125% on the average unused portion. The agreement requires the Company, among other things, to maintain tangible net worth (as defined) of no less than $85 million through December 30, 1997, a ratio of total liabilities to net worth of no greater than 1 to 1, and a net income to funded debt ratio of greater than 0.2 to 1. The Company is in compliance with all covenants as of December 31, 1996. (b) Economic Development Revenue Bond financed facilities are included in plant and equipment and the related bonds issued by a government unit are recorded as long-term debt. The variable rate bonds for the year ended December 31, 1996 had a weighted average interest rate of 3.6%. (c) The balances outstanding at December 31, 1996 and 1995 are payable by the Collitex Group, bear interest at rates ranging from 4.75% - 13.5%, mature serially through 2003 and are secured by property, plant, machinery and lending institution bonds. The Company also maintains a $3 million unsecured line of credit with a bank, which expires September 15, 1998. This line is available for standby and documentary letters of credit of which there were none outstanding at December 31, 1996. NOTE 8: INCOME TAXES The provision for income taxes consists of the following:
Years Ended December 31 1996 1995 1994 ---- ---- ---- Federal Current $3,364 $ 3,042 $2,480 Deferred 867 974 1,165 Foreign Current 2,333 1,850 831 Deferred 106 (117) 214 State 662 643 769 ------ ------- ------ $7,332 $ 6,392 $5,459 ====== ======= ======
F - 11 33 34 The cumulative amounts of each temporary difference that comprise the net deferred tax liability are as follows:
Years Ended December 31 1996 1995 1994 ---- ---- ---- Depreciation and other property basis differences $ 11,808 $ 11,089 $ 10,391 Costs capitalized to inventory for income tax purposes (303) (424) (470) Accrued liabilities and allowances not currently deductible (221) (56) (333) -------- -------- -------- $ 11,284 $ 10,609 $ 9,588 ======== ======== ========
An analysis of the differences between the federal statutory income tax rate and the effective tax rate is set forth below:
Years Ended December 31 1996 1995 1994 ---- ---- ---- Federal statutory tax rate 35.0% 35.0% 34.0% State income tax, net of federal income tax benefit 1.5 1.9 2.9 Foreign taxes less than federal rate (7.7) (10.5) (6.5) Affiliate dividend exclusion (3.9) (0.7) -- All other, net 0.3 3.2 1.6 ---- ---- ---- 25.2% 28.9% 32.0% ==== ==== ====
Collitex and Orvac currently benefit from tax incentives in Italy which significantly reduce the companies' effective tax rate. These incentives expire through 1999. United States income taxes have not been provided on undistributed foreign earnings of $37.6 million since the Company intends to permanently reinvest such earnings in expanding foreign operations. The unrecognized U.S. tax liability on the undistributed earnings is approximately $6.6 million at December 31, 1996. Total foreign based pre-tax income was approximately $15 million, $11.5 million and $6.3 million for 1996, 1995 and 1994, respectively. NOTE 9: COMMITMENTS AND CONTINGENT LIABILITIES A manufacturing facility in Sayre, Pennsylvania, owned beneficially by the principal shareholders of the Company, is leased at an annual rental of $108 through 1997. An office building in Pearl River, New York, also owned beneficially by the principal shareholders, was leased at an annual rental of $100 through 1995. Total rental expense for all operating leases amounts to $2,542 in 1996, $2,373 in 1995 and $1,934 in 1994. Minimum rental commitments for all noncancelable operating leases for the years 1997-2001 are: $2,064, $1,690, $1,445, $1,342 and $1,211, respectively. The minimum total rental commitment for all years subsequent to 2001 is $3,749. The Company accrues severance expense for employees of its Italian subsidiaries, as required by Italian statute, and these amounts are included in other liabilities in the accompanying financial statements. F - 12 34 35 The Company has been named a potentially responsible party related to contamination which occurred at certain superfund sites. Management believes the ultimate outcome of settling these contingencies is not likely to exceed $100. In the ordinary course of business, the Company and its subsidiaries are involved in certain disputes and litigation, none of which will in the opinion of management, have a material adverse effect on the Company's financial position or results of operations. NOTE 10: STOCK-BASED COMPENSATION AND SHAREHOLDERS' EQUITY On April 24, 1990, the Company's shareholders approved the 1990 Employee Stock Option Plan under which 2,278,349 shares of common stock, as adjusted for subsequent stock dividends, are reserved for issuance upon the exercise of options to be granted to key employees and directors. The plan provides for such issuances in the form of qualified or non-qualified stock options, and stock appreciation rights may be granted in tandem with non-qualified stock options. The option price per share of qualified stock options cannot be less than 100% of the market value at the date of grant. The option price per share of non-qualified stock options and stock appreciation rights are determined by the Board of Directors at its sole discretion. The options vest ratably over periods of up to four years. Options granted prior to 1994 are exercisable for a period of five years and those granted subsequently, for a period of ten years. The following is a summary of outstanding stock options:
Weighted Average Number of Shares(a) Exercise Price(a) ------------------- ----------------- 1994 Granted 117,188 $ 7.04 Exercised 77,320 3.33 Canceled 8,986 13.04 Outstanding at end of year 746,921 5.66 1995 Granted 343,906 $ 6.85 Exercised 173,147 3.19 Canceled 1,911 1.50 Outstanding at end of year 915,769 6.58 1996 Granted 354,894 $ 10.29 Exercised 196,019 4.38 Canceled 54,951 8.11 Outstanding at end of year 1,019,693 $ 8.20
(a) Adjusted for subsequent stock splits. F - 13 35 36 The following table summarizes information about stock options outstanding as of December 31, 1996:
Weighted-Average Weighted-Average Range of Exercise Prices Number of Options Exercise Price Remaining Contractual Life - ------------------------ ----------------- -------------- -------------------------- Options Outstanding $6.00 - $9.00 631,783 $ 6.98 4.9 $9.01 - $13.50 380,910 $ 10.07 8.6 $13.51 - $17.00 7,000 $ 17.00 9.7 --------- ------- --- 1,019,693 $ 8.20 6.3 --------- ------- --- Options Exercisable $6.00 - $9.00 469,375 $ 7.17 $9.01 - $13.50 110,745 $ 11.05 $13.51 - $17.00 -- -- --------- ------- 580,120 $ 7.91 --------- -------
In addition to stock options, the Company maintains an Employee Stock Purchase Plan which allows employees to purchase a certain amount of stock at a discount of 20% to the market price. The Company may sell up to 655,078 shares under this Plan and, as of December 31, 1996, 487,000 shares were available for future purchases. The weighted average fair value of shares sold in 1996 was $16.04 . Total compensation expense recognized for stock-based compensation for 1996, 1995 and 1994 was $139, $141 and $123, respectively. The Company accounts for stock options under Accounting Principles Board Opinion No. 25, pursuant to which no compensation cost has been recognized for the options granted. Had compensation cost for these options been determined consistent with Statement of Financial Accounting Standards No. 123, the impact on net income and earnings per share would have been insignificant. On August 7, 1996, August 9, 1995 and August 15, 1994, the Board of Directors declared 25% stock splits, effected in the form of stock dividends. All per share information presented in the accompanying financial statements has been adjusted to reflect these stock dividends. NOTE 11: EMPLOYEE SAVINGS PLAN The Company maintains a voluntary employee savings plan adopted pursuant to Section 401(k) of the Internal Revenue Code. Pursuant to the Plan, the Company, at its option, contributes 50% of employee savings up to 4% of salary. The Company's contribution under the Plan was $426, $339 and $320 during 1996, 1995 and 1994, respectively. The Company does not provide post-retirement or post-employment benefits. NOTE 12: BUSINESS SEGMENTS The Company operates as a one-segment business, engaged in the design, development, manufacture and distribution of label systems, bar code systems, labels, tags and related supplies and services for apparel manufacturers, retailers and other soft goods industries. The Company's manufacturing facilities are located in North and South America (principally the U.S.), Europe (principally Germany, Italy and the United Kingdom) and Asia (principally Hong Kong). Included in the Company's consolidated balance sheet at December 31, 1996 are the net assets of the Company's European and Asian operations of approximately $31.7 million and $17.0 million, respectively. F - 14 36 37 The following presents financial information for domestic, foreign and export operations:
Years Ended December 31 1996 1995 1994 ---- ---- ---- Sales to unaffiliated customers: United States - Domestic $ 130,672 $ 130,371 $ 117,647 - Export 9,873 8,359 9,347 Europe 53,151 42,653 26,685 Asia 26,132 20,053 12,933 --------- --------- --------- Total $ 219,828 $ 201,436 $ 166,612 ========= ========= ========= Operating income: United States - Domestic $ 18,500 $ 18,012 $ 15,364 - Export 1,370 2,347 2,570 Europe 7,735 6,912 3,372 Asia 7,237 4,993 3,126 --------- --------- --------- 34,842 32,264 24,432 Corporate expenses (8,473) (9,127) (6,451) --------- --------- --------- Total $ 26,369 $ 23,137 $ 17,981 ========= ========= ========= Assets employed: United States $ 116,605 $ 96,054 $ 75,803 Europe 46,109 47,591 43,807 Asia 19,445 13,495 9,093 --------- --------- --------- Total $ 182,159 $ 157,140 $ 128,703 ========= ========= =========
United States assets employed are used to manufacture products sold to domestic U.S. customers, export customers and to non-U.S. intercompany customers. During 1996, 1995 and 1994, one customer represented 11%, 12% and 11%, respectively, of the Company's total sales. NOTE 13: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES A summary of accounts payable and accrued liabilities is set forth below:
Dec. 31, 1996 Dec. 31, 1995 ------------- ------------- Accounts payable $11,977 $ 9,984 Accrued payroll costs 4,403 4,729 Other accrued liabilities 7,236 4,430 ------- ------- $23,616 $19,143 ======= =======
F - 15 37 38 NOTE 14: SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest and income taxes is set forth below:
Years Ended December 31 1996 1995 1994 ---- ---- ---- Interest $1,515 $1,507 $ 690 Income taxes $4,783 $4,600 $2,444
Cash paid and stock issued for business acquisitions and the fair value of assets acquired and liabilities assumed is set forth below:
Dec. 31, 1996 Dec. 31, 1994 ------------- ------------- Fair value of assets acquired, including goodwill of $3,119 and $13,627 in 1996 and 1994 $ 5,454 $ 30,835 Liabilities assumed (1,212) (12,118) ------- -------- Purchase price 4,242 18,717 Stock issued for acquisition -- (2,760) ------- -------- Cash paid, net of cash acquired $ 4,242 $ 15,957 ======= ========
At December 31, 1995, the goodwill relating to assets acquired in 1994 was increased by an additional $2.2 million. This increase represents contingent payments (including any additional costs associated with these transactions) required under the purchase agreements (Note 2). NOTE 15. SUBSEQUENT EVENTS On December 20, 1996, the Company announced it had reached an agreement with Odyssey Partners L.P. for the purchase of its 49% equity ownership in Monarch. The Company also reached agreements with two members of Monarch's management to acquire the 2% of Monarch owned by them. Additionally, agreements were reached to issue options on Paxar common stock to replace options on Monarch common stock held by eight members of Monarch's management. The aggregate purchase price will be approximately $130 million, to be paid in cash ($100 million), shares of Paxar common stock (approximately $5 million) and the remainder in warrants and options. The transaction is contingent upon certain Government approvals. Upon completion of the transaction, the Company will own 100% of Monarch. The Company has signed a commitment letter to enter into a facility consisting of senior unsecured debt up to $280 million, with a term of six years and with an interest rate of up to 1% over the London Interbank Offered Rate. The Company intends to use this facility to pay the cash portion of the purchase price. NOTE 16. EVENTS OCCURRING SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (UNAUDITED) On March 3, 1997, the Company completed the purchase of Monarch and the $280 million credit facility as discussed in Note 15. On March 13, 1997, Monarch commenced a cash tender offer for its $100,000,000 principal amount 12.5% Senior Notes due 2003 (the "Monarch Notes"). The offer expires on April 10, 1997. The redemption price will be $1,137.50 for each $1,000 of principal of the Monarch Notes, and the Company will pay a consent payment of $30 per $1,000 of principal of the Monarch Notes to each holder that consents to certain amendments to the Indenture under which the Monarch Notes were issued. F - 16 38 39 NOTE 17. CONDENSED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share) First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- 1996 Sales $52,750 $57,554 $51,940 $57,584 Gross profit 19,494 21,297 19,451 21,253 Operating income 5,991 7,164 6,221 6,993 Net income 4,343 5,613 5,299 6,549 ------- ------- ------- ------- Earnings per share $ 0.15 $ 0.20 $ 0.19 $ 0.23 ------- ------- ------- ------- 1995 Sales $50,524 $52,899 $49,307 $48,706 Gross profit 18,492 19,362 17,974 17,196 Operating income 6,114 6,736 5,549 4,738 Net income $ 3,941 $ 4,408 $ 3,631 $ 3,729 ------- ------- ------- ------- Earnings per share $ 0.14 $ 0.16 $ 0.13 $ 0.13 ------- ------- ------- -------
Earnings per share have been adjusted to reflect stock dividends. F - 17 39 40 PAXAR CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS)
ADDITIONS BALANCE AT CHARGED (CREDITED) BEGINNING OF TO COSTS AND OTHER BALANCE AT DESCRIPTION YEAR EXPENSES CHARGES DEDUCTIONS END OF YEAR - ----------- ---- -------- ------- ---------- ----------- Year ended December 31, 1996 Allowance for doubtful accounts $585 $ 576 $ -- $410 (2) $751 Year ended December 31, 1995 Allowance for doubtful accounts $506 $ 252 $ -- $173 (2) $585 Year ended December 31, 1994 Allowance for doubtful accounts $411 $ (24) $476 (1) $357 (2) $506
(1) Allowance established related to acquisitions. (2) Write-off of uncollectible accounts, net of recoveries and other. F - 18 40 41 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- EX-10.17 Credit Agreement dated March 3, 1997 EX-11.1 Statement re Computation of Per Share Earnings EX-21.1 List of Subsidiaries of Registrant EX-23.1 Consent of Independent Public Accountants EX-27.1 Financial Data Schedule EX-10.17 2 CREDIT AGREEMENT 3/3/97 1 EXECUTION COPY U.S. $280,000,000 CREDIT AGREEMENT Dated as of March 3, 1997 Among PAXAR CORPORATION as Borrower and THE INITIAL LENDERS, INITIAL ISSUING BANK AND SWING LINE BANK NAMED HEREIN as Initial Lenders, Initial Issuing Bank and Swing Line Bank and FLEET BANK, N.A. as Administrative Agent 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms........................................ 1 SECTION 1.02. Computation of Time Periods.................................. 18 SECTION 1.03. Accounting Terms............................................. 18 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances................................................. 18 SECTION 2.02. Making the Advances.......................................... 20 SECTION 2.03. The Competitive Bid Advances................................. 21 SECTION 2.04. Issuance of and Drawings and Reimbursement Under Letters of Credit.................................................... 24 SECTION 2.05. Fees......................................................... 26 SECTION 2.06. Termination or Reduction of the Commitments.................. 26 SECTION 2.07. Repayment of Advances........................................ 26 SECTION 2.08. Interest..................................................... 28 SECTION 2.09. Interest Rate Determination.................................. 29 SECTION 2.10. Conversion of Advances....................................... 30 SECTION 2.11. Prepayments.................................................. 30 SECTION 2.12. Increased Costs.............................................. 31 SECTION 2.13. Illegality................................................... 32 SECTION 2.14. Payments and Computations.................................... 32 SECTION 2.15. Taxes........................................................ 33 SECTION 2.16. Sharing of Payments, Etc..................................... 34 SECTION 2.17. Use of Proceeds.............................................. 35 SECTION 2.18. Additional Borrowers......................................... 35 ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01, 2.03 and 2.04..................................................... 35 SECTION 3.02. Conditions Precedent to the Initial Borrowing of Each Additional Borrower.......................................... 38 3 ii PAGE SECTION 3.03. Conditions Precedent to Certain Term Borrowings.............. 39 SECTION 3.04. Conditions Precedent to Each Borrowing (other than a Competitive Bid Borrowing) and Issuance...................... 39 SECTION 3.05. Conditions Precedent to Each Competitive Bid Borrowing....... 40 SECTION 3.06. Determinations Under Section 3.01............................ 40 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrowers.............. 41 ARTICLE V COVENANTS OF PAXAR SECTION 5.01. Affirmative Covenants........................................ 43 SECTION 5.02. Negative Covenants........................................... 46 SECTION 5.03. Financial Covenants.......................................... 50 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default............................................ 51 ARTICLE VII THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action..................................... 53 SECTION 7.02. Administrative Agent's Reliance, Etc......................... 53 SECTION 7.03. Fleet and Affiliates......................................... 54 SECTION 7.04. Lender Credit Decision....................................... 54 SECTION 7.05. Indemnification.............................................. 54 SECTION 7.06. Successor Administrative Agent............................... 54 4 iii PAGE ARTICLE VIII GUARANTY SECTION 8.01. Guaranty..................................................... 55 SECTION 8.02. Guaranty Absolute............................................ 55 SECTION 8.03. Waivers and Acknowledgments.................................. 56 SECTION 8.04. Subrogation.................................................. 56 SECTION 8.05. Continuing Guarantee; Assignments............................ 57 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc.............................................. 57 SECTION 9.02. Notices, Etc................................................. 58 SECTION 9.03. No Waiver; Remedies.......................................... 58 SECTION 9.04. Costs and Expenses........................................... 58 SECTION 9.05. Right of Set-off............................................. 59 SECTION 9.06. Binding Effect............................................... 59 SECTION 9.07. Assignments, Designations and Participations................. 60 SECTION 9.08. Confidentiality.............................................. 62 SECTION 9.09. No Liability of the Issuing Bank............................. 63 SECTION 9.10. Governing Law................................................ 63 SECTION 9.11. Execution in Counterparts.................................... 63 SECTION 9.12. Judgment..................................................... 63 SECTION 9.13. Jurisdiction, Etc............................................ 64 SECTION 9.14. Waiver of Jury Trial......................................... 65 5 iv PAGE Schedules Schedule I - List of Applicable Lending Offices Schedule 4.01(c) - Required Authorizations and Approvals Schedule 4.01(f) - Environmental Actions Schedule 4.01(j) - Environmental Laws Schedule 5.02(a) - Existing Liens Schedule 5.02(d) - Existing Debt Schedule 5.02(g) - Scheduled Investments 6 v Exhibits Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Term Note Exhibit A-3 - Form of Competitive Bid Note Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Competitive Bid Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Designation Agreement Exhibit E - Form of Credit Agreement Supplement Exhibit F - Form of Pledge Agreement Exhibit G - Form of Subsidiary Guaranty Exhibit H-1 - Form of Opinion of Counsel for Paxar Exhibit H-2 - Form of Opinion of Counsel for Additional Borrowers Exhibit I - Form of Acceptance of Process Agent 7 CREDIT AGREEMENT Dated as of March 3, 1997 Paxar Corporation, a New York corporation ("Paxar"), any other Subsidiary (as hereinafter defined) that becomes a Borrower (as hereinafter defined) pursuant to the terms hereof, the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof as the Initial Lenders, Fleet Bank, N.A. ("Fleet") as initial issuing bank (in such capacity, the "Initial Issuing Bank"), Fleet as the swing line bank (in such capacity, the "Swing Line Bank"), and Fleet as administrative agent (in such capacity, the "Administrative Agent") for the Lender Parties (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent's Account" means (a) in the case of Advances denominated in US Dollars, the account of the Administrative Agent maintained by the Administrative Agent at Fleet Bank, N.A. with its office at 1133 Avenue of the Americas, 40th Floor, New York, New York 10036, Account No. 1983580, Attention: Joseph Cucinotta and (b) in the case of Advances denominated in any Primary Currency, the account of the Administrative Agent designated in writing from time to time by the Administrative Agent to Paxar, the other Borrowers and the Lender Parties for such purpose. "Advance" means a Revolving Credit Advance, a Term Advance, a Swing Line Advance, a Letter of Credit Advance or a Competitive Bid Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Applicable Lending Office" means, with respect to each Lender Party, such Lender Party's Domestic Lending Office in the case of a Prime Rate Advance and such Lender Party's Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender Party notified by such Lender Party to the Administrative Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. "Applicable Margin" means (x) at any time prior to the later of March 31, 1997 and the date on which the Company executes and delivers a supplement to the Subsidiary Guaranty in accordance with the provisions of Section 5.01(n), 1.00% per annum for Term Advances and 0.625% per annum for Revolving Credit Advances and (y) at any time thereafter, a percentage per annum determined by reference to the Debt to EBITDA Ratio as set forth below: 8 2
================================================================================ Applicable Margin for Debt To Revolving Credit Applicable Margin for EBITDA Ratio Advances Term Advances ================================================================================ Level 1 3.25 to 1 or above 0.6250% 1.0000% - -------------------------------------------------------------------------------- Level 2 Greater than or equal to 3.00 to 1 but less than 3.25 to 1 0.5000% 0.7500% - -------------------------------------------------------------------------------- Level 3 Greater than or equal to 2.50 to 1 but less than 3.00 to 1 0.4125% 0.6000% - -------------------------------------------------------------------------------- Level 4 Greater than or equal to 2.00 to 1 but less than 2.50 to 1 0.3500% 0.5000% - -------------------------------------------------------------------------------- Level 5 Greater than or equal to 1.50 to 1 but less than 2.00 to 1 0.3000% 0.4250% - -------------------------------------------------------------------------------- Level 6 Greater than or equal to 1.00 to 1 but less than 1.50 to 1 0.2500% 0.3500% - -------------------------------------------------------------------------------- Level 7 Less than 1.00 to 1 0.2200% 0.3000% ================================================================================
The Applicable Margin for each Advance (other than a Competitive Bid Advance) shall be determined by reference to the Debt to EBITDA Ratio in effect on the first day of each Interest Period for such Advance; provided, however, that no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives financial statements pursuant to Section 5.01(o)(i) or (ii) and a certificate of the chief financial officer or the treasurer of Paxar demonstrating such ratio. "Applicable Percentage" means (x) at any time prior to the later of March 31, 1997 and the date on which the Company executes and delivers a supplement to the Subsidiary Guaranty in accordance with the provisions of Section 5.01(n), 0.375% per annum and (y) at any time thereafter, a percentage per annum determined by reference to the Debt to EBITDA Ratio as set forth below: 9 3
================================================================================ Debt To Applicable EBITDA Ratio Percentage ================================================================================ Level 1 0.3750% 3.25 to 1 or above - -------------------------------------------------------------------------------- Level 2 0.2500% Greater than or equal to 3.00 to 1 but less than 3.25 to 1 - -------------------------------------------------------------------------------- Level 3 0.1875% Greater than or equal to 2.50 to 1 but less than 3.00 to 1 - -------------------------------------------------------------------------------- Level 4 0.1500% Greater than or equal to 2.00 to 1 but less than 2.50 to 1 - -------------------------------------------------------------------------------- Level 5 0.1250% Greater than or equal to 1.50 to 1 but less than 2.00 to 1 - -------------------------------------------------------------------------------- Level 6 0.1000% Greater than or equal to 1.00 to 1 but less than 1.50 to 1 - -------------------------------------------------------------------------------- Level 7 0.0800% Less than 1.00 to 1 ================================================================================
The Applicable Percentage for the Revolving Credit Facility and the Term Facility shall be determined by reference to the Debt to EBITDA Ratio in effect from time to time; provided, however, that no change in the Applicable Percentage shall be effective until three Business Days after the date on which the Administrative Agent receives financial statements pursuant to Section 5.01(o)(i) or (ii) and a certificate of the chief financial officer or the treasurer of Paxar demonstrating such ratio. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto. "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). 10 4 "Bankers Trust Credit Agreements" means, collectively, the Credit Agreement dated as of June 29, 1995 among the Company, the financial institutions party thereto, BT Commercial Corporation, as administrative agent, and Bankers Trust Company, as Issuing Bank, as amended, and the Canadian Credit Agreement dated as of June 29, 1995 among the Company, Monarch Marking Systems Canada, Inc., the financial institutions party thereto and BT Bank of Canada, as agent, as amended. "Borrower" means Paxar and each wholly owned Subsidiary of Paxar that has delivered a Credit Agreement Supplement which has become effective; provided, however, that in no event shall the number of Borrowers hereunder exceed four at any one time. "Borrowing" means a Revolving Credit Borrowing, a Term Borrowing, a Swing Line Borrowing or a Competitive Bid Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurocurrency Rate Advances, on which dealings are carried on in the London interbank market and banks are open for business in the country of issue of the currency of such Eurocurrency Rate Advance. "Capital Expenditures" means, for any Person for any period, the sum of (a) all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person or have a useful life of more than one year plus (b) without duplication, the aggregate principal amount of all Debt (including Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures. "Capitalized Leases" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases. "Cash Equivalents" means any of the following, to the extent owned by Paxar or any of its Subsidiaries free and clear of all Liens and having a maturity of not greater than 180 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c), is organized under the laws of the United States or any state thereof and has combined capital and surplus of at least $1 billion, (c) commercial paper issued by any corporation organized under the laws of any state of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P or (d) Investments in money market funds that invest primarily in Cash Equivalents of the types described in clauses (a), (b) and (c) above and are established by a Lender Party or any Affiliate of a Lender Party. "Chemical Credit Agreement" means the U.S. $60,000,000 Amended and Restated Multi-Currency Revolving Credit Agreement dated as of June 18, 1996 among Paxar, Paxar Europe Limited, the Banks party thereto and Chemical Bank, as agent, as such agreement shall have been amended, supplemented or otherwise modified through the date hereof. "Collateral" has the meaning specified in the Pledge Agreement. 11 5 "Commitment" means a Term Commitment, a Revolving Credit Commitment or a Letter of Credit Commitment. "Company" means Monarch Marking Systems, Inc., a Delaware corporation. "Competitive Bid Advance" means an advance by a Lender Party to Paxar as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance or a LIBO Rate Advance (each of which may only be in US Dollars). "Competitive Bid Borrowing" means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lender Parties to Paxar whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.03. "Competitive Bid Note" means a promissory note of Paxar payable to the order of any Lender Party, in substantially the form of Exhibit A-3 hereto, evidencing the indebtedness of Paxar to such Lender Party resulting from a Competitive Bid Advance made by such Lender Party. "Confidential Information" means information that any Borrower furnishes to the Administrative Agent or any Lender Party in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Administrative Agent or such Lender Party from a source other than the Borrowers. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances (other than Competitive Bid Advances) of one Type into Advances of the other Type (other than Competitive Bid Advances) pursuant to Section 2.09 or 2.10. "Credit Agreement Supplement" has the meaning specified in Section 2.18. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 90 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (g) all Obligations of such Person in respect of Hedge Agreements, (h) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, (i) Debt of others referred to in clauses (a) through (h) above or clause (j) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of 12 6 whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Debt to EBITDA Ratio" means, for any fiscal quarter of Paxar, a ratio of Debt of Paxar and its Subsidiaries as at the end of such fiscal quarter to Consolidated EBITDA of Paxar and its Subsidiaries for the most recently completed four fiscal quarters; provided, however, that, for each of the fiscal quarters ending March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997, Consolidated EBITDA for the most recently completed four fiscal quarters shall be based on the Consolidated EBITDA of Paxar and its Subsidiaries for such period, adjusted on a pro forma basis for the Transaction in a manner acceptable to the Administrative Agent; provided further that for purposes of determining the Applicable Margin and the Applicable Percentage on March 31, 1997 (if such determination is necessary pursuant to those definitions), the Debt to EBITDA Ratio shall be determined based on Debt of Paxar and its Subsidiaries as at March 31, 1997 and Consolidated EBITDA of Paxar and its Subsidiaries for the four fiscal quarters ended December 31, 1996, adjusted on a pro forma basis for the Transaction in a manner acceptable to the Administrative Agent. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Designated Bidder" means (a) an Eligible Assignee or (b) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P that, in the case of either clause (a) or (b), (i) is organized under the laws of the United States or any State thereof, (ii) shall have become a party hereto pursuant to Section 9.07(d), (e) and (f) and (iii) is not otherwise a Lender Party. "Designation Agreement" means a designation agreement entered into by a Lender Party (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "Domestic Lending Office" means, with respect to any Lender Party, the office of such Lender Party specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, or such other office of such Lender Party as such Lender Party may from time to time specify to Paxar and the Administrative Agent. "EBIT" means, for any period, net income (or net loss) before deduction for income taxes and net interest expense, in each case determined in accordance with GAAP for such period. "EBITDA" means, for any period, net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense and (d) amortization expense, in each case determined in accordance with GAAP for such period and, in the case of clauses (a) through (d), to the extent such expenses are actually deducted in calculating net income (or net loss). "Effective Date" has the meaning specified in Section 3.01. 13 7 "Eligible Assignee" means (i) a Lender Party; (ii) an Affiliate of a Lender Party; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $500,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $500,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $500,000,000, so long as such bank is acting through a branch or agency located in the United States; (vi) the central bank of any country that is a member of the Organization for Economic Cooperation and Development; (vii) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $500,000,000 and (viii) any other Person approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 9.07, Paxar, such approval not to be unreasonably withheld or delayed; provided, however, that neither Paxar nor an Affiliate of Paxar shall qualify as an Eligible Assignee. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Equivalent" means (a) in US Dollars of any Primary Currency on any date of determination, the equivalent in US Dollars of such Primary Currency determined by using the quoted spot rate at which Fleet's principal office in New York City, New York, offers to exchange US Dollars for such Primary Currency in New York City, New York, at the open of business on such date and (b) in any Primary Currency of US Dollars on any date of determination, the equivalent in such Primary Currency of US Dollars determined by using the quoted spot rate at which Fleet's principal office in New York City, New York offers to exchange such Primary Currency for US Dollars in New York City, New York at the open of business on such date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of Paxar's controlled group, or under common control with Paxar, within the meaning of Section 414 of the Internal Revenue Code. 14 8 "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of Paxar or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by Paxar or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Lending Office" means, with respect to any Lender Party, the office of such Lender Party specified as its "Eurocurrency Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to Paxar and the Administrative Agent. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurocurrency Rate" means, for any Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing (other than a Competitive Bid Borrowing), the rate per annum (rounded upwards to the nearest 1/16 of 1%) at which deposits in US Dollars or in the applicable Primary Currency, as the case may be, appear on Page 3740 or 3750 of the Dow Jones Telerate Screen at or about 11:00 A.M. (London time) two Business Days before the first day of such Interest Period and for a period equal to such Interest Period. If for any reason such rate is not available, the term "Eurocurrency Rate" shall mean, for any Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing, the rate per annum (rounded upwards to the nearest 1/16 of 1%) appearing on the appropriate Reuters Screen as the London interbank offered rate for deposits in US Dollars or in the applicable Primary Currency, as the case may be, at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on such Reuters Screen, the applicable rate shall be the arithmetic mean of all such rates. "Eurocurrency Rate Advance" means an Advance (other than a Competitive Bid Advance) denominated in US Dollars or in a Primary Currency that bears interest as provided in Section 2.08(a)(ii). "Eurocurrency Rate Reserve Percentage" means, with respect to any Lender for any Interest Period for any Eurocurrency Rate Advance made by such Lender from time to time, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor thereto) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental 15 9 or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Existing Debt" has the meaning specified in Section 5.02(d)(iii)(B) hereof. "Extraordinary Receipt" means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including, without limitation, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof) and indemnity payments; provided, however, that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments in respect of loss or damage to equipment, fixed assets or real property are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets or real property in respect of which such proceeds were received in accordance with the terms of the Loan Documents, so long as such application is made within 6 months after the occurrence of such damage or loss. "Facility" means the Revolving Credit Facility, the Term Facility, the Swing Line Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Year" means a fiscal year of Paxar and its Consolidated Subsidiaries ending on December 31 in any calendar year. "Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i), which Advances shall be denominated in US Dollars. "Fleet" has the meaning specified in the recital of parties to this Agreement. "Foreign Loan Amount" means, at any date, the sum of the Equivalent on such date of the aggregate principal amount on such date of the outstanding Revolving Credit Advances denominated in any Primary Currency plus the aggregate principal amount on such date of the outstanding advances made by Paxar and its domestic Subsidiaries to any wholly-owned foreign Subsidiaries of Paxar. "Funded Debt" of any Person means Debt in respect of the Advances, in the case of any Borrower, and all other Debt of such Person that by its terms matures more than one year after the date of determination or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after 16 10 such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of determination. "GAAP" has the meaning specified in Section 1.03. "Guaranteed Obligations" has the meaning specified in Section 8.01. "Guaranty" has the meaning specified in Section 8.01. "Hazardous Materials" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "Indemnified Party" has the meaning specified in Section 9.04(b). "Information Memorandum" means the information memorandum dated January 1997 used by the Administrative Agent in connection with the syndication of the Commitments. "Initial Extension of Credit" means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder. "Initial Issuing Bank" has the meaning specified in the recital of parties to this Agreement. "Initial Lenders" has the meaning specified in the recital of parties to this Agreement. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "Interest Period" means, for each Eurocurrency Rate Advance comprising part of the same Borrowing (other than a Competitive Bid Borrowing) and each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such Eurocurrency Rate Advance or LIBO Rate Advance or the date of the Conversion of any Prime Rate Advance into such Eurocurrency Rate Advance and ending on the last day of the period selected by the relevant Borrower pursuant to the provisions below and, thereafter, with respect to Eurocurrency Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by such Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the relevant Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) a Borrower may not select any Interest Period with respect to any Eurocurrency Rate Advance or LIBO Rate Advance that ends after any principal repayment installment date unless, after giving effect to such selection, the aggregate principal amount of Prime Rate Advances and of Eurocurrency Rate Advances and LIBO Rate Advances having Interest Periods 17 11 that end on or prior to such principal repayment installment date shall be at least equal to the aggregate principal amount of Advances due and payable on or prior to such date; (ii) Interest Periods commencing on the same date for Eurocurrency Rate Advances comprising part of the same Borrowing (other than a Competitive Bid Borrowing) or for LIBO Rate Advances comprising part of the same Competitive Bid Borrowing shall be of the same duration; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock or other ownership or profit interest, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of "Debt" in respect of such Person. "Issuing Bank" means the Initial Issuing Bank and each Eligible Assignee to which the Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07. "L/C Related Documents" has the meaning specified in Section 2.07(d)(ii). "Lender Party" means any Lender, the Issuing Bank or the Swing Line Bank. "Lenders" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 9.07(a), (b) and (c) and, except when used in reference to a Borrowing (other than a Competitive Bid Borrowing), a Note (other than a Competitive Bid Note), a Commitment or a related term, each Designated Bidder. "Letter of Credit" has the meaning specified in Section 2.01(d). "Letter of Credit Advance" means an advance made by the Issuing Bank or any Lender pursuant to Section 2.04(c), which advance shall be denominated in US Dollars. "Letter of Credit Agreement" has the meaning specified in Section 2.04(a). "Letter of Credit Commitment" means, with respect to the Issuing Bank at any time, (x) during the period from the date hereof through the date on which the Odyssey Note is paid in full, the amount set 18 12 forth opposite the Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" and (y) thereafter, the Letter of Credit Commitment shall be $5,000,000 or, in either case, if the Issuing Bank has entered into one or more Assignments and Acceptances, set forth for the Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(g) as the Issuing Bank's "Letter of Credit Commitment" and, in each case, as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Letter of Credit Facility" means, at any time, an amount equal to the amount of the Issuing Bank's Letter of Credit Commitment at such time, as such amount may be reduced at or prior to such time pursuant to Section 2.06. "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances comprising part of the same Competitive Bid Borrowing, the rate per annum (rounded upwards to the nearest 1/16 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in US Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "LIBO Rate" shall mean, for any Interest Period for each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the rate per annum (rounded upwards to the nearest 1/16 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in US Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "LIBO Rate Advances" has the meaning specified in Section 2.03(a)(i). "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means this Agreement, the Notes, the Pledge Agreement, the Subsidiary Guaranty, any Credit Agreement Supplement entered into by a Borrower and any pledge agreement or security agreement entered into by Paxar or any Subsidiary Guarantor pursuant to the provisions of Section 5.02(d)(ii). "Loan Parties" means each Borrower and each Subsidiary Guarantor. "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of Paxar or Paxar and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of Paxar or Paxar and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under the Loan Documents or (c) the ability of any Loan Party to perform its obligations under the Loan Documents. "Monarch Bonds" means the Indenture dated as of June 29, 1995 between the Company and Shawmut Bank Connecticut, National Association, as such agreement may be amended, modified or supplemented pursuant to its terms. 19 13 "Monarch Indenture" means the 12-1/2% Senior Notes due 2003 issued by the Company pursuant to the terms of the Monarch Indenture. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Paxar or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of Paxar or any ERISA Affiliate and at least one Person other than Paxar and the ERISA Affiliates or (b) was so maintained and in respect of which Paxar or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset or the sale or issuance of any Debt or capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights, options or other securities to acquire capital stock or other ownership or profit interest by any Person, or any Extraordinary Receipt received by or paid to or for the account of any Person, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions and (b) the amount of taxes payable in connection with or as a result of such transaction and (c) the amount of any Debt secured by a Lien on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such costs, actually paid to a Person that is not an affiliate of such Person or any Loan Party or any Affiliate of any Loan Party and are properly attributable to such transaction or to the asset that is the subject thereof. "Net Interest Expense" means, for any period, the sum of the aggregate net interest expense of any Person and its Subsidiaries for such period, as determined in accordance with GAAP, and in any event including, without duplication, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptances and net costs under interest rate protection agreements and the portion of any obligation under Capitalized Leases allocable to consolidated net interest expense. "Note" means a Revolving Credit Note, a Term Note or a Competitive Bid Note. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Competitive Bid Borrowing" has the meaning specified in Section 2.03(a)(i). "Notice of Issuance" has the meaning specified in Section 2.04(a). "Notice of Renewal" has the meaning specified in Section 2.01(d). "Notice of Swing Line Borrowing" has the meaning specified in Section 2.02(b). "Notice of Termination" has the meaning specified in Section 2.01(d). 20 14 "Obligation" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Odyssey Note" means the promissory note dated March 3, 1997 made by Paxar and payable to Odyssey Partners, L.P. in an aggregate principal amount of $10,000,000. "Other Taxes" has the meaning specified in Section 2.15(b). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Asset Sale Amount" means, with respect to any Fiscal Year, an amount equal to the Net Cash Proceeds from asset sales permitted by Section 5.02(f)(iii). "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pledge Agreement" has the meaning specified in Section 3.01(l)(v). "Primary Currencies" means, collectively, the lawful currency of the United Kingdom of Great Britain and Northern Ireland, the lawful currency of the Federal Republic of Germany, the lawful currency of the Republic of France, the lawful currency of The Kingdom of the Netherlands, the lawful currency of The Swiss Confederation, the lawful currency of Spain, the lawful currency of Italy, the lawful currency of Belgium, the lawful currency of Australia and the lawful currency of Canada; provided, however, that any of the above-enumerated currencies shall cease to be a "Primary Currency" upon notification by the Required Lenders to the Administrative Agent that such currency is not freely transferable and convertible into US Dollars or dealings in deposits in such currency are not carried out in the London interbank market. 21 15 "Prime Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by Fleet in New York, New York, from time to time, as Fleet's prime rate; and (b) 1/2 of one percent per annum above the Federal Funds Rate. "Prime Rate Advance" means an Advance (other than a Competitive Bid Advance) that bears interest as provided in Section 2.08(a)(i). "Pro Rata Share" of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time and the denominator of which is the Revolving Credit Facility at such time. "Register" has the meaning specified in Section 9.07(g). "Registration Rights Agreement" means the Registration Rights Agreement dated as of March 3, 1997 between Paxar and Odyssey Partners, L.P., as the same may be amended, modified or otherwise supplemented from time to time in accordance with the terms of this Agreement. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Related Documents" means the Stock Purchase Agreement, the Warrant Agreement, the Registration Rights Agreement and the Odyssey Note. "Required Lenders" means at any time Lenders owed or holding at least a majority in interest of the sum of (a) the aggregate principal amount of the Advances (other than Competitive Bid Advances) outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, or, if no such principal amount and no Letters of Credit are outstanding at such time, Lenders holding at least a majority in interest of the aggregate of the Term Commitments and Revolving Credit Commitments. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to the Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Lenders ratably in accordance with their respective Revolving Credit Commitments. "Revolving Credit Advance" has the meaning specified in Section 2.01(a). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by each of the Lender Parties pursuant to Section 2.01(a). "Revolving Credit Commitment" means, with respect to any Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(g) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. 22 16 "Revolving Credit Facility" means, at any time, the aggregate amount of the Lenders' Revolving Credit Commitments at such time. "Revolving Credit Note" means a promissory note of each Borrower payable to the order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of such Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender to such Borrower. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of Paxar or any ERISA Affiliate and no Person other than Paxar and the ERISA Affiliates or (b) was so maintained and in respect of which Paxar or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Standby Letter of Credit" means any Letter of Credit issued under the Letter of Credit Facility, other than a Trade Letter of Credit. "Stock Purchase Agreement" means the Purchase and Sale Agreement dated as of December 20, 1996 between Paxar and Odyssey Partners, L.P., as the same may be amended, modified or otherwise supplemented from time to time in accordance with the terms of this Agreement. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary Guarantors" means each of the Subsidiaries of Paxar that is organized under the laws of the United States of America or any state thereof. "Subsidiary Guaranty" has the meaning specified in Section 3.01(l)(vi). 23 17 "Swing Line Advance" means an advance which shall be denominated in US Dollars made by (a) the Swing Line Bank pursuant to Section 2.01(c) or (b) any Lender pursuant to Section 2.02(b). "Swing Line Bank" has the meaning specified in the recital of parties to this Agreement. "Swing Line Borrowing" means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank. "Swing Line Facility" has the meaning specified in Section 2.01(c). "Term Advance" has the meaning specified in Section 2.01(b). "Term Advance Termination Date" means the earlier of July 31, 1997 and the date on which the aggregate Unused Term Credit Commitments of the Lenders are reduced to zero. "Term Borrowing" means a borrowing consisting of simultaneous Term Advances of the same Type made by the Lenders, which Term Advances shall be denominated in US Dollars. "Term Commitment" means, with respect to any Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Term Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(g) as such Lender's "Term Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Term Facility" means, at any time, the aggregate amount of the Lenders' Term Commitments at such time. "Term Note" means a promissory note of Paxar payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of Paxar to such Lender resulting from the Term Advances made by such Lender to Paxar. "Termination Date" means the earlier of March 3, 2003 and the date of termination in whole of the Commitments pursuant to Section 2.06 or 6.01. "Trade Letter of Credit" means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of inventory to Paxar or any of its Subsidiaries to effect payment for such inventory. "Transaction" has the meaning specified in Section 2.17. "Type" refers to the distinction between Advances (other than Competitive Bid Advances) bearing interest at the Prime Rate and Advances bearing interest at the Eurocurrency Rate. "Unused Revolving Credit Commitment" means, with respect to any Lender at any time (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Bank pursuant to Section 2.04(c) and outstanding at such time, (C) the aggregate principal amount of all Swing Line Advances made 24 18 by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at such time, and (D) the aggregate principal amount of all Competitive Bid Advances outstanding at such time. "Unused Term Credit Commitment" means, with respect to any Lender at any time, such Lender's Term Commitment at such time minus the aggregate principal amount of all Term Advances made by such Lender and outstanding at such time. "US Dollars" and the "$" sign each mean the lawful money of the United States of America. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "Warrant Agreement" means the Warrant Agreement dated as of March 3, 1997 between Paxar and Odyssey Partners, L.P., as the same may be amended, modified or otherwise supplemented from time to time in accordance with the terms of this Agreement. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances. (a) The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Revolving Credit Advance") to each Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount for each such Revolving Credit Advance (determined in the case of any Revolving Credit Advance denominated in a Primary Currency by reference to the Equivalent thereof in US Dollars on such Business Day) not to exceed such Lender's Unused Revolving Credit Commitment at such time; provided, however, that, after giving effect to such Revolving Credit Borrowing, the sum of (x) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances, Letter of Credit Advances and Competitive Bid Advances made hereunder and outstanding on such Business Day plus (y) the aggregate Available Amount of all Letters of Credit outstanding on such Business Day shall not exceed the Revolving Credit Facility on such Business Day. Each Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or the Equivalent thereof in the Primary Currency in which such Revolving Credit Borrowing is denominated) (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Swing Line Advances or outstanding Letter of Credit Advances) and shall consist of Revolving Credit Advances of the same Type and in the same currency made simultaneously by the Lenders ratably according to their Revolving Credit Commitments; provided, however, that after giving effect to any Revolving Credit Borrowing denominated in a Primary Currency, the Foreign Loan Amount on such date shall not exceed $55,000,000. Within 25 19 the limits of each Lender's Commitment, the Borrowers may borrow under this Section 2.01, prepay pursuant to Section 2.11 and reborrow under this Section 2.01. (b) The Term Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make three advances (each a "Term Advance") to Paxar from time to time on any Business Day during the period from the date hereof until the Term Advance Termination Date in an amount for each such Term Advance not to exceed such Lender's Unused Term Commitment at such time; provided, however, that Paxar shall borrow at least $100,000,000 under the Term Facility on the Effective Date. Each Term Borrowing shall consist of Term Advances of the same Type denominated in US Dollars made simultaneously by the Lenders ratably according to their Term Commitments. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. (c) The Swing Line Advances. Paxar may request the Swing Line Bank to make, and the Swing Line Bank shall make, on the terms and conditions hereinafter set forth, Swing Line Advances to Paxar from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $5,000,000 (the "Swing Line Facility") and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $100,000 or an integral multiple of $100,000 in excess thereof and shall be made as a Prime Rate Advance or shall bear interest at such other interest rate, if any, as may be agreed upon by Paxar and the Swing Line Bank. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, Paxar may borrow under this Section 2.01(c), repay pursuant to Section 2.07(c) or prepay pursuant to Section 2.11 and reborrow under this Section 2.01(c). (d) Letters of Credit. The Issuing Bank agrees, on the terms and conditions hereinafter set forth, to issue letters of credit (the "Letters of Credit") for the account of a Borrower from time to time on any Business Day during the period from the date hereof until 60 days before the Termination Date (i) in an aggregate Available Amount for all Letters of Credit not to exceed at any time the Issuing Bank's Letter of Credit Commitment at such time and (ii) in an Available Amount for each such Letter of Credit not to exceed the lesser of (x) the Letter of Credit Facility at such time and (y) the Unused Revolving Credit Commitments of the Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the relevant Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and (A) in the case of a Standby Letter of Credit, one year after the date of issuance thereof, but may by its terms be automatically renewable annually upon notice (a "Notice of Renewal") given to the Issuing Bank and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless such Issuing Bank has notified the relevant Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a "Notice of Termination")) and (B) in the case of a Trade Letter of Credit, 60 days after the date of issuance thereof; provided that the terms of each Standby Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Standby Letter of Credit to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date. If either a Notice of Renewal is not given by the relevant Borrower or a Notice of Termination is given by the Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, 26 20 that even in the absence of receipt of a Notice of Renewal the Issuing Bank may in its discretion, unless instructed to the contrary by the Administrative Agent or the relevant Borrower, deem that a Notice of Renewal had been timely delivered and in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(d), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.04(c) and request the issuance of additional Letters of Credit under this Section 2.01(d). SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing (other than a Competitive Bid Borrowing) shall be made on notice, given not later than 12:00 Noon (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances, or the first Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Prime Rate Advances, by the relevant Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing, and (v) in the case of a Borrowing consisting of Eurocurrency Rate Advances, initial Interest Period and the currency for each such Advance. Each Lender shall, before 12:00 Noon (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's address referred to in Section 9.02. (b) Each Swing Line Borrowing shall be made on notice, given not later than 12:00 Noon (New York City time) on the date of the proposed Swing Line Borrowing, by Paxar to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) interest rate to be applicable to the Advances comprising such Borrowing (which interest rate shall either be the Prime Rate or such other interest rate as may be agreed upon by Paxar and the Swing Line Bank). The Swing Line Bank will make the amount thereof available to the Administrative Agent at the Administrative Agent's Account, in same day funds. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to Paxar at the Administrative Agent's address referred to in Section 9.02. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender's Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. Paxar hereby agrees to each such sale and assignment. Effective upon each such sale and assignment, each Swing Line Advance purchased by a Lender shall be, for all purposes under this Agreement, a Revolving Credit Advance (which shall be a Prime Rate Advance). Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date 27 21 of demand by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. (c) Anything in subsection (a) above to the contrary notwithstanding, (i) a Borrower may not select Eurocurrency Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.09 or 2.13 and (ii) the Eurocurrency Rate Advances may not be outstanding as part of more than 10 separate Borrowings. (d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the relevant Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate Advances, the relevant Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the appropriate Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the appropriate Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the appropriate Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. The Competitive Bid Advances. (a) Each Lender severally agrees that Paxar may make Competitive Bid Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, (x) the aggregate amount of the Competitive Bid Advances then outstanding shall not exceed $60,000,000 and (y) the sum of the aggregate principal amount of the Revolving Credit Advances, the Swing Line Advances, the Letter of Credit Advances and the Competitive Bid Advances then outstanding plus the aggregate Available Amount of all Letters of Credit outstanding at such time shall not exceed the aggregate amount of the Revolving Credit Commitments of the Lenders. 28 22 (i) Paxar may request a Competitive Bid Borrowing under this Section 2.03 by delivering to the Administrative Agent, by telecopier or telex, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (v) date of such proposed Competitive Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, the Interest Period for and the maturity date of such LIBO Rate Advance, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, maturity date for repayment of each Fixed Rate Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring 7 days after the date of such Competitive Bid Borrowing or later than the earlier of (I) 180 days after the date of such Competitive Bid Borrowing and (II) the Termination Date), (y) interest payment date or dates relating thereto, and (z) other terms (if any) to be applicable to such Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed Competitive Bid Borrowing, if Paxar shall specify in the Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing being referred to herein as "Fixed Rate Advances") and (B) at least five Business Days prior to the date of the proposed Competitive Bid Borrowing, if Paxar shall instead specify in the Notice of Competitive Bid Borrowing that the rates of interest be offered by the Lenders are to be based on the LIBO Rate (the Advances comprising such Competitive Bid Borrowing being referred to herein as "LIBO Rate Advances"). Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on Paxar. The Administrative Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from Paxar by sending such Lender a copy of the related Notice of Competitive Bid Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Advances to Paxar as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to Paxar), before 9:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and before 10:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, of the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.03(a), exceed such Lender's Commitment, if any), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Administrative Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify Paxar of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing. (iii) Paxar shall, in turn, before 10:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and before 11:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either: 29 23 (x) cancel such Competitive Bid Borrowing by giving the Administrative Agent notice to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Administrative Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to Paxar by the Administrative Agent on behalf of such Lender for such Competitive Bid Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. Paxar shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the amount that each such Lender offered at such interest rate. (iv) If Paxar notifies the Administrative Agent that such Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made. (v) If Paxar accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by Paxar, (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before 1:00 P.M. (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to Paxar at the Administrative Agent's address referred to in Section 9.02. Promptly after each Competitive Bid Borrowing the Administrative Agent will notify each Lender of the amount of the Competitive Bid Borrowing and the Unused Revolving Credit Commitments of the Lenders after giving effect to such Competitive Bid Borrowing. (vi) If Paxar notifies the Administrative Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance shall be irrevocable and binding on Paxar. Paxar shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such 30 24 Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date. (b) Each Competitive Bid Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the Borrowers shall be in compliance with the limitations set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.03, Paxar may from time to time borrow under this Section 2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this Section 2.03, provided that a Competitive Bid Borrowing shall not be made within three Business Days of the date of any other Competitive Bid Borrowing. (d) Paxar shall repay to the Administrative Agent for the account of each Lender that has made a Competitive Bid Advance, on the maturity date of each Competitive Bid Advance (such maturity date being that specified by Paxar for repayment of such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and provided in the Competitive Bid Note evidencing such Competitive Bid Advance), the then unpaid principal amount of such Competitive Bid Advance. Paxar shall have no right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms, specified by Paxar for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. (e) Paxar shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by Paxar for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default, Paxar shall pay interest on the amount of unpaid principal of and interest on each Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note. (f) The indebtedness of Paxar resulting from each Competitive Bid Advance shall be evidenced by a separate Competitive Bid Note of Paxar payable to the order of the Lender making such Competitive Bid Advance. (g) Upon delivery of each Notice of Competitive Bid Borrowing, Paxar shall pay a non-refundable fee of $3,500 to the Administrative Agent for its own account. SECTION 2.04. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 11:00 A.M. (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the relevant Borrower to the Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telex or telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, 31 25 (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as the Issuing Bank may specify to such Borrower for use in connection with such requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the requested form of such Letter of Credit is acceptable to the Issuing Bank in its sole discretion and (y) it has not received written notice of objection to such issuance from the Required Lenders, the Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the relevant Borrower at its office referred to in Section 9.02 or as otherwise agreed with such Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to the Administrative Agent and each Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued during the preceding month and drawings during such month under all Letters of Credit and (B) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit. (c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Issuing Bank of a Letter of Credit Advance, which shall be a Prime Rate Advance, in the amount of such draft. Upon written demand by the Issuing Bank, with a copy of such demand to the Administrative Agent, each Lender shall purchase from the Issuing Bank, and the Issuing Bank shall sell and assign to each such Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Issuing Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to the Issuing Bank. Each Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank, provided notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Issuing Bank to any other Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents and warrants to such other Lender that the Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of the Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of the Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced by such amount on such Business Day. (d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.04(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. 32 26 SECTION 2.05. Fees. (a) Revolving Credit Facility Fee. Paxar agrees to pay to the Administrative Agent for the account of each Lender (other than the Designated Bidders) a facility fee on the aggregate amount of such Lender's Revolving Credit Commitment from the Effective Date in the case of each Initial Lender and from the later of the Effective Date and the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing March 31, 1997, and on the Termination Date. (b) Term Facility Fee. Paxar agrees to pay to the Administrative Agent for the account of each Lender (other than the Designated Bidders) a facility fee on the aggregate amount of such Lender's Unused Term Commitment from the Effective Date in the case of each Initial Lender and from the later of the Effective Date and the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Term Advance Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable quarterly on the last day of each March and June, commencing March 31, 1997, and on the Term Advance Termination Date. (c) Letter of Credit Fees, Etc. (i) Paxar shall pay to the Administrative Agent for the account of each Lender a commission, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing March 31, 1997, and on the earliest to occur of the full drawing, expiration, termination or cancellation of any such Letter of Credit and on the Termination Date, on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time at the Applicable Margin then in effect for the Revolving Credit Facility. (ii) Paxar shall pay to the Issuing Bank, for its own account, such commissions, issuance fees, fronting fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as Paxar and the Issuing Bank shall agree. (d) Administrative Agent's Fees. Paxar shall pay to the Administrative Agent for its own account such fees as may from time to time be agreed between Paxar and the Administrative Agent. SECTION 2.06. Termination or Reduction of the Commitments. The Borrower shall have the right, upon at least five Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the Unused Revolving Credit Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and provided further that the aggregate amount of the Revolving Credit Commitments of the Lenders shall not be reduced to an amount that is less than an amount equal to the sum of (x) the aggregate principal amount of the Competitive Bid Advances then outstanding and (y) the aggregate Available Amount of all Letters of Credit then outstanding. SECTION 2.07. Repayment of Advances. (a) Revolving Credit Advances. Each Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. (b) Term Advances. Paxar shall repay to the Administrative Agent for the ratable account of the Lenders the aggregate outstanding principal amount of the Term Advances on the following dates in the amounts indicated (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.11): 33 27
Date Amount ---- ------ March 31, 1998 $5.0 million June 30, 1998 5.0 million September 30, 1998 5.0 million December 31, 1998 5.0 million March 31, 1999 6.25 million June 30, 1999 6.25 million September 30, 1999 6.25 million December 31, 1999 6.25 million March 31, 2000 7.5 million June 30, 2000 7.5 million September 30, 2000 7.5 million December 31, 2000 7.5 million March 31, 2001 7.5 million June 30, 2001 7.5 million September 30, 2001 7.5 million December 31, 2001 7.5 million March 31, 2002 8.75 million June 30, 2002 8.75 million September 30, 2002 8.75 million December 31, 2002 8.75 million
provided, however, that the final principal installment shall be repaid on the Termination Date and in any event shall be in an amount equal to the aggregate principal amount of the Term Advances outstanding on such date. (c) Swing Line Advances. Paxar shall repay to the Administrative Agent for the account of the Swing Line Bank and each other Lender that has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made by each of them on the earliest of (i) the date repayment is demanded by the Swing Line Bank, (ii) 60 days after such Swing Line Advance is made and (iii) the Termination Date. (d) Letter of Credit Advances. (i) The relevant Borrower shall repay to the Administrative Agent for the account of the Issuing Bank and each other Lender that has made a Letter of Credit Advance on the earlier of demand and the Termination Date the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of each Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and 34 28 shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances (it being understood that any such payment by a Borrower is without prejudice to, and does not constitute a waiver of, any rights such Borrower might have or might acquire as a result of the payment by the Issuing Bank of any draft or the reimbursement by such Borrower thereof): (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of any Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that a Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (E) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Guaranty, the Subsidiary Guaranty or any other guarantee, for all or any of the Obligations of a Borrower in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, a Borrower or a guarantor. SECTION 2.08. Interest. (a) Scheduled Interest. Each Borrower shall pay interest on the unpaid principal amount of each Advance (other than Competitive Bid Advances or Swing Line Advances that are not Prime Rate Advances) owing to each Lender by such Borrower from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Prime Rate Advances. During such periods as such Advance is a Prime Rate Advance, a rate per annum equal at all times to the Prime Rate in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Prime Rate Advance shall be Converted or paid in full. (ii) Eurocurrency Rate Advances. During such periods as such Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (x) the Eurocurrency Rate for such Interest Period for such Advance plus (y) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such 35 29 Interest Period every three months from the first day of such Interest Period and on the date such Eurocurrency Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, each Borrower shall pay interest on (i) the unpaid principal amount of each Advance (other than a Competitive Bid Advance) owing to each Lender by such Borrower, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Prime Rate Advances pursuant to clause (a)(i) above. (c) Additional Interest on Eurocurrency Rate Advances. Each Borrower shall pay to each Lender, so long as and to the extent such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurocurrency Rate Advance of such Lender, from the date of such Eurocurrency Rate Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (a) the Eurocurrency Rate for the applicable Interest Period for such Eurocurrency Rate Advance from (b) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is otherwise payable on such Eurocurrency Rate Advance. Such Lender shall as soon as practicable provide notice to the Administrative Agent and the Borrowers of any such additional interest arising in connection with any such Eurocurrency Rate Advance, which notice shall be conclusive and binding, absent manifest error. SECTION 2.09. Interest Rate Determination. (a) The Administrative Agent shall give prompt notice to the Borrowers and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.08(a)(i) or (ii). (b) If, with respect to any Eurocurrency Rate Advances, the Required Lenders notify the Administrative Agent that the Eurocurrency Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrowers and the Lenders, whereupon (i) each Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate Advances are denominated in US Dollars, Convert into Prime Rate Advances and (B) if such Eurocurrency Rate Advances are denominated in a Primary Currency, be exchanged for an Equivalent amount of US Dollars and converted into Prime Rate Advances, and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit Advances or Term Advances into, Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist. (c) If a Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify such Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, (i) if such Eurocurrency Rate Advances are denominated in US Dollars, Convert into Prime Rate Advances and (ii) if such Eurocurrency Rate Advances are denominated in a Primary Currency, be exchanged for an Equivalent amount of US Dollars and Converted into Prime Rate Advances. 36 30 (d) On the date on which the aggregate unpaid principal amount of Eurocurrency Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall automatically (i) if such Eurocurrency Rate Advances are denominated in US Dollars, Convert into Prime Rate Advances and (ii) if such Eurocurrency Rate Advances are denominated in a Primary Currency, be exchanged for an Equivalent amount of US Dollars and Converted into Prime Rate Advances. (e) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate Advances are denominated in US Dollars, Convert into Prime Rate Advances and (B) if such Eurocurrency Rate Advances are denominated in a Primary Currency, be exchanged for an Equivalent amount of US Dollars and Converted into Prime Rate Advances and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended. SECTION 2.10. Conversion of Advances. Each Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 12:00 Noon (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.09 and 2.13, Convert all Advances owing by such Borrower (other than Competitive Bid Advances) of one Type comprising the same Borrowing into Advances (other than Competitive Bid Advances) of the other Type, so long as, after giving effect to any such Conversion, each such Borrowing is comprised of Advances denominated in the same currency and, in the case of any Borrowing comprised of Eurocurrency Rate Advances, having the same Interest Period; provided, however, that (w) no Eurocurrency Rate Advances of one currency shall be Converted into Eurocurrency Rate Advances of another currency, (x) any Conversion of Eurocurrency Rate Advances into Prime Rate Advances shall be made only on the last day of an Interest Period for such Eurocurrency Rate Advances, (y) any Conversion of Prime Rate Advances into Eurocurrency Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c) and (z) no Conversion of any such Advances shall result in more separate Borrowings than permitted under Section 2.02(c). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into Eurocurrency Rate Advances, the currency of and the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the relevant Borrower. SECTION 2.11. Prepayments. (a) Optional. Each Borrower may, upon at least one Business Day's notice in the case of Prime Rate Advances and three Business Days' notice in the case of Eurocurrency Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Advances owing by such Borrower and comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or the Equivalent thereof in the Primary Currency in which such Revolving Credit Borrowing is denominated, determined on the date the related notice of prepayment is given) and (y) in the event of any such prepayment of a Eurocurrency Rate Advance, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 9.04(c). Each such prepayment of the Term Advances shall be applied to the installments of the Term Facility on a pro rata basis. (b) Mandatory. (i) Paxar shall, on the date of receipt of the Net Cash Proceeds by Paxar or any of its Subsidiaries from (A) the sale, lease, transfer or other disposition of any assets of Paxar or any of its Subsidiaries (other than any sale, lease, transfer or other disposition of assets pursuant to clause (i) or (ii) of Section 5.02(f)), (B) the incurrence or issuance by Paxar or any of its Subsidiaries of any Debt (other than Debt incurred or issued pursuant to the exceptions set forth in Section 5.02(d) on the date hereof), (C) the sale or issuance by Paxar or any of its Subsidiaries of any capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest and (D) any Extraordinary Receipt 37 31 received by or paid to or for the account of Paxar or any of its Subsidiaries and not otherwise included in clause (A), (B) or (C) above, prepay an aggregate principal amount of the Term Advances comprising part of the same Borrowings equal to (x) in the case of clause (A) above, the amount of such Net Cash Proceeds in excess of the Permitted Asset Sale Amount and (y) in the case of clauses (B), (C) and (D) above, the amount of such Net Cash Proceeds. Each such prepayment described in subclause (x) of the immediately preceding sentence shall be applied to the Term Facility and to the installments thereof in reverse order of maturity. Each such prepayment described in subclause (y) of the immediately preceding sentence shall be applied to the Term Facility and to the installments thereof on a pro rata basis. (ii) Paxar shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances equal to the amount by which (A) the sum of the aggregate principal amount of (u) the Revolving Credit Advances denominated in US Dollars, plus (v) the Equivalent on such day of the Revolving Credit Advances denominated in Primary Currencies, plus (w) the Letter of Credit Advances, plus (x) the aggregate Available Amount of all Letters of Credit then outstanding, plus (y) the Swing Line Advances plus (z) the Competitive Bid Advances then outstanding exceeds (B) the Revolving Credit Facility. (iii) Prepayments of the Revolving Credit Facility made pursuant to clause (ii) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full and third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full. (iv) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. SECTION 2.12. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender Party of agreeing to make or making, funding or maintaining Eurocurrency Rate Advances or LIBO Rate Advances (excluding for purposes of this Section 2.12 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.15 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then Paxar shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost. A certificate as to the amount of such increased cost, submitted to Paxar and the Administrative Agent by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party's commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of this type or the issuance or maintenance of, or participation in, the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), Paxar shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party or such corporation in the light of such circumstances, to the extent that such Lender Party reasonably determines such 38 32 increase in capital to be allocable to the existence of such Lender Party's commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of, or participation in, any Letters of Credit. A certificate as to such amounts submitted to Paxar and the Administrative Agent by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.13. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make Eurocurrency Rate Advances or LIBO Rate Advances or to fund or maintain Eurocurrency Rate Advances or LIBO Rate Advances hereunder, (i) each Eurocurrency Rate Advance or LIBO Rate Advance, as the case may be, will automatically, upon such demand, be exchanged for an Equivalent amount of US Dollars and Converted into a Prime Rate Advance or an Advance that bears interest at the rate set forth in Section 2.08(a)(i), as the case may be, and (ii) the obligation of the Lenders to make Eurocurrency Rate Advances or LIBO Rate Advances or to Convert Prime Rate Advances into Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify Paxar and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.14. Payments and Computations. (a) Each Borrower shall make each payment required to be made by it hereunder and under the Notes not later than 12:00 Noon (New York City time) on the day when due in like funds as advanced to the Administrative Agent at the Administrative Agent's Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility or Letter of Credit fees ratably (other than amounts payable pursuant to Section 2.03, 2.12, 2.15 or 9.04(c)) to the Lender Parties for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender Party to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(g), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Each Borrower hereby authorizes each Lender Party, if and to the extent payment owed to such Lender Party is not made when due hereunder or under any Note held by such Lender Party, to charge from time to time against any or all of such Borrower's accounts with such Lender Party any amount so due. (c) All computations of interest based on the Prime Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurocurrency Rate or the Federal Funds Rate and of facility and Letter of Credit fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility or Letter of Credit fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances or LIBO Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. 39 33 (e) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any payment is due to any Lender Party hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent a Borrower shall not have so made such payment in full to the Administrative Agent, each Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.15. Taxes. (a) Any and all payments by a Borrower hereunder or under the Notes shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Administrative Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of overall net income taxes, by the jurisdiction under the laws of which such Lender Party or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender Party, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of overall net income taxes, by the jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If a Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Lender Party or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) Each Borrower shall indemnify each Lender Party and the Administrative Agent for and hold it harmless against the full amount of Taxes and Other Taxes (including, without limitation, taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.15) imposed on or paid by such Lender Party or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the relevant Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under the Notes by or on behalf of a Borrower through an account or branch outside the United States or by or on behalf of a Borrower by a payor that is not a United States person, if such Borrower determines that no Taxes are payable in respect thereof, such Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. 40 34 (e) Each Lender Party organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender or the Initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in writing by a Borrower (but only so long as such Lender Party remains lawfully able to do so), shall provide each of the Administrative Agent and the Borrower with two original Internal Revenue Service Forms 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the form provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender Party assignee becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service Form 1001 or 4224, that the applicable Lender Party reasonably considers to be confidential, such Lender Party, if legally required to do so, shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender Party required to do so has failed to provide a Borrower with the appropriate form described in Section 2.15(e) (other than if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided, or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under Section 2.15(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender Party shall reasonably request to assist the Lender Party to recover such Taxes. SECTION 2.16. Sharing of Payments, Etc. If any Lender Party shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) (a) on account of obligations owing to such Lender Party hereunder and under the Notes in excess of its ratable share of payments on account of the Obligations owing to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such participations in the Obligations owing to them as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each Lender Party shall be rescinded and such Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. Each Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of such Borrower in the amount of such participation. 41 35 SECTION 2.17. Use of Proceeds. The proceeds of the Term Advances shall be used to finance the acquisition (the "Transaction") by Paxar of the remaining portion of the outstanding capital stock of the Company that is not, prior to the date hereof, owned by Paxar and to redeem, purchase, defease or otherwise satisfy the Monarch Bonds, and in the case of all of the Advances, the proceeds thereof shall be available (and Paxar agrees that it and any other Borrower shall use such proceeds) solely for general corporate purposes of Paxar and its Subsidiaries. SECTION 2.18. Additional Borrowers. Upon the execution and delivery by any Subsidiary of Paxar acceptable to the Required Lenders in their reasonable judgment of a supplement to this Agreement, in substantially the form of Exhibit E hereto (a "Credit Agreement Supplement"), (i) such Person shall be referred to as a "Borrower" and shall be and become a Borrower, and each reference in this Agreement to a "Borrower" shall also mean and be a reference to such Borrower and each reference in any other Loan Document to a "Borrower" or a "Loan Party" shall also mean and be a reference to such Borrower, and (ii) such Person shall assume all of the Obligations of a Borrower hereunder. The Administrative Agent shall promptly notify each Lender of each such additional Borrower. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01, 2.03 and 2.04. Sections 2.01, 2.03 and 2.04 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) The terms and conditions of the Transaction shall be satisfactory to the Lender Parties; and the Transaction shall have been consummated strictly in accordance with the terms of the Stock Purchase Agreement, without any waiver or amendment of any material term, provision or condition set forth therein, and in compliance with all applicable laws. (b) The Stock Purchase Agreement shall be in full force and effect. (c) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of Paxar and each of its Subsidiaries, including the terms and conditions of the charter, bylaws and each class of capital stock of each Loan Party and each such Subsidiary and of each agreement or instrument relating to such structure or capitalization. (d) There shall have occurred (i) no Material Adverse Change since December 31, 1995 and (ii) no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole, since December 31, 1995. (e) There shall exist no action, suit, investigation, litigation or proceeding affecting Paxar or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to adversely affect the Transaction, the Facilities or the consummation of the transactions contemplated hereby. (f) The Lenders shall have completed a due diligence investigation of Paxar and its Subsidiaries and of the Company and its Subsidiaries in scope, and with results, satisfactory to the Lender Parties, and nothing shall have come to the attention of any of the Lender Parties during the course of such due diligence investigation to lead them to believe that the Information Memorandum was or has become 42 36 misleading, incorrect or incomplete in any material respect; without limiting the generality of the foregoing, the Lender Parties shall have been given such access to the management, records, books of account, contracts and properties of Paxar and its Subsidiaries and of the Company and its Subsidiaries as they shall have requested. (g) All governmental and third party consents and approvals necessary in connection with the Transaction, the Facilities and the other transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lender Parties that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (h) All of the information provided by or on behalf of Paxar to the Administrative Agent and the Lender Parties prior to their commitment (the "Pre-Commitment Information") shall be true and correct in all material aspects; and no additional information shall have come to the attention of the Administrative Agent or of any of the Lenders that is inconsistent in any material respect with the Pre-Commitment Information or that could reasonably be expected to have a Material Adverse Effect. (i) Paxar shall have notified each Lender Party and the Administrative Agent in writing as to the proposed Effective Date. (j) Paxar shall have paid all accrued fees and expenses of the Administrative Agent and the Lender Parties (including the accrued fees and expenses of counsel to the Administrative Agent). (k) On the Effective Date, the following statements shall be true and the Administrative Agent shall have received for the account of each Lender Party a certificate signed by a duly authorized officer of Paxar, dated the Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and (ii) No event has occurred and is continuing that constitutes a Default. (l) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Administrative Agent and (except for the Notes) in sufficient copies for each Lender Party: (i) The Notes to the order of the Lenders. (ii) Certified copies of (A) the resolutions of the Board of Directors of Paxar and each other Loan Party approving the Transaction, this Agreement, the Notes, each other Loan Document and each Related Document to which it is or is to be a party, (B) the bylaws of Paxar and each other Loan Party and (C) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Transaction, this Agreement, the Notes, each other Loan Document and each Related Document. (iii) A certificate of the Secretary or an Assistant Secretary of Paxar and each other Loan Party certifying the names and true signatures of the officers of Paxar and such other Loan Party authorized to sign this Agreement, the Notes, each other Loan Document and each Related Document to which they are or are to be parties and the other documents to be delivered hereunder. 43 37 (iv) A copy of the charter of Paxar, the Company and each other Loan Party and each amendment thereto, certified (as of a date reasonably near the Effective Date) by the Secretary of State of the jurisdiction of its incorporation as being a true and correct copy thereof. (v) A pledge agreement in substantially the form of Exhibit F hereto (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Pledge Agreement"), duly executed by Paxar and the other Loan Parties (other than the Company), together with: (A) certificates representing the Pledged Shares referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt referred to therein indorsed in blank, (B) acknowledgment copies or stamped receipt copies of proper financing statements, duly filed on or before the day of the Initial Extension of Credit under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Pledge Agreement, covering the Collateral described in the Pledge Agreement, (C) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing the financing statements referred to in clause (B) above and all other effective financing statements filed in the jurisdictions referred to in clause (B) above that name Paxar as debtor, together with copies of such other financing statements, and (D) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Pledge Agreement has been taken. (vi) A guaranty in substantially the form of Exhibit G hereto (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Subsidiary Guaranty"), duly executed by each of the Subsidiary Guarantors (other than the Company). (vii) Certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lender Parties, together with all agreements, instruments and other documents delivered in connection therewith. (viii) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements dated December 31, 1995, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties' due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the Effective Date), pro forma financial statements as to Paxar and forecasts prepared by management of Paxar, in form and substance satisfactory to the Lender Parties, of balance sheets, income 44 38 statements and cash flow statements on an annual basis for each year following the Effective Date until the Termination Date. (ix) Certificates, in form and substance satisfactory to the Lender Parties, attesting to the Solvency of each Loan Party after giving effect to the Transaction and the other transactions contemplated hereby, from its chief financial officer. (x) Evidence of insurance with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties, including, without limitation, business interruption insurance. (xi) A favorable opinion of Snow Becker Krauss P.C., counsel for Paxar, substantially in the form of Exhibit H-1 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xii) A favorable opinion of Shearman & Sterling, counsel for the Administrative Agent, in form and substance satisfactory to the Administrative Agent. (xiii) Evidence satisfactory to the Administrative Agent of (A) the termination of the Chemical Credit Agreement and the Bankers Trust Credit Agreements and (B) the payments in full of all amounts due under or in respect of the Chemical Credit Agreement and the Bankers Trust Credit Agreements. SECTION 3.02. Conditions Precedent to the Initial Borrowing of Each Additional Borrower. The obligation of each Lender to make an initial Advance to each Borrower (other than Paxar) following its designation as a Borrower hereunder pursuant to Section 2.18 on the occasion of the initial Borrowing thereby is subject to the Administrative Agent's receipt on or before the date of such initial Borrowing of each of the following, in form and substance satisfactory to the Administrative Agent and dated such date: (a) The Credit Agreement Supplement relating to such Borrower, in substantially the form of Exhibit E hereto. (b) A Revolving Credit Note of such Borrower to the order of each of the Lenders, respectively. (c) A certificate of the Secretary or an Assistant Secretary (or person performing similar functions) of such Borrower certifying (A) appropriate resolutions of the board of directors (or persons performing similar functions) of such Borrower approving this Agreement and its Revolving Credit Notes, and all documents evidencing other necessary corporate (or equivalent) action and governmental approvals, if any, with respect to this Agreement and its Revolving Credit Notes (copies of which shall be attached thereto), (B) copies of the by-laws (or the equivalent thereof) of such Borrower (copies of which shall be attached thereto) and (C) the names and true signatures of the officers of such Borrower authorized to sign the Credit Agreement Supplement relating to such Borrower and its Revolving Credit Notes and the other documents to be delivered by such Borrower hereunder. (d) A copy of the charter or articles (or other similar organizational document) of such Borrower, certified (as of a date reasonably near the date of such Borrowing) as being a true and complete copy thereof by the Secretary of State (or other appropriate governmental authority) of the jurisdiction of organization of such Borrower or, if such certificate is not provided in the jurisdiction of organization of 45 39 such Borrower, certified (as of a date reasonably near the date of such Borrowing) as being a true and complete copy thereof by a duly authorized officer of such Borrower. (e) A copy of a certificate of the Secretary of State (or other appropriate governmental authority) of the jurisdiction of organization of such Borrower, dated reasonably near the date of such Borrowing, certifying that such Borrower is duly organized and in good standing (or the equivalent thereof) under the laws of the jurisdiction of its organization. (f) A certificate signed by a duly authorized officer of such Borrower, dated as of the date of such Borrowing, certifying that such Borrower has obtained all authorizations, consents, approvals (including, without limitation, exchange control approvals) and licenses of any governmental authority or other third party necessary for such Borrower to execute and deliver its Credit Agreement Supplement and its Revolving Credit Notes and to perform its obligations under this Agreement or any of its Revolving Credit Notes. (g) Evidence of acceptance by Paxar of its appointment as the process agent of such Borrower in accordance with Section 9.13(a), in substantially the form of Exhibit I hereto. (h) A favorable opinion of counsel for such Borrower reasonably acceptable to the Administrative Agent, dated the date of such Borrowing, in substantially the form of Exhibit H-2 hereto, and addressing such other matters as any Lender Party through the Administrative Agent may reasonably request. (i) Such other documents, opinions and other information as any Lender Party, through the Administrative Agent, may reasonably request. SECTION 3.03. Conditions Precedent to Certain Term Borrowings. The obligation of each Lender to make a Term Advance on the occasion of each Term Borrowing the proceeds of which will be used to purchase, defease or otherwise satisfy the Monarch Bonds (other than in connection with the redemption of $30,000,000 aggregate principal amount of the Monarch Bonds from the proceeds of an "Equity Offering" (as defined in the Monarch Indenture)) shall be subject to the condition precedent that the Company shall have executed and delivered a supplement to the Subsidiary Guaranty and a supplement to the Pledge Agreement in accordance with the provisions of Section 5.01(n). SECTION 3.04. Conditions Precedent to Each Borrowing (other than a Competitive Bid Borrowing) and Issuance. The obligation of each Lender to make an Advance (other than a Competitive Bid Advance, a Letter of Credit Advance made by the Issuing Bank or a Lender pursuant to Section 2.04(c) and a Swing Line Advance made by a Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (other than a Competitive Bid Borrowing but including the Initial Extension of Credit), and the obligation of the Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit and the right of a Borrower to request a Swing Line Borrowing or the issuance or renewal of a Letter of Credit, shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Borrowing or issuance or renewal (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing, Notice of Issuance or Notice of Renewal and the acceptance by the relevant Borrower of the proceeds of such Borrowing or of such Letter of Credit or the renewal of such Letter of Credit shall constitute a representation and warranty by Paxar and such Borrower that on the date of such Borrowing or issuance or renewal such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of such date, before and after giving effect to such Borrowing or issuance or renewal and to the 46 40 application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing or issuance or renewal, in which case as of such specific date, and (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or renewal or from the application of the proceeds therefrom, that constitutes a Default; and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Lender Party through the Administrative Agent may reasonably request. SECTION 3.05. Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as part of such Competitive Bid Borrowing is subject to the conditions precedent that (i) the Administrative Agent shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the Administrative Agent shall have received a Competitive Bid Note payable to the order of such Lender for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Competitive Bid Borrowing and the acceptance by Paxar of the proceeds of such Competitive Bid Borrowing shall constitute a representation and warranty by such Borrower that on the date of such Competitive Bid Borrowing such statements are true): (a) the representations and warranties contained in each Loan Document are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Competitive Bid Borrowing, in which case as of such specific date, (b) no event has occurred and is continuing, or would result from such Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default, and (c) no event has occurred and no circumstance exists as a result of which the information concerning Paxar that has been provided to the Administrative Agent and each Lender by Paxar in connection herewith would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. SECTION 3.06. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender Party prior to the date that the Borrower, by notice to the Lender Parties, designates as the proposed Effective Date, specifying its objection thereto. The Administrative Agent shall promptly notify the Lender Parties of the occurrence of the Effective Date. 47 41 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrowers. Each Borrower represents and warrants as follows: (a) Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. (b) The execution, delivery and performance by each Loan Party of this Agreement, the Notes, each other Loan Document and each Related Document to which it is or is to be a party, and the consummation of the Transaction and the other transactions contemplated hereby, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or by-laws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery and performance by any Loan Party of this Agreement, the Notes, any other Loan Document or any Related Document to which it is or is to be a party or for the consummation of the Transaction or the other transactions contemplated hereby, (ii) the grant by Paxar of the Liens granted by it pursuant to the Pledge Agreement, (iii) the perfection or maintenance of the Liens created by the Pledge Agreement (including the first priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Pledge Agreement, except for those authorizations, approvals, actions, notices and filings listed on Schedule 4.01(c) hereto, all of which have been duly obtained, taken, given or made and are in full force and effect. (d) This Agreement has been, and each of the Notes, each other Loan Document and each Related Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each of the Notes, each other Loan Document and each Related Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its respective terms. (e) (i) The Consolidated balance sheet of Paxar and its Subsidiaries as at December 31, 1995, and the related Consolidated statements of income and cash flows of Paxar and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Arthur Andersen LLP, independent public accountants, and the Consolidated balance sheet of Paxar and its Subsidiaries as at September 30, 1996, and the related Consolidated statements of income and cash flows of Paxar and its Subsidiaries for the nine months then ended, duly certified by the chief financial officer or treasurer of Paxar, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of said balance sheet as at September 30, 1996, and said statements of income and cash flows for the nine months then ended, to 48 42 year-end audit adjustments, the Consolidated financial condition of Paxar and its Subsidiaries as at such dates and the Consolidated results of the operations of Paxar and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1995, there has been no Material Adverse Change. (ii) The Consolidated balance sheet of the Company and its Subsidiaries as at December 31, 1995, and the related Consolidated statements of income and cash flows of the Company and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Arthur Andersen LLP, independent public accountants, and the Consolidated balance sheet of the Company and its Subsidiaries as at September 30, 1996, and the related Consolidated statements of income and cash flows of the Company and its Subsidiaries for the nine months then ended, duly certified by the vice president of finance or the treasurer of the Company, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of said balance sheet as at September 30, 1996, and said statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Company and its Subsidiaries as at such dates and the Consolidated results of operations of the Company and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1995, there has been no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole. (f) Except with respect to the matters disclosed on Schedule 4.01(f), there is no pending or threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby. (g) No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (h) The Consolidated pro forma balance sheet of Paxar and its Subsidiaries as at December 31, 1996, and the related Consolidated pro forma statement of income and cash flows of Paxar and its Subsidiaries for the fiscal year then ended, certified by the chief financial officer of Paxar, copies of which have been furnished to each Lender Party, fairly present the Consolidated pro forma financial condition of Paxar and its Subsidiaries as at such date and the Consolidated pro forma results of operations of Paxar and its Subsidiaries for the period ended on such date, in each case giving effect to the Transactions and the other transactions contemplated hereby. (i) Neither the Information Memorandum nor any other information, exhibit or report furnished by any Loan Party to the Administrative Agent or any Lender Party in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. (j) Except with respect to the matters disclosed on Schedule 4.01(j), the operations and properties of Paxar and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances 49 43 exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (k) Neither any Loan Party nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (l) Each Loan Party is, individually and together with its Subsidiaries, Solvent. ARTICLE V COVENANTS OF PAXAR SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Paxar will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws as provided in Section 5.01(l). (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither Paxar nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which Paxar or such Subsidiary operates. (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, however, that Paxar and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b), and provided further that neither Paxar nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of Paxar or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Paxar or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Paxar, such Subsidiary or the Lender Parties. 50 44 (e) Visitation Rights. At any reasonable time and from time to time, permit (i) the Administrative Agent or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, Paxar and any of its Subsidiaries, and (ii) the Administrative Agent or any of the Lender Parties or any agents or representatives thereof to discuss, in connection with the Loan Documents, the affairs, finances and accounts of Paxar and any of its Subsidiaries with any of their officers and with their independent certified public accountants. (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Paxar and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property to which Paxar or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so except, in any case, where the failure to do so, either individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. (i) Performance of Related Documents. Perform and observe all of the terms and provisions of each Related Document to be performed or observed by it, maintain each such Related Document in full force and effect, enforce such Related Document in accordance with its terms, take all such action to such end as may be from time to time requested by the Administrative Agent and, upon request of the Administrative Agent, make to each other party to each such Related Document such demands and requests for information and reports or for action as Paxar is entitled to make under such Related Document. (j) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Agreement with any of their Affiliates on terms that are fair and reasonable and no less favorable to Paxar or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (k) Interest Rate Hedging. On or prior to September 30, 1997, enter into, and maintain at all times thereafter, interest rate Hedge Agreements with Persons acceptable to the Administrative Agent on terms and conditions reasonably satisfactory to the Required Lenders. (l) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither Paxar nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in 51 45 good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (m) Preparation of Environmental Reports. If an Event of Default shall have occurred and be continuing, at the request of the Required Lenders, provide to the Lender Parties within 60 days after such request, at the expense of Paxar, an environmental site assessment report for the properties described in such request, prepared by an environmental consulting firm acceptable to the Required Lenders, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Required Lenders determine at any time that a material risk exists that any such report will not be provided within the time referred to above, the Required Lenders may retain an environmental consulting firm to prepare such report at the expense of Paxar, and Paxar hereby grants and agrees to cause any Subsidiary that owns any property described in such request to grant at the time of such request, to the Administrative Agent, the Lender Parties, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment. (n) Monarch as Subsidiary Guarantor. On or prior to the 150th day following the Effective Date, cause the Company to (i) execute a supplement to the Subsidiary Guaranty pursuant to the terms of the Subsidiary Guaranty without conflicting with or resulting in the breach of, or constituting a default under, the Monarch Indenture, (ii) execute a supplement to the Pledge Agreement pursuant to the terms of the Pledge Agreement without conflicting with or resulting in the breach of, or constituting a default under, the Monarch Indenture and (iii) cause certain covenants (acceptable to the Required Lenders) contained in the Monarch Indenture to be deleted in their entirety. (o) Reporting Requirements. Furnish to the Lender Parties: (i) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of Paxar, Consolidated and consolidating balance sheets of Paxar and its Subsidiaries as of the end of such quarter and Consolidated and consolidating statements of income and cash flows of Paxar and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer or treasurer of Paxar as having been prepared in accordance with generally accepted accounting principles and certificates of the chief financial officer of Paxar as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03, provided that in the event of any change in GAAP used in the preparation of such financial statements, Paxar shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (ii) as soon as available and in any event within 105 days after the end of each fiscal year of Paxar, a copy of the annual audit report for such year for Paxar and its Subsidiaries, containing Consolidated and consolidating balance sheets of Paxar and its Subsidiaries as of the end of such fiscal year and Consolidated and consolidating statements of income and cash flows of Paxar and its Subsidiaries for such fiscal year, together with a certificate of the chief financial officer of Paxar as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03 and in each case accompanied by an opinion acceptable to the Required Lenders by Arthur Andersen LLP or other independent public accountants acceptable to the Required Lenders, provided that in the event of any change in GAAP used in the preparation of such financial statements, Paxar shall also 52 46 provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (iii) as soon as available and in any event no later than 105 days after the end of each fiscal year of Paxar, forecasts prepared by management of Paxar, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on an annual basis for each of the three immediately succeeding fiscal years; (iv) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer or treasurer of Paxar setting forth details of such Default and the action that Paxar has taken and proposes to take with respect thereto; (v) promptly after the sending or filing thereof, copies of all reports that Paxar sends to any of its securityholders, and copies of all reports and registration statements that Paxar or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (vi) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting Paxar or any of its Subsidiaries of the type described in Section 4.01(f); (vii) promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by Paxar or any of its Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect; and (viii) such other information respecting Paxar or any of its Subsidiaries as any Lender Party through the Administrative Agent may from time to time reasonably request. (p) Release of Security Relating to Bankers Trust Credit Agreements. Within 30 days of the date hereof, the Administrative Agent shall have received satisfactory evidence that all liens and any other security interests relating to the Bankers Trust Credit Agreements and any other loan documents relating thereto have been terminated or released. SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Paxar will not: (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, other than: (i) Permitted Liens, (ii) purchase money Liens upon or in any real property or equipment acquired or held by Paxar or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of such property or equipment, or Liens existing on such property or equipment at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, 53 47 however, that no such Lien shall extend to or cover any properties of any character other than the real property or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, provided further that the principal amount of the indebtedness secured by a Lien referred to in this clause (ii) shall not exceed $500,000, and provided further that the sum of the aggregate principal amount of the indebtedness secured by the Liens referred to in this clause (ii) plus the aggregate principal amount of the indebtedness secured by the Liens referred to in clause (iv) below shall not exceed the amount specified therefor in Section 5.02(d)(iii)(C) at any time outstanding, (iii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto, (iv) Liens arising in connection with Capitalized Leases permitted under Section 5.02(d)(iii)(C); provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases, and (v) the replacement, extension or renewal of any Lien permitted by clause (iii) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby. (b) Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its Subsidiaries to do so, except that (i) any domestic Subsidiary of Paxar may merge or consolidate with or into any other domestic Subsidiary of Paxar, (ii) any foreign Subsidiary of Paxar may merge or consolidate with or into any other foreign Subsidiary of Paxar and (iii) any Subsidiary of Paxar may merge into Paxar, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles. (d) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) in the case of Paxar, Debt in respect of Hedge Agreements designed to hedge against fluctuations in interest rates incurred in the ordinary course of business and consistent with prudent business practice in an aggregate notional amount not to exceed $100,000,000 at any time outstanding; (ii) (A) in the case of any of its domestic Subsidiaries, Debt owed to Paxar or to a wholly-owned Subsidiary of Paxar and (B) in the case of any of its foreign Subsidiaries, Debt owed to Paxar or to a wholly-owned domestic Subsidiary of Paxar, provided that (1) after giving effect to the incurrence of any such Debt referred to in this clause (B), the Foreign Loan Amount shall not exceed $55,000,000 and (2) any such Debt referred to in this clause (B) shall be evidenced by a promissory note and such promissory note shall be pledged in favor of the Administrative Agent and the Lender Parties pursuant to the terms of the Pledge Agreement or a pledge agreement or a security agreement in form and substance reasonably satisfactory to the Administrative Agent; and 54 48 (iii) in the case of Paxar and any of its Subsidiaries, (A) Debt under the Loan Documents, (B) Debt existing on the Effective Date or Debt created or incurred under a loan or credit facility existing on the Effective Date and, in each case, described on Schedule 5.02(d) hereto (the "Existing Debt"), and any Debt extending the maturity of, or refunding or refinancing, in whole or in part, the Existing Debt, provided that (1) the principal amount of such Existing Debt shall not be increased above the principal amount thereof outstanding immediately prior to such extension, refunding or refinancing, and the direct and contingent obligors therefor shall not be changed, as a result of or in connection with such extension, refunding or refinancing and (2) any Existing Debt constituting Debt owed by a foreign Subsidiary to Paxar or to a wholly owned domestic Subsidiary of Paxar shall be evidenced by a promissory note and such promissory note shall be pledged in favor of the Administrative Agent and the Lender Parties pursuant to the terms of the Pledge Agreement or a pledge agreement or a security agreement in form and substance reasonably satisfactory to the Administrative Agent, (C) Capitalized Leases and Debt secured by Liens permitted by Section 5.02(a)(ii), provided that the sum of such Capitalized Leases plus the aggregate amount of Debt secured by Liens permitted by Section 5.02(a)(ii) shall not exceed $10,000,000 at any one time outstanding, (D) unsecured Debt incurred in the ordinary course of business aggregating not more than $20,000,000 at any one time outstanding, (E) in the case of Existing Debt of Paxar and its Subsidiaries and the Debt referred to in clause (D) above, Debt of Paxar and its domestic Subsidiaries of the type described in clause (i) of the definition of "Debt" guaranteeing the Obligations of Paxar or such Subsidiary, as the case may be, under such Existing Debt or such Debt referred to in cause (D) above, (F) Debt of Paxar or any of its wholly owned domestic Subsidiaries that is subordinate to the Obligations of the Loan Parties under the Loan Documents in an aggregate principal amount acceptable to the Required Lenders and on terms and conditions satisfactory to the Required Lenders; and (G) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. (e) Lease Obligations. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under leases or agreements to lease having an original term of one year or more that would cause the direct and contingent liabilities of Paxar and its Subsidiaries, on a Consolidated basis, in respect of all such obligations to exceed $10,000,000 payable in any period of 12 consecutive months. (f) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except (i) sales of inventory in the ordinary course of 55 49 its business, (ii) in a transaction authorized by subsection (b) of this Section and (iii) sales of assets for cash and for fair value in an aggregate amount not to exceed $1,000,000 in any Fiscal Year. (g) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than: (i) (A) Investments by Paxar and its domestic Subsidiaries in their Subsidiaries outstanding on the date hereof and additional Investments in wholly owned domestic Subsidiaries of Paxar that, prior to the making of such Investments, were wholly owned Subsidiaries of Paxar, provided that, prior to the date on which the Company complies with the provisions of Section 5.01(n), the aggregate amount that may be invested in the Company shall not exceed $34,000,000 (which amount shall be used solely to redeem the Monarch Bonds), (B) Investments by Paxar and its domestic Subsidiaries in wholly owned domestic Subsidiaries of Paxar that, prior to the making of such Investments were not wholly owned Subsidiaries of Paxar, in an aggregate amount invested from the date hereof not to exceed $25,000,000, provided that with respect to Investments in any newly acquired or created wholly owned domestic Subsidiary of Paxar, such Subsidiary shall become (1) a Subsidiary Guarantor pursuant to the terms of the Subsidiary Guaranty and (2) an "Additional Grantor" pursuant to the terms of the Pledge Agreement, (C) Investments by the foreign Subsidiaries of Paxar in their Subsidiaries outstanding on the date hereof and (D) Investments by Paxar and its domestic Subsidiaries in wholly owned foreign Subsidiaries of Paxar (whether such wholly owned Subsidiaries are existing on the date hereof or are newly acquired or created) in an aggregate amount invested from the date hereof not to exceed the difference between (i) $25,000,000 and (ii) the aggregate amount of all Investments made by Paxar and its domestic Subsidiaries pursuant to clause (F) of this Section 5.02(g)(i), provided that (x) no single Investment permitted by this clause (D) in any newly acquired or created wholly owned foreign subsidiary shall exceed $10,000,000 and (y) no Investment may be made in foreign Subsidiaries of the Company prior to the date on which the Company complies with Section 5.01(n), (E) the Investment described on Schedule 5.02(g) hereto, and (F) Investments by Paxar and its domestic Subsidiaries in non-wholly owned foreign Subsidiaries in an aggregate amount invested from the date hereof not to exceed $10,000,000; (ii) loans and advances to employees in the ordinary course of the business of Paxar and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $2,000,000 at any time outstanding; (iii) Investments in Cash Equivalents; (iv) Investments in an aggregate principal amount not to exceed $15,000,000 at any time outstanding in overnight Eurodollar deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c) of the definition of "Cash Equivalents", is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion; (v) Investments consisting of intercompany Debt permitted under Section 5.02(d)(ii); and (vi) other Investments in an aggregate amount invested not to exceed $1,000,000 in Persons other than wholly owned Subsidiaries; provided that (1) Paxar and its domestic Subsidiaries shall not make any Investments pursuant to this clause (vi) in any foreign Subsidiary 56 50 of Paxar or any foreign Person and (2) with respect to any such Investment in any newly acquired or created domestic Subsidiary of Paxar, such Subsidiary shall become a Subsidiary Guarantor pursuant to the terms of the Subsidiary Guaranty. (h) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof. (i) Charter Amendments. Amend, or permit any of its Subsidiaries to amend, its certificate of incorporation or bylaws. (j) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, other than (i) the prepayment of the Advances in accordance with the terms of this Agreement, (ii) regularly scheduled or required repayments or redemptions of Existing Debt or (iii) the redemption, purchase, defeasance or other satisfaction of the Monarch Bonds prior to the scheduled maturity thereof, or amend, modify or change in any manner any term or condition of any Existing Debt, or permit any of its Subsidiaries to do any of the foregoing other than to prepay any Debt payable to Paxar. (k) Amendment, Etc. of Related Documents. Cancel or terminate any Related Document or consent to or accept any cancellation or termination thereof, amend, modify or change in any manner any term or condition of any Related Document or give any consent, waiver or approval thereunder, waive any default under or any breach of any term or condition of any Related Document, agree in any manner to any other amendment, modification or change of any term or condition of any Related Document or take any other action in connection with any Related Document that would impair the value of the interest or rights of Paxar thereunder or that would impair the rights or interests of the Administrative Agent or any Lender Party, or permit any of its Subsidiaries to do any of the foregoing. (l) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets other than an agreement that permits Liens (i) in favor of the Lender Parties, (ii) in connection with any Existing Debt or (iii) in connection with Debt permitted pursuant to Section 5.02(d)(iii)(C), provided that any such agreement permitted by this clause (iii) shall only relate to the asset that is the subject of the Capitalized Lease or the purchase money Lien, as the case may be. (m) Partnerships, Etc. Become a general partner in any general or limited partnership or joint venture, or permit any of its Subsidiaries to do so, other than any Subsidiary of Paxar the sole assets of which consist of its interest in such partnership or joint venture. SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Paxar will: (a) Net Worth. Maintain at all times an excess of Consolidated total assets over Consolidated total liabilities, in each case of Paxar and its Subsidiaries, of not less than $137,000,000 plus 50% of Consolidated net income (without taking into account any net loss that occurs for any period after the date hereof) of Paxar and its Subsidiaries for the period after January 1, 1997 to and including each date of determination computed on a cumulative basis for said entire period plus 100% of the Net Cash Proceeds received by Paxar from the sale or issuance by Paxar of its capital stock on and after January 1, 1997. (b) Debt to EBITDA Ratio. Maintain at the end of each fiscal quarter of Paxar, a Debt to EBITDA Ratio of Paxar and its Subsidiaries of less than the ratio set forth below for such fiscal quarter: 57 51
Fiscal Quarter Ending Ratio -------------- ----- March 31, 1997 3.50:1 June 30, 1997 3.50:1 September 30, 1997 3.25:1 December 31, 1997 3.25:1 Thereafter 3.00:1
(c) Fixed Charge Coverage Ratio. Maintain at the end of each fiscal quarter of Paxar a ratio of Consolidated EBITDA of Paxar and its Subsidiaries for the most recently completed four fiscal quarters of Paxar and its Subsidiaries less the aggregate amount of Capital Expenditures made by Paxar and its Subsidiaries during such four fiscal quarter period to the sum of (i) interest and fees payable on all Debt during such four fiscal quarter period plus (ii) principal amounts of all Debt scheduled to be payable during such four fiscal quarter period, in each case by Paxar and its Subsidiaries, of not less 1.50:1; provided, however, that, for each of the fiscal quarters ending March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997, each of the financial components for this fixed charge coverage ratio shall be based on such the financial statements of Paxar and its Subsidiaries for such period, adjusted on a pro forma basis for the Transaction in a manner acceptable to the Administrative Agent. (d) Foreign Subsidiary Financial Covenant. Cause each Borrower that is a foreign Subsidiary of Paxar to maintain, at the end of each fiscal quarter of such Borrower, a ratio of Consolidated EBIT for the most recently completed four fiscal quarters of such Borrower and its Subsidiaries to Consolidated Net Interest Expense for the most recently completed four fiscal quarters of such Borrower and its Subsidiaries of not less than 1.25:1. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or the Borrower shall fail to pay any interest on any Advance or make any other payment of fees or other amounts payable under this Agreement or any Note within two days after the same becomes due and payable; or (b) Any representation or warranty made or deemed made by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) (i) Paxar shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d), (e), (j), (k), (n) or (p), 5.02 or 5.03, or (ii) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days after the earlier of the date on which (A) an officer of Paxar becomes aware of such failure or (B) written notice thereof shall have been given to Paxar by the Administrative Agent or any Lender Party; or 58 52 (d) Paxar or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a principal or notional amount of at least $500,000 in the aggregate (but excluding Debt outstanding hereunder) of Paxar or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) Paxar or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Paxar or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Paxar or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $500,000 shall be rendered against Paxar or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any non-monetary judgment or order shall be rendered against Paxar or any of its Subsidiaries that could be reasonably expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) (i) Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Paxar (or other securities convertible into such Voting Stock) representing 30% or more of the combined voting power of all Voting Stock of Paxar; or (ii) during any period of up to 24 consecutive months, commencing after the date of this Agreement, individuals who at the beginning of such 24-month period were directors of Paxar shall cease for any reason to constitute a majority of the board of directors of Paxar; or (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Paxar; or 59 53 (i) Paxar or any of its ERISA Affiliates shall incur or, in the reasonable opinion of the Required Lenders, shall be reasonably likely to incur liability in excess of $500,000 in the aggregate as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of Paxar or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to each of the Borrowers, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to each of the Borrowers, declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each of the Borrowers; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each of the Borrowers. ARTICLE VII THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action. Each Lender Party hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender Party prompt notice of each notice given to it by Paxar pursuant to the terms of this Agreement and, upon request by any Lender Party, a copy of any such notice. SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender Party that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for Paxar), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of Paxar or to inspect the property (including the books and records) of Paxar; (v) shall 60 54 not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Fleet and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Fleet shall have the same rights and powers under this Agreement as any other Lender Party and may exercise the same as though it were not the Administrative Agent; and the term "Lender", "Lenders", "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include Fleet in its individual capacity. Fleet and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, Paxar, any of its Subsidiaries and any Person who may do business with or own securities of Paxar or any such Subsidiary, all as if Fleet were not the Administrative Agent and without any duty to account therefor to the Lender Parties. SECTION 7.04. Lender Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. The Lender Parties (other than the Designated Bidders) agree to indemnify the Administrative Agent (to the extent not reimbursed by Paxar), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding or if any Notes are held by Persons that are not Lender Parties, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement (collectively, the "Indemnified Costs"), provided that no Lender Party shall be liable for any portion of the Indemnified Costs resulting from the Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender Party (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower, provided that no Lender Party shall be required to reimburse any portion of such out-of-pocket expenses resulting from the Administrative Agent's gross negligence or willful misconduct. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender Party or a third party. SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lender Parties and Paxar and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lender Parties, appoint a 61 55 successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. ARTICLE VIII GUARANTY SECTION 8.01. Guaranty. Paxar absolutely, unconditionally and irrevocably guarantees (the undertaking by Paxar under this Article VIII being the "Guaranty") the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of each other Loan Party now or hereafter existing under the Loan Documents, whether for principal, interest, fees, commissions, expenses or otherwise (such Obligations being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Administrative Agent or any Lender Party in enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, Paxar's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to the Administrative Agent or any Lender Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party. SECTION 8.02. Guaranty Absolute. Paxar guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any other Lender Party with respect thereto. The Obligations of Paxar under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against Paxar to enforce this Guaranty, irrespective of whether any action is brought against any other Loan Party or whether any other Loan Party is joined in any such action or actions. The liability of Paxar under this Guaranty shall be absolute, unconditional and irrevocable irrespective of, and Paxar hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any and all of the following: (a) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document (including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise); (c) any taking, exchange, release or non-perfection of any Collateral or any taking, release or amendment or waiver of or consent to departure from any other guarantee for all or any of the Guaranteed Obligations; 62 56 (d) any change, restructuring or termination of the corporate structure or existence of any other Loan Party or any of its Subsidiaries; (e) any failure of the Administrative Agent or any Lender Party to disclose to any Loan Party any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or hereafter known to the Administrative Agent or such Lender Party, as the case may be; or (f) any other circumstance (including, without limitation, any statute of limitations or any existence of or reliance on any representation by the Administrative Agent or any Lender Party) that might otherwise constitute a defense available to, or a discharge of, Paxar, any other Loan Party or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender Party or by any other Person upon the insolvency, bankruptcy or reorganization of any other Loan Party or otherwise, all as though such payment had not been made. SECTION 8.03. Waivers and Acknowledgments. (a) Paxar hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty, and any requirement that the Administrative Agent or any Lender Party exhaust any right or take any action against any other Loan Party or any other Person or any Collateral. (b) Paxar hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any Lender Party to disclose to Paxar any matter, fact or thing relating to the business, operation or condition of any other Loan Party or any of its Subsidiaries or its property and assets now or hereafter known by the Administrative Agent or such Lender Party. (c) Paxar hereby unconditionally waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (d) Paxar acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 8.03 are knowingly made in contemplation of such benefits. SECTION 8.04. Subrogation. Paxar hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or may hereafter acquire against any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of its Obligations under this Guaranty or under any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against such other Loan Party or any other insider guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by setoff or in any other manner, payment or security on account of such claim, remedy or right, until such time as all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all of the Letters of Credit shall have expired, terminated or been cancelled and the Commitments shall have expired or terminated. If any amount shall be paid to Paxar in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of all of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the full drawing, termination, expiration or cancellation of all Letters of Credit and (c) the Termination Date, such amount shall be held in trust for the benefit 63 57 of the Administrative Agent and the Lender Parties and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) Paxar shall pay to the Administrative Agent all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) all of the Letters of Credit shall have expired, terminated or been cancelled, and (iv) the Termination Date shall have occurred, the Administrative Agent and the Lender Parties will, at Paxar's request and expense, execute and deliver to Paxar appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer of subrogation to Paxar of an interest in the Guaranteed Obligations resulting from the payment made by Paxar. SECTION 8.05. Continuing Guarantee; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until (subject to reinstatement pursuant to Section 8.02) the latest of (i) the payment in full in cash of all of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the full drawing, termination, expiration or cancellation of all Letters of Credit, and (iii) the Termination Date, (b) be binding upon Paxar and its respective successors and assigns and (c) inure to the benefit of, and be enforceable by, the Administrative Agent and the Lender Parties and their respective successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Commitment or Commitments, the Advances owing to it and the Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender Party under this Article VIII or otherwise, in each case as provided in Section 9.07. ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by Paxar therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Notes (other than Competitive Bid Notes) or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes (other than Competitive Bid Notes) or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes (other than Competitive Bid Notes), or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (f) reduce or limit the obligations of Paxar under Section 8.01 or otherwise limit the Obligations of any Loan Party owing to any Lender Party or the Administrative Agent under the Loan Documents, (g) release all or substantially all of the Collateral in any transaction or series of related transactions or permit the creation, incurrence, assumption or existence of any Lien on all or substantially all of the Collateral in any transaction or series of related transactions to secure any Obligations other than Obligations owing to any Lender Party or the Administrative Agent under the Loan Documents or (h) amend this Section 9.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or the Issuing Bank, as the case may be, in addition to the Lenders 64 58 required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Bank, as the case may be, under this Agreement. SECTION 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed or delivered, if to Paxar, at its address at 105 Corporate Park Drive, White Plains, New York 10604-3814, Attention: George Mitchell; if to any other Borrower, at its address specified in the applicable Credit Agreement Supplement; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender Party; and if to the Administrative Agent, at its address at 244 Westchester Avenue, White Plains, New York 10604, Attention: Neil Platt; or, as to Paxar or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to Paxar and the Administrative Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by telex answerback, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VII shall not be effective until received by the Administrative Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender Party or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. Costs and Expenses. (a) Paxar agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder, including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable fees and expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Administrative Agent and the Lender Parties, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Administrative Agent and each Lender Party in connection with the enforcement of rights under this Section 9.04(a). (b) Paxar agrees to indemnify and hold harmless the Administrative Agent and each Lender Party and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Notes, this Agreement, the other Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any property of Paxar or any of its Subsidiaries or any Environmental Action relating in any way to Paxar or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's 65 59 gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by Paxar, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. Paxar also agrees not to assert any claim against the Administrative Agent, any Lender Party, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Notes, this Agreement, any of the other Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any Eurocurrency Rate Advance or LIBO Rate Advance is made by a Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, or if any payment of principal of any Swing Line Advance (other than a Swing Line Advance that is a Prime Rate Advance) is made by Paxar to or for the account of the Swing Line Bank other than on the day on which Paxar and the Swing Line Bank had agreed such Swing Line Advance would be payable, as a result of a payment or Conversion pursuant to Section 2.09(d) or (e), 2.11 or 2.13, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, such Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in Sections 2.12, 2.15 and 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender Party and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender Party or such Affiliate to or for the credit or the account of a Borrower against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement and the Notes held by such Lender Party, whether or not such Lender Party shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender Party agrees promptly to notify the relevant Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its Affiliates may have. SECTION 9.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01, 2.03 and 2.04, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by Paxar and the Administrative Agent and when the Administrative Agent shall have been notified by each Initial Lender and the Initial Issuing Bank that such Initial Lender and the Initial Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent and each Lender Party and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. 66 60 SECTION 9.07. Assignments, Designations and Participations. (a) Each Lender (other than the Designated Bidders) may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances (other than Competitive Bid Advances) owing to it and the Note or Notes (other than any Competitive Bid Note) held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any right to make Competitive Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note subject to such assignment and a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other instrument or document furnished pursuant hereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or any other Loan Party or the performance or observance by the Borrowers or any other Loan Party of any of their respective obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 or Section 5.01(o) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Paxar. Within five Business Days after its receipt of such notice, the Borrowers, at Paxar's own expense, shall execute and deliver to the Administrative Agent in exchange 67 61 for the surrendered Note a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 or A-2 hereto, as the case may be. (d) Each Lender (other than the Designated Bidders) may designate one or more banks or other entities to have a right to make Competitive Bid Advances as a Lender pursuant to Section 2.03; provided, however, that (i) no such Lender shall be entitled to make more than one such designation, (ii) each such Lender making one or more of such designations shall retain the right to make Competitive Bid Advances as a Lender pursuant to Section 2.03, (iii) each such designation shall be to a Designated Bidder and (iv) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make Competitive Bid Advances as a Lender pursuant to Section 2.03 and the obligations related thereto. (e) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other instrument or document furnished pursuant hereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or any other Loan Party or the performance or observance by the Borrowers or any other Loan Party of any of their respective obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (f) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit D hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Paxar. (g) The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance and each Designation Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and, with respect to Lender Parties other than Designated Bidders, the Commitment of, and principal amount of the Advances owing to, each Lender Party from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and each Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall 68 62 be available for inspection by the Borrowers or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (h) The Issuing Bank may assign to an Eligible Assignee all of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the undrawn portion of the Letter of Credit Commitment at such time, (ii) each such assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500. (i) Each Lender Party may sell participations to one or more banks or other entities (other than Paxar or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitments to the Borrower hereunder) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Administrative Agent and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note or any other Loan Document, or any consent to any departure by the Borrowers therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (j) Any Lender Party may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 9.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrowers or any other Loan Party furnished to such Lender Party by or on behalf of the Borrowers; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrowers received by it from such Lender. (k) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 9.08. Confidentiality. Neither the Administrative Agent nor any Lender Party shall disclose any Confidential Information to any other Person without the consent of Paxar, other than (a) to the Administrative Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 9.07(j), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to any Borrower received by it from such Lender and (d) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. 69 63 SECTION 9.09. No Liability of the Issuing Bank. Each Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the relevant Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to such Borrower, to the extent of any direct, but not consequential, damages suffered by such Borrower that such Borrower proves were caused by (i) the Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit issued on account of such Borrower comply with the terms of the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a Letter of Credit issued on account of such Borrower after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. SECTION 9.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 9.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.12. Judgment. (a) Rate of Exchange. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder (including, without limitation, under Section 8.01) or under any Note or Notes in another currency into US Dollars or into a Primary Currency, as the case may be, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, a Lender Party could purchase such other currency with US Dollars or with a Primary Currency, as the case may be, in New York City, New York at the close of business on the Business Day immediately preceding the day on which final judgment is given, together with any premiums and costs of exchange payable in connection with such purchase. (b) Indemnity. The obligation of each Borrower in respect of any sum due from it to the Administrative Agent or any Lender Party hereunder or under any Note or Notes shall, notwithstanding any judgment in a currency other than US Dollars or a Primary Currency, as the case may be, be discharged only to the extent that on the Business Day next succeeding receipt by the Administrative Agent or such Lender Party of any sum adjudged to be so due in such other currency, the Administrative Agent or such Lender Party may, in accordance with normal banking procedures, purchase US Dollars or such Primary Currency, as the case may be, with such other currency. If the US Dollars or such Primary Currency so purchased are less than the sum originally due to the Administrative Agent or such Lender Party in US Dollars or in such Primary Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender Party against such loss, and if the US Dollars or such Primary Currency so purchased exceed the sum originally due to the Administrative Agent or any Lender Party in US Dollars or in such Primary Currency, as the case may be, the Administrative Agent or such Lender Party agrees to remit to such Borrower such excess. 70 64 SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each Borrower further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to such Borrower at its address specified pursuant to Section 9.02 or in the Credit Agreement Supplement. Each Borrower (other than Paxar) hereby further agrees that service of process in any such action or proceeding brought in any such New York state court or in any such federal court may be made upon Paxar at its address specified in Section 9.02, and each Borrower (other than Paxar) hereby irrevocably appoints Paxar as its authorized agent to accept such service of process, and hereby irrevocably agrees that the failure of Paxar to give any notice of such service to such Borrower shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) To the extent that any Borrower has or hereafter may acquire any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Borrower hereby irrevocably waives such immunity in respect of its obligations under this Agreement and the Notes and the other Loan Documents. 71 SECTION 9.14. Waiver of Jury Trial. Each of the Borrowers, the Administrative Agent and the Lender Parties hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the Notes or the other Loan Documents or the actions of the Administrative Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. PAXAR CORPORATION By --------------------------------- Title: FLEET BANK, N.A., as Administrative Agent By --------------------------------- Title: FLEET BANK, N.A., as Initial Issuing Bank By --------------------------------- Title: Initial Lenders FLEET BANK, N.A. By --------------------------------- Title: ABN AMRO BANK N.V. NEW YORK BRANCH By --------------------------------- Title: By --------------------------------- Title: 72 BANK OF BOSTON CONNECTICUT By --------------------------------- Title: THE BANK OF NEW YORK By --------------------------------- Title: THE BANK OF NOVA SCOTIA By --------------------------------- Title: CORESTATES BANK, N.A. By --------------------------------- Title: CREDITO ITALIANO S.p.A. By --------------------------------- Title: By --------------------------------- Title: FIRST UNION NATIONAL BANK By --------------------------------- Title: MELLON BANK, N.A. By --------------------------------- Title: 73 NATIONAL CITY BANK OF DAYTON By --------------------------------- Title: NATIONSBANK, N.A. By --------------------------------- Title: STATE STREET BANK AND TRUST COMPANY By --------------------------------- Title: THE SUMITOMO BANK, LIMITED By --------------------------------- Title: By --------------------------------- Title: SUNTRUST BANK, ATLANTA By --------------------------------- Title: By --------------------------------- Title: WACHOVIA BANK OF GEORGIA, N.A. By --------------------------------- Title: 74 SCHEDULE I LIST OF APPLICABLE LENDING OFFICES
=================================================================================================================================== NAME OF DOMESTIC EUROCURRENCY REVOLVING CREDIT TERM CREDIT LETTER OF INITIAL LENDER LENDING OFFICE LENDING OFFICE COMMITMENT COMMITMENT CREDIT - -------------- -------------- -------------- ---------------- ----------- COMMITMENT ---------- - ----------------------------------------------------------------------------------------------------------------------------------- Fleet Bank, N.A. 1133 Avenue of the Americas 1133 Avenue of the Americas $17,500,000 $17,500,000 $15,000,000 40th Floor 40th Floor New York, NY New York, NY Tel: (212) 703-1649 Tel: (212) 703-1649 Fax: (212) 703-1570 Fax: (212) 703-1570 Attn: Joseph Cucinotta Attn: Joseph Cucinotta - ----------------------------------------------------------------------------------------------------------------------------------- ABN-AMRO 500 Park Avenue 500 Park Avenue 4,000,000 4,000,000 N/A Bank N.V., New New York, NY 10022 New York, NY 10022 York Branch Tel: (212) 446-4289 Tel: (212) 446-4289 Fax: (212) 832-7468 Fax: (212) 832-7468 Attn: Pamela Del Vecchio Attn: Pamela Del Vecchio - ----------------------------------------------------------------------------------------------------------------------------------- Bank of Boston - One Landmark Square, One Landmark Square, 9,000,000 9,000,000 N/A Connecticut Suite 2002 Suite 2002 Stamford, CT 06901 Stamford, CT 06901 Tel: (203) 973-1943 Tel: (203) 973-1940 Fax: (203) 967-8169 Fax: (203) 967-8169 Attn: Leonne Sherief Attn: Jennifer Edwards - ----------------------------------------------------------------------------------------------------------------------------------- The Bank of New 90 Crystal Run Road The Bank of New York 13,750,000 13,750,000 N/A York Middletown, NY 10940 Grand Cayman Tel: (914) 624-2593 48 Wall Street, 13th Floor Fax: (914) 623-9459 New York, NY 10286 Attn: John Gambardella Tel: (914) 624-2593 Fax: (914) 623-9459 Attn: John Gambardella - -----------------------------------------------------------------------------------------------------------------------------------
75 - ----------------------------------------------------------------------------------------------------------------------------------- The Bank of One Liberty Plaza One Liberty Plaza $ 9,000,000 $ 9,000,000 N/A Nova Scotia 26th Floor 26th Floor New York, NY 10006 New York, NY 10006 Tel: (212) 225-5044 Tel: (212) 225-5044 Fax: (212) 225-5145 Fax: (212) 225-5145 Attn: Tilsa Cora Attn: Tilsa Cora - ----------------------------------------------------------------------------------------------------------------------------------- Corestates Bank, 1345 Chestnut Street 1345 Chestnut Street 9,000,000 9,000,000 N/A N.A. P.O. Box 7618 P.O. Box 7618 Philadelphia, PA 19101 Philadelphia, PA 19101 Tel: (215) 973-2372 Tel: (215) 973-2372 Fax: (215) 973-7820 Fax: (215) 973-7820 Attn: Brian M. Haley Attn: Brian M. Haley - ----------------------------------------------------------------------------------------------------------------------------------- Credito Italiano, 375 Park Avenue Grand Cayman Branch 4,000,000 4,000,000 N/A S.p.A. 2nd Floor c/o New York Branch New York, NY 10152 375 Park Ave., 2nd Floor Tel: (212) 546-9611 New York, NY 10152 Fax: (212) 546-9675 Tel: (212) 546-9615 Attn: Harmon P. Butler, FVP Fax: (212) 546-9675 Attn: Luz David - ----------------------------------------------------------------------------------------------------------------------------------- First Union 50 Main Street 3 Bishopsgate 9,000,000 9,000,000 N/A National Bank White Plains, NY 10606 London, ECN 3AB, England Tel: (914) 286-5039 Tel: 011-44-171-216-1606 Fax: (914) 286-5001 Fax: 011-44-171-929-4644 Attn: David Ring, VP Attn: Ian Morrison, VP - ----------------------------------------------------------------------------------------------------------------------------------- Mellon Bank, 165 EAB Plaza-6 West 701 Market Street 9,000,000 9,000,000 N/A N.A. Uniondale, NY 11556 Philadelphia, PA 19101 Tel: (516) 522-2691 Tel: (215) 553-3005 Fax: (516) 522-2896 Fax: (215) 553-1016 Attn: Jeffrey Carstens Attn: Helen Goode - ----------------------------------------------------------------------------------------------------------------------------------- National City 6 N. Main Street 6 N. Main Street $ 4,000,000 $ 4,000,000 N/A Bank of Dayton Dayton, OH 45412 Dayton, OH 45412 Tel: (937) 226-2041 Tel: (937) 226-2041 Fax: (937) 226-2058 Fax: (937) 226-2058 Attn: Neil Hinker Attn: Neil Hinker - -----------------------------------------------------------------------------------------------------------------------------------
76 - ----------------------------------------------------------------------------------------------------------------------------------- NationsBank, 101 North Tryon Street 101 North Tryon Street 13,750,000 13,750,000 N/A N.A. Charlotte, NC 28255 Charlotte, NC 28255 Tel: (212) 407-5433 Tel: (212) 407-5433 Fax: (212) 751-6909 Fax: (212) 751-6909 Attn: Karim T. Assef Attn: Karim T. Assef - ----------------------------------------------------------------------------------------------------------------------------------- State Street Bank 225 Franklin Street 225 Franklin Street 4,000,000 4,000,000 N/A and Trust Boston, MA 02110 Boston, MA 02110 Company Tel: (617) 664-1182 Tel: (617) 664-1182 Fax: (617) 664-7920 Fax: (617) 664-7920 Attn: Evelyn King Attn: Evelyn King - ----------------------------------------------------------------------------------------------------------------------------------- The Sumitomo 233 S. Wacker Drive, 233 S. Wacker Drive, 9,000,000 9,000,000 N/A Bank, Limited Suite 5400 Suite 5400 Chicago, IL 60606 Chicago, IL 60606 Tel: n/a Tel: n/a Fax: n/a Fax: n/a Attn: n/a Attn: n/a - ----------------------------------------------------------------------------------------------------------------------------------- SunTrust Bank, 25 Park Place, 25 Park Place, 9,000,000 9,000,000 N/A Atlanta 26th Floor 26th Floor Atlanta, GA 30303 Atlanta, GA 30303 Tel: (404) 230-5413 Tel: (404) 230-5413 Fax: (404) 658-4905 Fax: (404) 658-4905 Attn: Kara King Attn: Kara King - ----------------------------------------------------------------------------------------------------------------------------------- Wachovia Bank 191 Peachtree St. N.E. 191 Peachtree St. N.E. 16,000,000 16,000,000 N/A of Georgia, N.A. Atlanta, GA 30303 Atlanta, GA 30303 Tel: (212) 603-7705/7709 Tel: (212) 603-7705/7709 Fax: (212) 603-7729 Fax: (212) 603-7729 Attn: Mike Davis/Kelli Hunt Attn: Mike Davis/Kelli Hunt ===================================================================================================================================
77 EXHIBIT A-1 - FORM OF REVOLVING CREDIT PROMISSORY NOTE U.S. _______________ Dated: March __, 1997 FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a _________________________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the aggregate principal amount of the Revolving Credit Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of March __, 1997 among the Borrower, [Paxar Corporation,] the other Borrowers party thereto, the Lender and certain other lenders party thereto, and Fleet Bank, N.A., as Administrative Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) on the Termination Date. The Borrower promises to pay the Lender interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Fleet Bank, N.A., as Administrative Agent, at _________________________, ____________________, __________, in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Revolving Credit Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Revolving Credit Advances") by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of the Borrower under this Promissory Note and the Credit Agreement, and the obligations of the other Loan Parties under the Loan Documents, are secured by the Collateral as provided in the Loan Documents. The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. [NAME OF BORROWER] By______________________________ Title: 78 ADVANCES AND PAYMENTS OF PRINCIPAL
=================================================================================================================================== AMOUNT OF AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION DATE ADVANCE OR PREPAID BALANCE MADE BY - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ===================================================================================================================================
79 EXHIBIT A-2 - FORM OF TERM PROMISSORY NOTE U.S. _______________ Dated: March __, 1997 FOR VALUE RECEIVED, the undersigned, PAXAR CORPORATION, a New York corporation ("Paxar"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office as defined in the Credit Agreement referred to below) the aggregate principal amount of the Term Advances (as defined below) owing to the Lender by Paxar pursuant to the Credit Agreement dated as of March __, 1997 among Paxar, the other Borrowers party thereto, the Lender and certain other lenders party thereto, and Fleet Bank, N.A., as Administrative Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) on the Termination Date and as otherwise provided in the Credit Agreement. Paxar promises to pay the Lender interest on the unpaid principal amount of each Term Advance from the date of such Term Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Fleet Bank, N.A., as Administrative Agent, at _________________________, ____________________, __________, in same day funds. Each Term Advance owing to the Lender by Paxar pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Term Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Term Advances") by the Lender to Paxar from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of Paxar resulting from each such Term Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of Paxar under this Promissory Note and the Credit Agreement, and the obligations of the other Loan Parties under the Loan Documents, are secured by the Collateral as provided in the Loan Documents. Paxar hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. PAXAR CORPORATION By__________________________________ Title: 80 ADVANCES AND PAYMENTS OF PRINCIPAL
=================================================================================================================================== AMOUNT OF AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION DATE ADVANCE OR PREPAID BALANCE MADE BY - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ===================================================================================================================================
81 EXHIBIT A-3 - FORM OF COMPETITIVE BID PROMISSORY NOTE U.S. _______________ Dated: _______________, 199_ FOR VALUE RECEIVED, the undersigned, PAXAR CORPORATION, a New York corporation ("Paxar"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement dated as of March __, 1997 among Paxar, the other Borrowers party thereto, the Lender and certain other lenders party thereto, and Fleet Bank, N.A., as Administrative Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined)), on _______________, 199_, the principal amount of U.S. _______________. Paxar promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below: Interest Rate: _____% per annum (calculated on the basis of a year of _____ days for the actual number of days elapsed). Interest Payment Date: _____ and _____. Both principal and interest are payable in lawful money of the United States of America to Fleet Bank, N.A. for the account of the Lender at the office of Fleet Bank, N.A., at _________________________ in same day funds. This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. The obligations of Paxar under this Promissory Note and the Credit Agreement are secured by collateral as provided therein. Paxar hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. PAXAR CORPORATION By_____________________________________ Title: 82 EXHIBIT B-1 - FORM OF NOTICE OF BORROWING Fleet Bank, N.A., as Administrative Agent for the Lenders parties to the Credit Agreement referred to below _________________________ _________________________ [Date] Attention: _______________ Ladies and Gentlemen: The undersigned, [Name of Borrower], refers to the Credit Agreement, dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among [Paxar Corporation], the undersigned,the other Borrowers party thereto, certain Lenders party thereto and Fleet Bank, N.A., as Administrative Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _______________, 199_. (ii) The Facility under which the Proposed Borrowing is requested is the ________ Facility. (iii) The Type of Advances comprising the Proposed Borrowing is [Prime Rate Advances] [Eurocurrency Rate Advances]. (iv) The aggregate amount of the Proposed Borrowing is _______________. [(v) The initial Interest Period [and the currency] for each Eurocurrency Rate Advance made as part of the Proposed Borrowing is _____ month[s] and [Primary Currency].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Revolving Credit Borrowing: (A) the representations and warranties contained in each Loan Document are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Proposed Borrowing, in which case as of such specific date); and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, [NAME OF BORROWER] By________________________________ Title: 83 EXHIBIT B-2 - FORM OF NOTICE OF COMPETITIVE BID BORROWING Fleet Bank, N.A., as Administrative Agent for the Lenders parties to the Credit Agreement referred to below _________________________ _________________________ [Date] Attention: _______________ Ladies and Gentlemen: The undersigned, Paxar Corporation, refers to the Credit Agreement, dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, the other Borrowers party thereto, certain Lenders party thereto and Fleet Bank, N.A., as Administrative Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be made: (A) Date of Competitive Bid Borrowing _____________________ (B) Amount of Competitive Bid Borrowing _____________________ (C) [Maturity Date] [Interest Period] _____________________ (D) Interest Rate Basis _____________________ (E) Interest Payment Date(s) _____________________ (F) ___________________ _____________________ (G) ___________________ _____________________ (H) ___________________ _____________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Competitive Bid Borrowing: (a) the representations and warranties contained in each Loan Document are correct, before and after giving effect to the Proposed Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Proposed Competitive Bid Borrowing, in which case as of such specific date); (b) no event has occurred and is continuing, or would result from the Proposed Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default; (c) no event has occurred and no circumstance exists as a result of which the information concerning the undersigned that has been provided to the Administrative Agent and each Lender by the undersigned in connection with the Credit Agreement would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; and (d) the aggregate amount of the Proposed Competitive Bid Borrowing and all Revolving Credit Borrowings and Swing Line Borrowings to be made on the same day under the Credit Agreement is within the aggregate amount of the Unused Revolving Credit Commitments of the Lenders. 84 2 The undersigned hereby confirms that the Proposed Competitive Bid Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement. Very truly yours, PAXAR CORPORATION By________________________________ Title: 85 EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement") among Paxar Corporation, a New York corporation ("Paxar"), the other Borrowers (as defined in the Credit Agreement) party thereto, the Lenders (as defined in the Credit Agreement) and Fleet Bank, N.A., as administrative agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of Competitive Bid Advances and Competitive Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of Competitive Bid Advances and Competitive Bid Notes). After giving effect to such sale and assignment, the Assignee's Commitments and the amount of the Advances owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or any other instrument or document provided pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note or Notes held by the Assignor and requests that the Administrative Agent exchange such Note or Notes for a new Note or Notes payable to the order of the Assignee in an amount equal to the Commitments assumed by the Assignee pursuant hereto or new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 or delivered pursuant to Section 5.01(o) thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender Party; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.15 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto. 86 2 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender Party thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights, except under Section 2.11, 2.15 and 9.04 of the Credit Agreement, and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 87 Schedule 1 to Assignment and Acceptance Percentage interest assigned: _____% Assignee's Commitment: __________ Aggregate outstanding principal amount of Revolving Credit Advances assigned: __________ Aggregate outstanding principal amount of Term Advances assigned: Principal amount of Revolving Credit Note payable to Assignee: __________ Principal amount of Term Note payable to Assignee: Principal amount of Revolving Credit Note payable to Assignor: __________ Principal amount of Term Note payable to Assignor: Effective Date*: _______________, 199_
[NAME OF ASSIGNOR], as Assignor By_________________________________ Title: Dated: _______________, 199_ [NAME OF ASSIGNEE], as Assignee By_________________________________ Title: Dated: _______________, 199_ Domestic Lending Office: [Address] Eurocurrency Lending Office: [Address] Accepted [and Approved]** this __________ day of _______________, 199_ ________ * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Administrative Agent. ** Required if the Assignee is an Eligible Assignee solely by reason of clause (viii) of the definition of "Eligible Assignee". 88 2 FLEET BANK, N.A., as Administrative Agent By_________________________________________ Title: [Approved this __________ day of _______________, 199_ PAXAR CORPORATION By__________________________________________]* Title: ________ * Required if the Assignee is an Eligible Assignee solely by reason of clause (viii) of the definition of "Eligible Assignee". 89 EXHIBIT D - FORM OF DESIGNATION AGREEMENT Dated _______________, 199_ Reference is made to the Credit Agreement dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement") among Paxar Corporation, a New York corporation ("Paxar"), the other Borrowers (as defined in the Credit Agreement) party thereto, the Lenders (as defined in the Credit Agreement) and Fleet Bank, N.A., as agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. _________________________ (the "Designor") and _________________________ (the "Designee") agree as follows: 1. The Designor hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Competitive Bid Advances pursuant to Section 2.03 of the Credit Agreement. 2. The Designor makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Documents or any other instrument or document provided pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, the Loan Documents or any other instrument or document furnished pursuant thereto and (ii) the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 or delivered pursuant to Section 5.01(o) thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designor or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Designated Bidder. 4. Following the execution of this Designation Agreement by the Designor and its Designee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Designation Agreement (the "Effective Date") shall be the date of acceptance hereof by the Administrative Agent, unless otherwise specified on the signature page hereto. 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make Competitive Bid Advances as a Designated Bidder pursuant to Section 2.03 of the Credit Agreement and the rights and obligations of a Lender related thereto. 6. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. 7. This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original 90 2 and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Designation Agreement. IN WITNESS WHEREOF, the Designor and the Designee have caused this Designation Agreement to be executed by their officers thereunto duly authorized as of the date first above written. Effective Date*: _______________, 199__ [NAME OF DESIGNOR], as Designor By______________________________ Title: [NAME OF DESIGNEE], as Designee By______________________________ Title: Applicable Lending Office (and address for notices): [Address] Accepted this ____ day of _______________, 199_ FLEET BANK, as Administrative Agent By_________________________________ Title: ________ * This date should be no earlier than five Business Days after the delivery of this Designation Agreement to the Administrative Agent. 91 EXHIBIT E - FORM OF CREDIT AGREEMENT SUPPLEMENT [DATE] To each of the Lender Parties pursuant to the Credit Agreement referred to below Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement") among Paxar Corporation, a New York corporation ("Paxar"), the other Borrowers (as defined in the Credit Agreement) party thereto, the Lenders (as defined in the Credit Agreement) and Fleet Bank,N.A., as agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. [NAME AND JURISDICTION OF INCORPORATION OF ADDITIONAL BORROWER] (the "Additional Borrower"), in consideration of the agreement of each Lender Party to extend credit to it from time to time under, and on the terms and conditions set forth in, the Credit Agreement does hereby assume each of the obligations imposed upon an Additional Borrower under the Credit Agreement and agrees to be bound by all of the terms and conditions of the Credit Agreement. The Additional Borrower hereby agrees as follows: 1. The Additional Borrower hereby agrees, as of the date first above written, to be bound as a Borrower by all of the terms and conditions of the Credit Agreement to the same extent as each of the other Borrowers. The Additional Borrower further agrees, as of the date first above written, that each reference in the Credit Agreement to a "Borrower" shall also mean and be a reference to the Additional Borrower, and each reference in any other Loan Document to a "Borrower" or a "Loan Party" shall also mean and be a reference to the Additional Borrower. 2. The Additional Borrower hereby represents and warrants to the Administrative Agent and each of the Lender Parties that the representations and warranties contained in each Loan Document are correct on and as of the date hereof as though made on and as of such date other than any such representations and warranties that, by their terms, refer to a date other than the date hereof, in which case as of such specific date. 3. Pursuant to the terms of the Credit Agreement, the Required Lenders hereby indicate their approval of the Additional Borrower. 4. This Credit Agreement Supplement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. 5. (a) The Additional Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Credit Agreement Supplement or any other Loan Document to which it is a party, or for recognition or enforcement of any judgment, and the Additional Borrower hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding 92 2 may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Additional Borrower further irrevocably consents to the service or process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to the Additional Borrower at its address set forth below its name on the signature pages hereto. The Additional Borrower hereby further agrees that service of process in any such action or proceeding brought in any such New York state court or in any such federal court may be made upon Paxar at its address specified in Section 9.02 of the Credit Agreement, and the Additional Borrower hereby irrevocably appoints Paxar as its authorized agent to accept such service of process, and hereby irrevocably agrees that the failure of Paxar to give any notice of such service to the Additional Borrower shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. The Additional Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Credit Agreement Supplement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Credit Agreement Supplement or the other Loan Documents to which it is a party in the courts of any jurisdiction. (b) The Additional Borrower irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Credit Agreement Supplement in any New York State or federal court. The Additional Borrower hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) To the extent that the Additional Borrower has or hereafter may acquire any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Additional Borrower hereby irrevocably waives such immunity in respect of its obligations under this Agreement. 6. The Additional Borrower hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Credit Agreement Supplement or any of the other Loan Documents to which it is a party, or the actions of the Administrative Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. Very truly yours, [NAME OF ADDITIONAL BORROWER] By _______________________________ Name: Title: Address: 93 3 Accepted and Agreed: FLEET BANK, N.A. as Administrative Agent By_______________________________ Title: FLEET BANK, N.A., as Initial Issuing Bank By_______________________________ Title: Initial Lenders FLEET BANK, N.A. By_______________________________ Title: ABN AMRO BANK N.V. NEW YORK BRANCH By_______________________________ Title: By_______________________________ Title: BANK OF BOSTON CONNECTICUT By_______________________________ Title: THE BANK OF NEW YORK By_______________________________ Title: 94 4 THE BANK OF NOVA SCOTIA By_______________________________ Title: CORESTATES BANK, N.A. By_______________________________ Title: CREDITO ITALIANO S.p.A. By_______________________________ Title: By_______________________________ Title: FIRST UNION NATIONAL BANK By_______________________________ Title: MELLON BANK, N.A. By_______________________________ Title: NATIONAL CITY BANK OF DAYTON By_______________________________ Title: NATIONSBANK, N.A. By_______________________________ Title: 95 5 STATE STREET BANK AND TRUST COMPANY By_______________________________ Title: THE SUMITOMO BANK, LIMITED By_______________________________ Title: By_______________________________ Title: SUNTRUST BANK, ATLANTA By_______________________________ Title: By_______________________________ Title: WACHOVIA BANK OF GEORGIA, N.A. By_______________________________ Title: 96 EXHIBIT F PLEDGE AGREEMENT PLEDGE AGREEMENT dated March 3, 1997 made by Paxar Corporation, a New York corporation ("Paxar") and each of the direct and indirect domestic Subsidiaries (as defined in the Credit Agreement) of Paxar listed on the signature pages hereof and the Additional Grantors (as defined in Section 16(b)) (such Persons so listed and the Additional Grantors being, collectively, the "Subsidiary Grantors"; together with Paxar, the "Grantors") to Fleet Bank, N.A. ("Fleet"), as administrative agent (the "Administrative Agent") for the lenders (the "Lenders") party to the Credit Agreement (as hereinafter defined) and for the issuing bank (the "Issuing Bank"; together with the Lenders, the "Lender Parties") party to the Credit Agreement. PRELIMINARY STATEMENTS: (1) The Lender Parties and the Administrative Agent have entered into a Credit Agreement dated as of March 3, 1997 (said Agreement, as it may hereafter be amended or otherwise modified from time to time, being the "Credit Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined) with Paxar and other Subsidiaries of Paxar that may, pursuant to the terms of the Credit Agreement, become Borrowers thereunder. Pursuant to the Credit Agreement, the Lender Parties will make Advances to finance, in part, the acquisition by Paxar of all shares of the outstanding common stock, $0.01 par value ( all such common stock being the "Company Stock") of Monarch Marking Systems, Inc., a Delaware corporation (the "Company"), pursuant to the Stock Purchase Agreement, that are not presently owned by Paxar. (2) Each Grantor is the owner of the shares (the "Pledged Shares") set forth opposite such Grantor's name in Part I of Schedule I hereto and issued by the corporations named therein and of the indebtedness (the "Pledged Debt") set forth opposite such Grantor's name in Part II of said Schedule I and issued by the obligors named therein. (3) It is a condition precedent to the making of Advances and the issuing of Letters of Credit by the Lender Parties under the Credit Agreement that the Grantors shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and otherwise extend credit under the Credit Agreement, each of the Grantors hereby agrees with the Administrative Agent for its benefit and the ratable benefit of the Lender Parties as follows: SECTION 1. Grant of Security. Each of the Grantors hereby assigns and pledges to the Administrative Agent for its benefit and the ratable benefit of the Lender Parties, and hereby grants to the Administrative Agent for its benefit and the ratable benefit of the Lender Parties a security interest in, the following (collectively, the "Collateral"): (a) all of the following (the "Security Collateral"): 97 2 (i) the Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares. Notwithstanding anything to the contrary, the foreign Subsidiaries of the Grantors are not included in any pledge hereunder; (ii) the Pledged Debt and the instruments evidencing the Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; (iii) all additional shares of Company Stock from time to time acquired by Paxar in any manner, and the certificates representing such additional shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and (iv) all additional indebtedness from time to time owed to such Grantor by any obligor of the Pledged Debt and the instruments evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; and (b) all proceeds of any and all of the foregoing Collateral (including, without limitation, proceeds that constitute property of the types described in clause (a) of this Section 1). SECTION 2. Security for Obligations. This Agreement secures the payment of all Obligations of each Grantor now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (all such Obligations being the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to the Administrative Agent or the Lender Parties under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Grantor. SECTION 3. Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Administrative Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) neither the Administrative Agent nor any Lender Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Administrative Agent or any Lender Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. Delivery of Security Collateral. All certificates or instruments representing or evidencing Security Collateral shall be delivered to and held by or on behalf of the Administrative 98 3 Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed, undated instruments of transfer or assignment in blank, all in form and substance satisfactory to the Administrative Agent. The Administrative Agent shall have the right, at any time in its discretion and without notice to Paxar, to transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 8(a). In addition, the Administrative Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Security Collateral for certificates or instruments of smaller or larger denominations. SECTION 5. Representations and Warranties. Each Grantor represents and warrants as follows: (a) The chief place of business and chief executive office of such Grantor and the office where such Grantor keeps its records concerning the Collateral are located at the address specified below the name of such Grantor on the signature pages hereof (or, in the case of any Additional Grantor, at the address listed below the name of such Additional Grantor on the signature page of the Pledge Agreement Supplement (as defined in Section 16(b)) executed and delivered by such Additional Grantor). (b) Such Grantor is the legal and beneficial owner of the Collateral free and clear of any Lien, except for the security interest created by this Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Administrative Agent relating to this Agreement. Such Grantor has no trade names. (c) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. The Pledged Debt owed to such Grantor has been duly authorized, authenticated or issued and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default. (d) The Pledged Shares constitute 100% of Company Stock. The Pledged Debt is outstanding in the principal amount indicated on Schedule I. (e) This Agreement and the pledge of the Security Collateral pursuant hereto create a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. (f) No consent of any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other third party is required either (i) for the grant by such Grantor of the assignment and security interest granted hereby, for the pledge by such Grantor of the Security Collateral pursuant hereto or for the execution, delivery or performance of this Agreement by such Grantor, (ii) for the perfection or maintenance of the pledge, assignment and security interest created hereby (including the first priority nature of such pledge, assignment or security interest) or (iii) for the exercise by the 99 4 Administrative Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally. SECTION 6. Further Assurances. (a) Each of the Grantors agrees that from time to time, at the expense of Paxar, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Administrative Agent may request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, such Grantor will, (i) if any Collateral shall be evidenced by a promissory note or other instrument, deliver and pledge to the Administrative Agent hereunder such note or instrument duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Administrative Agent and (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Administrative Agent may request, in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereby. (b) Each Grantor hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of such Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Administrative Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail. SECTION 7. Place of Perfection; Records. Each of the Grantors shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Collateral at the location therefor specified in Section 5(a) or, upon 30 days' prior written notice to the Administrative Agent, at such other locations in a jurisdiction where all actions required by Section 6 shall have been taken with respect to the Collateral. Each of the Grantors will hold and preserve such records and will permit representatives of the Administrative Agent at any time during normal business hours to inspect and make abstracts from such records. SECTION 8. Voting Rights; Dividends; Etc. (a) So long as no Event of Default shall have occurred and be continuing: (i) The Grantors shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the other Loan Documents; provided, however, that the Grantors shall not exercise or refrain from exercising any such right if, in the Administrative 100 5 Agent's judgment, such action would have a material adverse effect on the value of the Security Collateral or any part thereof. (ii) The Grantors shall be entitled to receive and retain any and all dividends and interest paid in respect of the Security Collateral; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Security Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Security Collateral shall be, and shall be forthwith delivered to the Administrative Agent to hold as, Security Collateral and shall, if received by any of the Grantors, be received in trust for the benefit of the Administrative Agent and the Lender Parties, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Administrative Agent as Security Collateral in the same form as so received (with any necessary indorsement). (iii) The Administrative Agent shall execute and deliver (or cause to be executed and delivered) to each of the Grantors all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of any Event of Default: (i) All rights of the Grantors (x) to exercise or refrain from exercising the voting and other consensual rights that they would otherwise be entitled to exercise pursuant to Section 8(a)(i) shall automatically cease and (y) to receive the dividends and interest payments that they would otherwise be authorized to receive and retain pursuant to Section 8(a)(iii) shall automatically cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends and interest payments. (ii) All dividends and interest payments that are received by any of the Grantors contrary to the provisions of paragraph (i) of this Section 8(b) shall be received in trust for the benefit of the Administrative Agent and the Lender Parties, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Administrative Agent as Security Collateral in the same form as so received (with any necessary indorsement). 101 6 SECTION 9. Transfers and Other Liens; Additional Shares. (a) Each of the Grantors agrees that it shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral except for the pledge, assignment and security interest created by this Agreement. (b) Paxar shall (i) from and after the date hereof, cause the Company not to issue any stock or other securities in addition to or in substitution for the Pledged Shares, except to Paxar, and (ii) deliver or otherwise transfer to the Administrative Agent as pledgee hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of Company Stock or other securities of the Company. SECTION 10. Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Administrative Agent such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, upon the occurrence of an Event of Default, to take any action and to execute any instrument that the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (b) to receive, indorse and collect any drafts or other instruments and documents in connection with clause (a) above, and (c) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral. SECTION 11. Administrative Agent May Perform. If any of the Grantors fails to perform any agreement contained herein, the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by Paxar under Section 15(b). SECTION 12. The Administrative Agent's Duties. The powers conferred on the Administrative Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Security Collateral, whether or not the Administrative Agent or any Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation 102 7 of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Fleet accords its own property. SECTION 13. Remedies. If any Event of Default shall have occurred and be continuing: (a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at such time (the "N.Y. Uniform Commercial Code") (whether or not the N.Y. Uniform Commercial Code applies to the affected Collateral) and also may (i) require any or all of the Grantors to, and each Grantor hereby agrees that it will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place to be designated by the Administrative Agent that is reasonably convenient to both parties and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Administrative Agent pursuant to Section 15) in whole or in part by the Administrative Agent for the ratable benefit of the Lender Parties against all or any part of the Secured Obligations in such order as the Administrative Agent shall elect. Any surplus of such cash or cash proceeds held by the Administrative Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantors or to whomsoever may be lawfully entitled to receive such surplus. (c) The Administrative Agent may exercise any and all rights and remedies of any of the Grantors under or in connection with or otherwise in respect of the Collateral. (d) All payments received by any Grantor under or in connection with or otherwise in respect of the Collateral shall be received in trust for the benefit of the Administrative Agent and the Lender Parties, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary indorsement). 103 8 SECTION 14. Registration Rights. If the Administrative Agent shall determine to exercise its right to sell all or any of the Security Collateral pursuant to Section 13, Paxar agrees that, upon request of the Administrative Agent, Paxar will, at its own expense: (a) execute and deliver, and cause each issuer of the Security Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Administrative Agent, advisable to register such Security Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished and to make all amendments and supplements thereto and to the related prospectus that, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Security Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Security Collateral, as requested by the Administrative Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; (d) provide the Administrative Agent with such other information and projections as may be necessary or, in the opinion of the Administrative Agent, advisable to enable the Administrative Agent to effect the sale of such Security Collateral; and (e) do or cause to be done all such other acts and things as may be necessary to make such sale of the Security Collateral or any part thereof valid and binding and in compliance with applicable law. The Administrative Agent is authorized, in connection with any sale of the Security Collateral pursuant to Section 13, to deliver or otherwise disclose to any prospective purchaser of the Security Collateral (i) any registration statement or prospectus, and all supplements and amendments thereto, prepared pursuant to clause (a) above, (ii) any information and projections provided to it pursuant to clause (d) above and (iii) any other information in its possession relating to the Security Collateral. SECTION 15. Indemnity and Expenses. (a) Each of the Grantors agrees to indemnify the Administrative Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from the Administrative Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. (b) Paxar will upon demand pay to the Administrative Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and 104 9 agents, that the Administrative Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Administrative Agent or the Lenders hereunder or (iv) the failure by Paxar or any of the Grantors to perform or observe any of the provisions hereof. SECTION 16. Amendments; Waivers; Etc. (a) Subject to the provisions of Section 9.01 of the Credit Agreement, no amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. (b) Upon the execution and delivery by any Person of a supplement to this Agreement pursuant to either Section 5.01(n) or Section 5.02(g) of the Credit Agreement, in each case in substantially the form of Exhibit A hereto (each a "Pledge Agreement Supplement"), (i) such Person shall be referred to as an "Additional Grantor" and shall be and become a Grantor, and each reference in this Agreement to an "Additional Grantor" or a "Grantor" shall also mean and be a reference to such Additional Grantor and each reference in any other Loan Document to a "Grantor" or a "Loan Party" shall also mean and be a reference to such Additional Grantor, and (ii) the schedules attached to each Pledge Agreement Supplement shall be incorporated into and become a part of and supplement the schedules to this Agreement, as appropriate, and the Administrative Agent may attach such supplements to such schedules, and each reference to such schedules shall mean and be a reference to such schedules, as supplemented pursuant hereto. SECTION 17. Security Interest Absolute. The obligations of each of the Subsidiary Grantors under this Agreement are independent of the Secured Obligations, and a separate action or actions may be brought and prosecuted against any of the Subsidiary Grantors to enforce this Agreement, irrespective of whether any action is brought against Paxar or whether Paxar is joined in any such action or actions. All rights of the Administrative Agent and the pledge, assignment and security interest hereunder, and all obligations of the Subsidiary Grantors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other amendment or waiver of or any consent to any departure from any Loan Document, including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to Paxar or any of its subsidiaries or otherwise; 105 10 (c) any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; (d) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of Paxar or any of its subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of Paxar or any of its subsidiaries; or (f) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Subsidiary Grantor or a third party grantor of a security interest. SECTION 18. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic, telex or cable communication) and, mailed, telegraphed, telecopied, telexed, cabled or delivered, if to any Grantor, addressed to it at the address set forth below its name on the signature pages hereof; if to any Additional Grantor, addressed to it at the address set forth below its name on the signature pages to the Pledge Agreement Supplement executed and delivered by such Additional Grantor; if to the Administrative Agent, addressed to it at its address specified in the Credit Agreement or, as to any party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section . All such notices and other communications shall, when mailed, telecopied, telegraphed, telexed or cabled, respectively, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, addressed as aforesaid. SECTION 19. Continuing Security Interest; Assignments Under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the later of the payment in full in cash of the Secured Obligations and the Termination Date, (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent, the Lender Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 9.07 of the Credit Agreement. SECTION 20. Release and Termination. (a) Upon the later of the payment in full in cash of the Secured Obligations and the Termination Date, the pledge, assignment and security interest granted by each of the Grantors hereby shall terminate and all rights to the Collateral shall revert to the appropriate Grantor. Upon any such termination, the Administrative Agent will, at Paxar's expense, 106 11 execute and deliver to the appropriate Grantor such documents as such Grantor shall reasonably request to evidence such termination. (b) Notwithstanding the provisions of Section 20(a), upon the earlier of (x) the execution and delivery by the Company of a supplement to the Subsidiary Guaranty in accordance with the provisions of Section 5.01(n) of the Credit Agreement and (y) the later of the payment in full in cash of the Secured Obligations and the Termination Date, the pledge, assignment and security interest in the Pledge Shares granted hereby shall terminate and all rights to the Pledged Shares shall revert to Paxar. Upon any such termination, the Administrative Agent will, at Paxar's expense, execute and deliver to Paxar such documents as Paxar shall reasonably request to evidence such termination. SECTION 21. Governing Law; Terms. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Unless otherwise defined herein or in the Credit Agreement, terms used in Article 9 of the N.Y. Uniform Commercial Code are used herein as therein defined. IN WITNESS WHEREOF, Paxar has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PAXAR CORPORATION By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 PAXAR CAPITAL CORPORATION By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 107 12 SYSTEMS HOLDINGS, INC. By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 WOVEN LABEL HOLDINGS, INC. By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 108 SCHEDULE I PART I PLEDGED SHARES
Issuer Class of Stock Stock Certificate No(s). Number of Shares ------ -------------- ------------------------ ---------------- Monarch Marking Common, 1 1,000 Systems, Inc. par value $.01 per share
PART II PLEDGED DEBT
Original Principal Grantor Debt Issuer Description of Debt Debt Certificate No(s). Final Maturity Amount - ------- ----------- ------------------- ----------------------- -------------- --------- NONE.
109 EXHIBIT A FORM OF PLEDGE AGREEMENT SUPPLEMENT ______________, 19 Fleet Bank, N.A., as Administrative Agent 1133 Avenue of the Americas, 40th Floor, New York, New York 10036 Attention:___________________________ Pledge Agreement dated as of March 3, 1997 made by PAXAR CORPORATION and the Subsidiary Grantors party thereto to Fleet Bank, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to the above-captioned Pledge Agreement (such Pledge Agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, being the "Pledge Agreement"). The terms defined in the Pledge Agreement and not otherwise defined herein are used herein as therein defined. The undersigned hereby agrees, as of the date first above written, to become an Additional Grantor under the Pledge Agreement as if it were an original party thereto and agrees that each reference in the Pledge Agreement to an "Additional Grantor" or to a "Grantor" shall also mean and be a reference to the undersigned. The undersigned hereby assigns and pledges to the Administrative Agent for its benefit and the ratable benefit of the Lender Parties, and hereby grants to the Administrative Agent for its benefit and the ratable benefit of the Lender Parties as security for the Secured Obligations a lien on and security interest in, all of the right, title and interest of the undersigned, whether now owned or hereafter acquired, in and to the Collateral listed on the attached supplement to Schedule I to the Pledge Agreement. The undersigned hereby certifies that such supplement has been prepared by the undersigned in substantially the form of such Schedule I and is accurate and complete as of the date hereof. The undersigned hereby makes each representation and warranty set forth in Section 5 of the Pledge Agreement (as modified by the attached supplement to Schedule I to the Pledge Agreement) to the same extent as each other Grantor and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Pledge Agreement to the same extent as each other Grantor. 110 This letter shall be governed by, and construed in accordance with, the law of the State of New York. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF THE LOAN DOCUMENTS (AS DEFINED IN THE CREDIT AGREEMENT) , THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE ADMINISTRATIVE AGENT, ANY LENDER PARTY OR THE ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Very truly yours, [NAME OF ADDITIONAL GRANTOR] By________________________ Title: Address: 111 EXHIBIT G SUBSIDIARY GUARANTY GUARANTY dated March 3, 1997 made by each of the Persons listed on the signature pages hereof (the "Initial Guarantors"); and the Additional Guarantors (as defined in Section 8(b)) (such Persons, together with the Initial Guarantors, being collectively referred as the "Guarantors") in favor of the Lender Parties as defined in the Credit Agreement referred to below. PRELIMINARY STATEMENT. The Lender Parties and Fleet Bank, N.A., as Administrative Agent for the Lender Parties, are parties to a Credit Agreement dated as of March 3, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms not otherwise defined herein are used herein as therein defined) with Paxar Corporation, a Delaware corporation ("Paxar"), and other Subsidiaries of Paxar that may, pursuant to the terms of the Credit Agreement, become Borrowers thereunder. Each of the Guarantors may receive a portion of the proceeds of the Advances under the Credit Agreement and will derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. It is a condition precedent to the making of Advances and the issuance of Letters of Credit by the Lender Parties under the Credit Agreement that each of the Guarantors shall have executed and delivered this Guaranty. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and to issue Letters of Credit under the Credit Agreement from time to time, each of the Guarantors hereby agrees as follows: Section 1. Guaranty; Limitation of Liability. (a) Each of the Guarantors hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Borrowers now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (such Obligations being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Administrative Agent or any Lender Party in enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, each Guarantors' liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrowers to the Administrative Agent or any Lender Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Borrower. (b) The liability of each of the Guarantors under this Guaranty shall not exceed the greater of (i) the net benefit realized by such Guarantor from the proceeds of the advances made from time to time by the Borrowers to such Guarantor or any Subsidiary of such Guarantor and (ii) the greater of (x) 95% of the Adjusted Net Assets of such Guarantor on the date of delivery hereof and (y) 95% of the Adjusted Net Assets of such Guarantor on the date of any payment hereunder. "Adjusted Net Assets" of any of the Guarantors at any date means the lesser of (x) the amount by which the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities, but excluding liabilities under this Guaranty, of such Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Guarantor at such date 112 2 exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts, excluding debt in respect of this Guaranty, as they become absolute and matured. Section 2. Guaranty Absolute. Each of the Guarantors guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any Lender Party with respect thereto. The Obligations of each of the Guarantors under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against any of the Guarantors to enforce this Guaranty, irrespective of whether any action is brought against any Borrower or any other Loan Party or whether any Borrower or any other Loan Party is joined in any such action or actions. The liability of each of the Guarantors under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each of the Guarantors hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or any of its Subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents or any other assets of Paxar or any of its Subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of Paxar or any of its Subsidiaries; (f) any failure of any Lender Party to disclose to Paxar or any of the Guarantors any information relating to the financial condition, operations, properties or prospects of any Loan Party now or in the future known to any Lender Party (each of the Guarantors waiving any duty on the part of the Lender Parties to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any Lender 113 3 Party that might otherwise constitute a defense available to, or a discharge of, any of the Borrowers, any of the Guarantors or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Lender Party or any other Person upon the insolvency, bankruptcy or reorganization of any Borrower or any other Loan Party or otherwise, all as though such payment had not been made. Section 3. Waivers and Acknowledgments. (a) Each of the Guarantors hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any Lender Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Borrowers or any other Person or any Collateral. (b) Each of the Guarantors hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (c) Each of the Guarantors acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 3 are knowingly made in contemplation of such benefits. Section 4. Subrogation. Each of the Guarantors will not exercise any rights that it may now or hereafter acquire against any Borrower or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's Obligations under this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender Party against any Borrower or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Borrower or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and the Commitments shall have expired or terminated. If any amount shall be paid to any of the Guarantors in violation of the preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and the Termination Date, such amount shall be held in trust for the benefit of the Administrative Agent and the Lender Parties and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall make payment to the Administrative Agent or any Lender Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall be paid in full in cash and (iii) the Termination Date shall have occurred, the Administrative Agent and the Lender Parties will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, 114 4 without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Guarantor. Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all payments made by any Guarantor hereunder shall be made, in accordance with Section 2.15 of the Credit Agreement, free and clear of and without deduction for any and all present or future Taxes. If any Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Administrative Agent or any Lender Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section ) the Administrative Agent or such Lender Party (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each of the Guarantors agrees to pay any present or future Other Taxes. (c) Each of the Guarantors will indemnify the Administrative Agent and each Lender Party for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section ) paid by the Administrative Agent or such Lender Party (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date the Administrative Agent or such Lender Party (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes by or on behalf of any of the Guarantors, such Guarantor will furnish to the Administrative Agent, at its address referred to in the Credit Agreement, the original receipt of payment thereof or a certified copy of such receipt. In the case of any payment hereunder by or on behalf of any Guarantor through an account or branch outside the United States or on behalf of any Guarantor by a payor that is not a United States person, if such Guarantor determines that no Taxes are payable in respect thereof, such Guarantor shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Upon the reasonable request in writing of any Guarantor, each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of the Credit Agreement in the case of each Initial Lender or Initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance or other agreement pursuant to which it became a Lender Party in the case of each other Lender Party, and from time to time thereafter upon the reasonable request in writing by any Guarantor (but only so long thereafter as such Lender Party remains lawfully able to do so), provide the Administrative Agent and such Guarantor with Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the 115 5 Internal Revenue Service, certifying that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments under the Credit Agreement or the Notes. If the form provided by a Lender Party at the time such Lender Party first becomes a party to the Credit Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender Party assignee becomes a party to the Credit Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) and requested by any Guarantor pursuant to this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service Form 1001 or 4224, that any Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to such Guarantor and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender Party required to do so has failed to provide any Guarantor following such Guarantor's request therefor pursuant to subsection (e) above with the appropriate form described in subsection (e) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e)), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) with respect to Taxes imposed by the United States; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, each of the Guarantors shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (g) Without prejudice to the survival of any other agreement of each of the Guarantors hereunder or under any other Loan Document, the agreements and obligations of each of the Guarantors contained in this Section 5 shall survive the payment in full of the Guaranteed Obligations and all other amounts payable under this Guaranty. Section 6. Representations and Warranties. Each of the Guarantors hereby represents and warrants to each of the Lender Parties as follows: (a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. (b) Such Guarantor has, independently and without reliance upon the Administrative Agent or any Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and such Guarantor has established adequate means of obtaining from any other Loan Parties on a continuing basis information pertaining 116 6 to, and is now and on a continuing basis will be completely familiar with, the financial condition, operations, properties and prospects of such other Loan Parties. (c) Such Guarantor is, individually and together with its Subsidiaries, solvent. Section 7. Confirmation of Certain Provisions of the Credit Agreement. Each of the Guarantors hereby confirms and agrees that so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding, or any Lender Party shall have any Commitment, such Guarantor will perform and observe all of the terms, covenants and agreements set forth in the Loan Documents to be performed or observed by such Guarantor or that Paxar has agreed to cause such Guarantor to perform or observe. Section 8. Amendments; Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by any of the Guarantors therefrom shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lender Parties (other than any Lender Party that is, at such time, a Defaulting Lender), (i) limit, reduce or terminate the liability of any of the Guarantors hereunder, (ii) postpone any date fixed for payment hereunder or (iii) change the number of Lender Parties required to take any action hereunder. (b) Upon the execution and delivery by any Person of a supplement to this Guaranty pursuant to either Section 5.01(n) or Section 5.02(g) of the Credit Agreement, in each case in substantially the form of Exhibit A attached hereto (each a "Guaranty Supplement"), such Person shall be referred to as an "Additional Guarantor" and shall be and become a Guarantor, and each reference in this Guaranty to a "Guarantor" shall also mean and be a reference to such Additional Guarantor and each reference in any other Loan Document to a "Guarantor" or a "Loan Party" shall also mean and be a reference to such Additional Guarantor. Section 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered to it, if to any Initial Guarantor, addressed to it at its address set forth below its name on the signature pages hereto, if to any Additional Guarantor, at its address set forth below its name on the signature page to the Guarantee Supplement executed and delivered by it, if to the Administrative Agent or any Lender Party, at its address specified in the Credit Agreement, or as to any party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively. Section 10. No Waiver; Remedies. No failure on the part of the Administrative Agent or any other Lender Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or 117 7 further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 11. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of said Section 6.01, each Lender Party and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender Party or such Affiliate to or for the credit or the account of any Guarantor against any and all of the Obligations of such Guarantor now or hereafter existing under this Guaranty, whether or not such Lender Party shall have made any demand under this Guaranty and although such Obligations may be unmatured. Each Lender Party agrees promptly to notify such Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its respective Affiliates may have. Section 12. Indemnification. Without limitation on any other Obligations of any Guarantor or remedies of the Lender Parties under this Guaranty, each of the Guarantors shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Lender Party from and against, and shall pay on demand, any and all losses, liabilities, damages, costs, expenses and charges (including the reasonable fees and disbursements of such Lender Party's legal counsel) suffered or incurred by such Lender Party as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Borrower enforceable against such Borrower in accordance with their terms. Section 13. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and the Termination Date, (b) be binding upon each of the Guarantors, their successors and assigns and (c) inure to the benefit of and be enforceable by the Administrative Agent and the Lender Parties and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender Party herein or otherwise, in each case as and to the extent provided in Section 9.07 of the Credit Agreement. SECTION 14. Judgment. (a) Rate of Exchange. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder, under the Credit Agreement or under any Note or Notes in another currency into US Dollars or into a Primary Currency, as the case may be, each of the Guarantors agrees, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, a Lender Party 118 8 could purchase such other currency with US Dollars or with a Primary Currency, as the case may be, in New York City, New York at the close of business on the Business Day immediately preceding the day on which final judgment is given, together with any premiums and costs of exchange payable in connection with such purchase. (b) Indemnity. The obligation of each of the Guarantors in respect of any sum due from it to the Administrative Agent or any Lender Party hereunder, under the Credit Agreement or under any Note or Notes shall, notwithstanding any judgment in a currency other than US Dollars or a Primary Currency, as the case may be, be discharged only to the extent that on the Business Day next succeeding receipt by the Administrative Agent or such Lender Party of any sum adjudged to be so due in such other currency, the Administrative Agent or such Lender Party may, in accordance with normal banking procedures, purchase US Dollars or such Primary Currency, as the case may be, with such other currency. If the US Dollars or such Primary Currency so purchased are less than the sum originally due to such Administrative Agent or such Lender Party in US Dollars or in such Primary Currency, each of the Guarantors agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender Party against such loss, and if the US Dollars or such Primary Currency so purchased exceed the sum originally due to the Administrative Agent or any Lender Party in US Dollars or in such Primary Currency, as the case may be, the Administrative Agent or such Lender Party agrees to remit to such Guarantor such excess. SECTION 15. Jurisdiction, Etc. (a) Each of the Guarantors hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents, or for recognition or enforcement of any judgment, and each of the Guarantors hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the Guarantors further irrevocably consents to the service or process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to such Guarantor at its address set forth below its name on the signature pages hereto. Each of the Guarantors hereby further agrees that service of process in any such action or proceeding brought in any such New York state court or in any such federal court may be made upon Paxar at its address specified in Section 9.02 of the Credit Agreement, and each of the Guarantors hereby irrevocably appoints Paxar as its authorized agent to accept such service of process, and hereby irrevocably agrees that the failure of Paxar to give any notice of such service to such Guarantor shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of the Guarantors agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party in the courts of any jurisdiction. (b) Each of the Guarantors irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any of the other 119 9 Loan Documents to which it is or is to be a party in any New York State or federal court. Each of the Guarantors hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 120 10 (c) To the extent that any Guarantor has or hereafter may acquire any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Agreement and the other Loan Documents. SECTION 16. Waiver of Jury Trial. Each of the Guarantors hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Guaranty or any of the other Loan Documents, the transactions contemplated thereby or the actions of the Administrative Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PAXAR CAPITAL CORPORATION By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 SYSTEMS HOLDINGS, INC. By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 WOVEN LABEL HOLDINGS, INC. By_______________________________________ Title: Address: 105 Corporate Park Drive White Plains, NY 10604-3814 121 EXHIBIT A TO THE SUBSIDIARY GUARANTY FORM OF GUARANTY SUPPLEMENT __________, ____ To each of the Lender Parties pursuant to the Credit Agreement referred to below Credit Agreement dated as of March 3, 1997 (as in effect on the date hereof and as it may be hereafter amended, supplemented or otherwise modified hereafter from time to time, the "Credit Agreement") among Paxar Corporation, the Lenders, Issuing Banks and Swing Line Bank named therein and Fleet Bank, N.A. as Administrative Agent. Ladies and Gentlemen: Reference is made to the above-captioned Credit Agreement and to the Subsidiary Guaranty referred to therein (such Subsidiary Guaranty, as in effect on the date hereof and as it may be hereafter amended, supplemented or otherwise modified from time to time, the "Subsidiary Guaranty"). Capitalized terms not otherwise defined herein shall have the same meanings as specified in the Credit Agreement and in the Subsidiary Guaranty. The undersigned hereby agrees as follows: 1. The undersigned hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Borrower now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (such Obligations being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Administrative Agent or any Lender Party in enforcing any rights under this Guaranty Supplement and the Subsidiary Guaranty and the other Loan Documents, on the terms and subject to the limitations set forth in the Subsidiary Guaranty as if it were an original party thereto. Without limiting the generality of the foregoing, the undersigned's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Administrative Agent or any Lender Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. 2. The undersigned hereby confirms that it is the intention of all parties that the Obligations of the undersigned under this Guaranty Supplement and the Subsidiary Guaranty not constitute a fraudulent transfer or conveyance for purposes of the United States Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to this Guaranty Supplement and the Subsidiary Guaranty or any of the Obligations of the undersigned hereunder or thereunder. To effectuate the foregoing intention, the undersigned hereby irrevocably agrees that, notwithstanding anything to the contrary contained in this Guaranty Supplement or the Subsidiary 122 2 Guaranty, the Obligations of the undersigned and all other liabilities of the undersigned under this Guaranty Supplement and the Subsidiary Guaranty shall not exceed the greater of (i) the net benefit realized by such Guarantor from the proceeds of the advances made from time to time by the Borrowers to such Guarantor or any Subsidiary of such Guarantor and (ii) the greater of (x) 95% of the Adjusted Net Assets of such Guarantor on the date of delivery hereof and (y) 95% of the Adjusted Net Assets of such Guarantor on the date of any payment hereunder. 3. The undersigned hereby agrees, as of the date first above written, to be bound as a Guarantor by all of the terms and conditions of the Subsidiary Guaranty to the same extent as each of the other Guarantors. The undersigned further agrees, as of the date first above written, that each reference in the Subsidiary Guaranty to a "Guarantor" shall also mean and be a reference to the undersigned, and each reference in any other Loan Document to a "Guarantor" or a "Loan Party" shall also mean and be a reference to the undersigned. 4. This Guaranty Supplement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. 5. (a) The undersigned hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty Supplement, or for recognition or enforcement of any judgment, and the undersigned hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The undersigned further irrevocably consents to the service or process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to the undersigned at its address set forth below its name on the signature pages hereto. The undersigned hereby further agrees that service of process in any such action or proceeding brought in any such New York state court or in any such federal court may be made upon Paxar at its address specified in Section 9.02 of the Credit Agreement, and the undersigned hereby irrevocably appoints Paxar as its authorized agent to accept such service of process, and hereby irrevocably agrees that the failure of Paxar to give any notice of such service to the undersigned shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. The undersigned agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty Supplement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty Supplement or the other Loan Documents to which it is a party in the courts of any jurisdiction. (b) The undersigned irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty Supplement in any New York State or federal court. The undersigned hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 123 3 (c) To the extent that the undersigned has or hereafter may acquire any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the undersigned hereby irrevocably waives such immunity in respect of its obligations under this Agreement. 6. The undersigned hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Guaranty Supplement or any of the other Loan Documents to which it is a party, or the actions of the Administrative Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. Very truly yours, [NAME OF ADDITIONAL GUARANTOR] By _______________________________ Name: Title: Address: 124 EXHIBIT H-2 - FORM OF OPINION OF COUNSEL FOR ADDITIONAL BORROWERS [Date] To each of the Lenders parties to the Credit Agreement dated as of March __, 1997 among Paxar Corporation, said Lenders and Fleet Bank, N.A., as Administrative Agent for said Lenders, and to Fleet Bank, N.A., as Administrative Agent [Name of Additional Borrower] Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.02(h) of the Credit Agreement, dated as of March __, 1997 (as amended, supplemented or otherwise modified through the date hereof the "Credit Agreement"), among Paxar Corporation, a New York corporation (the "Paxar") and the other Borrowers (as defined therein) party thereto, the Lender Parties party thereto, Fleet Bank, N.A. ("Fleet") as Initial Issuing Bank, Fleet as the Swing Line Bank, and Fleet as Administrative Agent for said Lender Parties. Terms defined in the Credit Agreement are used herein as therein defined. We have acted as [NAME OF JURISDICTION] counsel for _____________________ (the "Additional Borrower") in connection with the preparation, execution and delivery of the Credit Agreement Supplement executed by the Additional Borrower. In that connection, we have examined: (1) The Credit Agreement Supplement executed by the Additional Borrower. (2) The Credit Agreement. (3) Each of the Revolving Credit Notes delivered by the Additional Borrower pursuant to Section 3.02 of the Credit Agreement on the date hereof. (4) The documents furnished by the Additional Borrower pursuant to Article III of the Credit Agreement. 125 2 (5) The [Articles] [Certificate] of Incorporation [or other similar organizational document] of the Additional Borrower and all amendments thereto (the "Charter"). (6) The [by-laws][other similar constituent documents] of the Additional Borrower and all amendments thereto (the "By-laws"). (5) A certificate of the [Secretary of State][other similar governmental authority, if applicable] of _____________ (the "Jurisdiction"), dated _______________, 199_, attesting to the continued corporate existence and good standing of the Additional Borrower in such Jurisdiction. We have also examined the originals, or copies certified to our satisfaction, of the documents listed in a certificate of the chief financial officer of the Additional Borrower, dated the date hereof (the "Certificate"), certifying that the documents listed in such certificate are all of the indentures, loan or credit agreements, leases, guarantees, mortgages, security agreements, bonds, notes and other agreements or instruments, and all of the orders, writs, judgments, awards, injunctions and decrees, that affect or purport to affect the Additional Borrower's right to borrow money or the Additional Borrower's obligations under the Credit Agreement, the Credit Agreement Supplement or the Revolving Credit Notes. In addition, we have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Additional Borrower, certificates of public officials and of officers of the Additional Borrower, and agreements, instruments and other documents, as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Additional Borrower or its officers or of public officials. In rendering the opinions set forth below, we have assumed that all documents submitted to us as certified or photostatic copies conform to the original documents, all signatures on all documents submitted to us for examination (other than that of the Additional Borrower on the Credit Agreement Supplement and each of the Revolving Credit Notes executed by it) are genuine, and all public records reviewed by us or on our behalf are accurate and complete. Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the following opinion: 1. The Additional Borrower is [a corporation] duly organized[,][and] validly existing [and in good standing] under the Jurisdiction. 2. The Additional Borrower has all necessary corporate power and authority to execute and deliver, and to perform its obligations under, each of the Loan Documents to which it is a party and to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. 3. The execution, delivery and performance by the Additional Borrower of each Loan Document to which it is a party, and the consummation of the transactions contemplated thereby, are within the Additional Borrower's corporate powers, have been duly authorized by 126 3 all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to the Additional Borrower or (iii) any contractual or legal restriction contained in any document listed in the Certificate or, to the best of our knowledge, contained in any other similar document or any order writ, judgment, award, injunction or decree that affects or purports to affect the Additional Borrower. 4. The Credit Agreement Supplement and each other Loan Document to be delivered pursuant to the Credit Agreement or the Credit Agreement Supplement on or prior to the date hereof has been duly executed and delivered by the Additional Borrower. 5. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Additional Borrower of the Credit Agreement, the Credit Agreement Supplement and the other Loan Documents. [6. The Credit Agreement, the Credit Agreement Supplement and each of the other Loan Documents is, and after giving effect to the initial Borrowing, the Notes will be, legal, valid and binding obligations of the Additional Borrower enforceable against the Additional Borrower in accordance with their respective terms.](1) [__. The choice of New York law to govern the Credit Agreement Supplement of the Additional Borrower, the Credit Agreement and each of the Revolving Credit Notes issued by the Additional Borrower is a valid and effective choice of law under the laws of the Jurisdiction, and under the Jurisdiction's principles of conflicts of laws, a court of the Jurisdiction will apply New York law in an action or proceeding arising out of such Credit Agreement Supplement, the Credit Agreement or any such Revolving Credit Note to the extent that the parties thereto have agreed to its application therein, except to the extent that the Jurisdiction's procedural or remedial law shall apply. Without limiting the generality of the foregoing, a court of the Jurisdiction will apply the usury law of the State of New York to the Credit Agreement and each of the Revolving Credit Notes. __. Neither the Administrative Agent nor any Lender is required to qualify to do business in the Jurisdiction or to comply with the requirements of any foreign lender statute in order to perform under the Credit Agreement or any of the Notes or to carry out any of the other transactions contemplated thereby or to avail themselves of the rights and remedies provided thereby, nor will the Administrative Agent or any Lender be subject to taxation in the Jurisdiction, in each case solely as the result of the performance of the Credit Agreement or any of the Notes. ________ (1) This opinion should be given if the Additional Borrower is a U.S. Person. 127 4 __. No stamp, registration or other similar taxes, fees or charges are or will be required to be paid in the Jurisdiction in connection with the execution, delivery, performance or enforcement of the Credit Agreement or any of the Notes.]2 We express no opinion as to the laws of any jurisdiction other than the laws of the Jurisdiction. Very truly yours, ________ (2) These opinions should be given if the Additional Borrower is a foreign Person. 128 EXHIBIT I - FORM OF ACCEPTANCE OF PROCESS AGENT [LETTERHEAD OF PAXAR] [Date] To each of the Lenders party to the Credit Agreement referred to below, and to Fleet Bank, N.A., as Administrative Agent for such Lenders [NAME OF ADDITIONAL BORROWER] Ladies and Gentlemen: Reference is made to (a) the Credit Agreement dated as of March __, 1997 (as amended or modified from time to time, the "Credit Agreement") among Paxar Corporation, a New York corporation ("Paxar"), the other Borrowers (as defined in the Credit Agreement) party thereto, the Lenders (as defined in the Credit Agreement) and Fleet Bank, N.A., as agent for the Lenders (the "Administrative Agent"), and (b) the Credit Agreement Supplement dated _________, pursuant to which __________, a ___________ (the "Additional Borrower"), has become a "Borrower" under and for all purposes of the Credit Agreement. Terms defined in the Credit Agreement are used herein with the same meaning Pursuant to Section 9.13 of the Credit Agreement and to the Credit Agreement Supplement, the Additional Borrower has appointed Paxar (with its address at _________________________, Attention: _______________) as its process agent (the "Process Agent") to receive on behalf of the Additional Borrower and its property service of copies of any summons and complaint and any other process that may be served in any action or proceeding in any New York state court or any federal court sitting in New York City, New York, and any appellate court from any thereof, arising out of or relating to its Credit Agreement Supplement, the Credit Agreement or any of the Notes issued by it. The undersigned hereby accepts such appointment as the Process Agent and agrees with each of you that (a) Paxar will maintain an office in White Plains, through the Termination Date and will give the Administrative Agent prompt notice of any change of its address, (b) Paxar will perform its duties as the Process Agent to receive on behalf of the Additional Borrower and its property service of copies of any summons and complaint and any other process that may be served in any action or proceeding in any New York state court or any federal court sitting in New York City, New York, and any appellate court from any thereof, arising out of or relating to the Credit Agreement Supplement of the Additional Borrower, the Credit Agreement or any of the Notes issued by the Additional Borrower and (c) the undersigned will forward forthwith to the Additional Borrower at its address at ________________ or, if different, its then current address, copies of any summons, complaint and other process that the undersigned receives in connection with its appointment as the Process Agent therefor. 129 2 This acceptance and agreement shall be binding upon the Company and all of its successors and assigns. Very truly yours, PAXAR CORPORATION By_______________________________ Name: Title: 130 Schedule 4.01(c) Required Authorizations and Approvals None. 131 Schedule 4.01(f) Environmental Actions The following materials are enclosed with this Schedule: (1) A draft of the Form 10K filing together with the Superfund Status Report for Monarch Marking Systems, Inc. pertaining to environmental matters. (2) Letter from Whiteman Osterman & Hanna to Arthur Andersen LLP, dated January 31, 1997, pertaining to environmental matters for Paxar Corporation. 132 Schedule 4.01(j) Environmental Laws See Schedule 4.01(f), which is identical. 133 Schedule 5.02(d) Existing Debt
Outstanding Total Facility Expires ----------- -------------- ------- PAXAR: Economic Development Revenue Bonds - Wachovia $ 8,000,000 $ 8,000,000 2011 Unsecured Letter of Credit line of credit - Bank of Boston 0 3,000,000 1998 Nationsbank of Va. - EDA loan 67,000 2000 Pennsylvania Industrial Develop. Authority 69,000 2000 Interest rate swap - Chase 15,000,000 15,000,000 1998 G.P. Rustichelli - Collitax acquisition debt 3,500,000,000 ITL 1997 Collitax: Interbanca 135,730 1998 Mediocredito 775,991 2003 Fime Leasing Spa. 978,543 1999 Orvac: B.N.L. 23,397 1998 Mediocredito 200,017 2001 Monarch foreign subsidiaries: UK capital lease 387,000 2000 Overdraft lines: 150,000 GBP UK - NatWest Bank 0 France - Banque De Beacque Beau 0 5,000,000 FRF Credit Comm. De France 0 3,000,000 FRF TOTAL $25,637,578 " 3,500,000,000 ITL
134 Schedule 5.02(g) Scheduled Investments 1. Acquisition of 100% of Golden State, a $23,000,000 coated fabric company with a principal office in Taiwan. The consideration for the proposed acquisition is estimated to be approximately $18,000,000 in cash. The proposed acquisition is scheduled to close in approximately 60 - 180 days from the date hereof. 2. The transfer of ownership of Italian based Orvac, S.r.l. from Systems Holdings, Inc. (a wholly owned subsidiary of Paxar Corporation) to North Middletown Road Holdings, B.V., a Netherlands based Subsidiary of Paxar Corporation. The transferred Investment totals approximately $8,600,000 and includes a note payable to Paxar Corporation of $5,100,000. Orvac, S.r.l. has annual sales of approximately $8,000,000 and is a manufacturer of hot stamp inks and coated fabrics. EX-11.1 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 PAXAR CORPORATION STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 ---- ---- ---- Net income $21,804 $15,709 $11,601 ======= ======= ======= Earnings per share $ 0.77 $ 0.56 $ 0.42 ======= ======= ======= Earnings per share assuming full dilution $ 0.77 $ 0.56 $ 0.42 ======= ======= ======= Weighted average number of common shares outstanding 27,878 27,628 27,113 Common stock equivalents: Add: Net shares assumed to be issued for dilutive stock options 536 400 310 ------- ------- ------- Total weighted average common and common equivalent shares outstanding 28,414 28,028 27,423 ======= ======= ======= Weighted average number of common shares outstanding 27,878 27,628 27,113 Common stock equivalents, assuming full dilution: Add: Net shares assumed to be issued for dilutive stock options 646 454 310 ------- ------- ------- Total weighted average number of shares outstanding assuming full dilution 28,524 28,082 27,423 ======= ======= =======
EX-21.1 4 LISTS OF SUBSIDIARIES 1 EXHIBIT 21.1 PAXAR CORPORATION SUBSIDIARIES COMPANY JURISDICTION OF ORGANIZATION - ------- ---------------------------- North Middletown Road Holdings, B.V. Netherlands Packaging Systems International, Incorporated U.S. Virgin Islands North America: Paxar Capital Corporation New York Monarch Marking Systems, Inc. Delaware Woven Label Holdings, Inc. New York Systems Holdings, Inc. New York Paxar de Mexico, S.A. de C.V. Mexico South America: Paxar do Brasil Ltda. Brazil Europe: Paxar Europe Limited England Collitex S.r.l. Italy Tessitura Italiana Etichette S.r.l. Italy Astria S.r.l. Italy Orvac S.r.l. Italy Orvac Sud S.r.l. Italy Paxar Italia S.r.l. Italy Paxar Deutschland, GmbH Germany Paxar Polska Sp.zo.o. Poland Paxar Iberia S.A. Spain Paxar Benelux Bvba Belgium Brian Pulfrey, Ltd. England Asia: Paxar Far East Ltd. Hong Kong Paxar (Singapore) Pte Ltd. Singapore EX-23.1 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report, dated February 10, 1997, on the consolidated financial statements and schedule of Paxar Corporation included in this Form 10-K into the Company's previously filed Registration Statements File Nos. 33-42685 and 33-44299. ARTHUR ANDERSEN LLP Stamford, Connecticut March 31, 1997 EX-27.1 6 FINANCIAL DATA SCHEDULE
5 0000075681 PAXAR CORPORATION 12-MOS DEC-31-1996 DEC-31-1996 4,816 0 36,870 0 30,681 78,276 98,517 38,860 182,159 28,942 0 0 0 2,803 117,117 182,159 219,828 219,828 138,333 138,333 0 0 1,365 29,136 7,332 21,804 0 0 0 21,804 .77 0
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