-----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, UAOmM98LYyJ5FhO0yanHETmcpzy+bqLVZkIBD8EkEoWKB2CY+FqIYvwMCAru7Ezm piUVMKx9RSuKWoa+vtWhCQ== 0000912057-96-000445.txt : 19960116 0000912057-96-000445.hdr.sgml : 19960116 ACCESSION NUMBER: 0000912057-96-000445 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960112 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAB PRODUCTS CO CENTRAL INDEX KEY: 0000096116 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE FURNITURE (NO WOOD) [2522] IRS NUMBER: 941190862 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07736 FILM NUMBER: 96503110 BUSINESS ADDRESS: STREET 1: 1400 PAGE MILL RD CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4158522400 MAIL ADDRESS: STREET 1: 1400 PAGE MILL ROAD CITY: PALO ALTO STATE: CA ZIP: 94304 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended NOVEMBER 30, 1995 --------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 1-7736 TAB PRODUCTS CO. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 94-1190862 - -------------------------------------- ----------------------------------- (State of Incorporation) (IRS Employer Identification No.) 1400 PAGE MILL ROAD, PALO ALTO, CALIFORNIA 94304 - ------------------------------------------ ----------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number - including area code (415) 852-2400 ------------------ NOT APPLICABLE - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common shares outstanding as of November 30, 1995 - 4,851,951 This report, including all exhibits and attachments, contains 34 pages. ------ TAB PRODUCTS CO. INDEX PART I. FINANCIAL INFORMATION Page No. ITEM 1. Financial Statements: Consolidated Condensed Balance Sheets November 30, 1995 and May 31, 1995 3 Consolidated Condensed Statements of Earnings Three and Six months ended November 30, 1995 and 1994 4 Consolidated Condensed Statements of Cash Flows Six months ended November 30, 1995 and 1994 5 Supplemental Financial Data - Notes 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 6. Exhibits 10 Signatures 12 2 PART 1: FINANCIAL INFORMATION ITEM 1: Financial Statements TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (000's ommitted except share data)
ASSETS November 30, 1995 May 31, 1995 ----------------- ------------ Current Assets: Cash and cash equivalents $ 5,522 $ 6,753 Short-term investments 2,540 1,600 Accounts receivable, less allowances of $695 and $708 for doubtful accounts 27,625 24,692 Inventories 15,563 14,584 Prepaid income taxes and other expenses 2,421 3,704 ----------------- ------------ Total current assets 53,671 51,333 Property, plant and equipment, net of accumulated depreciation of $34,613 and $33,246 21,386 21,652 Goodwill 5,036 5,241 Other assets 3,727 3,423 ----------------- ------------ $ 83,820 $ 81,649 ----------------- ------------ ----------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 4,093 $ 3,313 Accounts payable 8,526 7,292 Commissions payable 3,351 2,918 Other accrued liabilities 7,986 7,728 ----------------- ------------ Total current liabilities 23,956 21,251 ----------------- ------------ Long-term debt, less current portion 17,297 18,733 ----------------- ------------ Deferred taxes and other non-current liabilities 1,837 1,837 ----------------- ------------ Stockholders' Equity: Preferred stock: $0.01 par value, authorized - 500,000 shares, issued - none - - Common stock: $0.01 par value, authorized - 25,000,000 shares, issued - November 1995 and May 1995 - 7,284,178 shares 73 73 Additional paid-in capital 12,705 12,705 Retained earnings 58,832 57,898 Treasury stock: November 1995 and May 1995 - 2,432,227 shares (31,365) (31,365) Cumulative translation adjustment 485 517 ----------------- ------------ 40,730 39,828 ----------------- ------------ $ 83,820 $ 81,649 ----------------- ------------ ----------------- ------------
3 TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) (000's ommitted except share data)
Three Months Ended November 30 --------------------------- 1995 1994 ----------- ----------- Revenues $ 38,862 $ 38,351 ----------- ----------- Costs and expenses: Cost of revenues 23,492 23,364 Selling 10,535 10,517 General and administrative 2,887 2,467 Research and development 96 234 ----------- ----------- Total costs and expenses 37,010 36,582 ----------- ----------- Operating income 1,852 1,769 Interest, net (389) (493) ----------- ----------- Earnings before income taxes 1,463 1,276 Provision for income taxes 637 555 ----------- ----------- Net earnings $ 826 $ 721 ----------- ----------- ----------- ----------- Earnings per share $ 0.17 $ 0.15 ----------- ----------- ----------- ----------- Average common and equivalent shares outstanding 4,851,951 4,840,501 Six Months Ended November 30 --------------------------- 1995 1994 ----------- ----------- Revenues $ 76,276 $ 74,965 ----------- ----------- Costs and expenses: Cost of revenues 46,315 45,650 Selling 20,769 20,433 General and administrative 5,674 5,343 Research and development 200 431 ----------- ----------- Total costs and expenses 72,958 71,857 ----------- ----------- Operating income 3,318 3,108 Interest, net (807) (974) ----------- ----------- Earnings before income taxes 2,511 2,134 Provision for income taxes 1,092 928 ----------- ----------- Net earnings $ 1,419 $ 1,206 ----------- ----------- ----------- ----------- Earnings per share $ 0.29 $ 0.25 ----------- ----------- ----------- ----------- Average common and equivalent shares outstanding 4,851,951 4,837,920
4 TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (000's ommitted)
Six Months Ended November 30, ------------------------- 1995 1994 ---------- ---------- Operating Activities: Net earnings $ 1,419 $ 1,206 Depreciation and amortization 1,825 1,882 Other (10) 54 Changes in operating assets and liabilities: Accounts receivable (2,920) 3,424 Inventories (979) (1,331) Prepaid income taxes and other expenses 1,283 567 Other assets (99) 283 Accounts payable 1,234 (3,319) Commissions payable 433 (38) Other accrued liabilities 258 (265) ---------- ---------- Net cash provided by Operating Activities 2,444 2,463 ---------- ---------- Investing Activities: Purchase of property, plant and equipment, net (1,562) (626) Purchases of short-term investments (2,437) - Sales of short-term investments 1,497 - ---------- ---------- Net cash required by Investing Activities (2,502) (626) ---------- ---------- Financing Activities: Repayment of long-term debt (656) (73) Proceeds from issuance of common stock - 200 Dividends (485) (483) ---------- ---------- Net cash required by Financing Activities (1,141) (356) ---------- ---------- Effect of exchange rate changes on cash (32) 275 ---------- ---------- Increase (decrease) in cash and cash equivalents (1,231) 1,756 Cash and cash equivalents at beginning of period 6,753 2,371 ---------- ---------- Cash and cash equivalents at end of period $ 5,522 $ 4,127 ---------- ---------- ---------- ----------
5 TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES SUPPLEMENTAL FINANCIAL DATA - NOTES (UNAUDITED) 1. Inventories consisted of the following (000's omitted): November 30, 1995 May 31, 1995 ----------------- ------------ Finished goods $ 9,916 $ 8,914 Work in process 649 653 Raw materials 4,998 5,017 ----------------- ------------ $ 15,563 $ 14,584 ----------------- ------------ ----------------- ------------ 2. Earnings per share data are computed using the average number of common and dilutive common equivalent shares outstanding. 3. Dividends declared for the six month periods ended November 30, 1995 and 1994 were as follows: Record Date Shares Outstanding Per Share Dividend ----------- ------------------ ------------------ November 22, 1995 4,851,951 $ 0.05 August 25, 1995 4,851,951 $ 0.05 November 25, 1994 4,851,951 $ 0.05 August 25, 1994 4,838,188 $ 0.05 4. The above financial information reflects all adjustments consisting of normal recurring items which are, in the opinion of management, necessary for a fair presentation of the results of the interim periods. These financial statements should be read in conjunction with the company's audited financial statements for the year ended May 31, 1995. 5. During the six months ended November 30, 1995 the company canceled stock options to purchase 798,500 shares of the company's common stock at prices ranging from $6.125 to $13.50 and exchanged them for options to purchase 598,500 shares of the company's common stock at current market value of $6.00 per share with new vesting periods. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION At November 30, 1995, the company had cash and short-term investments of $8.1 million, a decrease of $.3 million from the $8.4 million in cash and short-term investments at May 31, 1995. The company's working capital position at November 30, 1995, was $29.7 million as compared with $30.1 million at May 31, 1995. The current ratio of 2.2 at November 30, 1995, was down slightly from the 2.4 reported May 31, 1995. Accounts receivable at November 30, 1995, was $27.6 million an increase of $2.9 million from the accounts receivable of $24.7 million at May 31, 1995. The increased accounts receivable is attributable to higher revenues in the months preceding the November 30, 1995 quarter end as compared to May 31, 1995. The company continued to make progress on its collections with a further reduction in its days sales outstanding at November 30, 1995 as compared to May 31, 1995. Inventories at November 30, 1995 were higher as a result of increased demand on certain products and the build up of inventory for product transitions. Management believes that the company's cash and cash equivalents, available credit facilities and operational cash flows will adequately finance anticipated growth, capital expenditures and debt obligations for the foreseeable future. Investments in property, plant and equipment to support operations were $1.6 million during the six months ended November 30, 1995. Capital expenditures to support operations for fiscal 1996 are expected to be in the range of $2.5 to $3.0 million. For the six month period ended November 30, 1995, the company paid cash dividends of $485,000 as compared to $483,000 in the prior fiscal year. The company has an unsecured revolving line of credit of $10 million with a bank that expires on October 31, 1996. There were no borrowings outstanding under the line of credit at November 30, 1995. RESULTS OF OPERATIONS REVENUES for the second quarter of fiscal 1996 were $38.9 million, up $.5 million or 1.3% from revenues of $38.4 million for the second quarter of fiscal 1995. Revenues for the six months ended November 30, 1995, were $76.3 million, up $1.3 million or 1.7% from revenues of $75.0 million in the first six months of the prior fiscal year. The company increased list prices, in the United States, on major product lines in late fiscal 1995 and early fiscal 1996. During the second quarter of fiscal 1996 revenues from major product lines in the U.S. increased $.3 million over the second quarter of fiscal 1995 and increased $.2 million in other products. During the first six months of fiscal 1996 revenues from major product lines in the U.S. increased $1.7 million over the first six months of fiscal 1995 but were partially offset by a $.4 million decrease in other products. The increased revenues, for both the second quarter and six months ended November 30, 1995, were attributable to both the price increases and higher unit volume. 7 COST OF REVENUES, as a percentage of revenues, was 60.4% for the second quarter of fiscal 1996, down from the 60.9% reported for the second quarter of fiscal 1995. For the six months ended November 30, 1995, the cost of revenues was 60.7% as compared to 60.9% in the first six months of the prior fiscal year. The lower cost of revenues, as a percentage of sales, is attributable to lower product costs primarily as a result of increased selling prices. SELLING EXPENSES were $10.5 million or 27.1% of total revenues for the second quarter of fiscal 1996 as compared to $10.5 million or 27.4% of total revenues for the second quarter of fiscal 1995. For the six months ended November 30, 1995, selling expenses were $20.8 million as compared to $20.4 million in the prior fiscal year. Total selling expenses for the first six months of fiscal 1996 increased $.4 million over the comparable period for fiscal 1995. The increased selling expenses were attributable to higher commission expense on a year to date basis. GENERAL AND ADMINISTRATIVE EXPENSES, in the second quarter of fiscal 1996 were $2.9 million, $.4 million higher than the $2.5 million reported in the second quarter of fiscal 1995. For the six months ended November 30, 1995, general and administrative expenses were $5.7 million, $.4 million higher than the $5.3 million reported the prior fiscal year. The increased general and administrative expenses for the second quarter and the first six months of fiscal 1996 are primarily due to increased employee related costs. OPERATING INCOME for the quarter ended November 30, 1995, was $1.9 million, an increase of $.1 million or 4.7% from the $1.8 million reported in the second quarter of last year. For the six months ended November 30, 1995, operating income was $3.3 million, $.2 million or 6.8% higher than the $3.1 million reported for the prior fiscal year. INTEREST EXPENSE, net, was $389,000 in the second quarter of fiscal 1996 as compared to $493,000 in the second quarter of fiscal 1995. For the six months ended November 30, 1995, interest expense, net, was $807,000 as compared to $974,000 in the prior fiscal year. The decreases in interest expense, net, were primarily due to a lower level of debt during fiscal 1996 compared to the same periods of fiscal 1995 as a result of debt repayments. EARNINGS PER SHARE for the three months ended November 30, 1995, were $.17 per share, an increase of 13% over the $.15 per share earned in the second quarter of the prior fiscal year. For the six months ended November 30, 1995, earnings per share were $.29 per share, an increase of 16% over the $.25 per share in the prior fiscal year. 8 PART II: OTHER INFORMATION ITEMS 1 - 5. Not applicable. 9
ITEM 6. Exhibits (a) 10.1 Registrants 1981 Incentive Stock Option Plan (Exhibit (10) of the 1983 10-K)(1), (2) 10.2 Amended 1981 Incentive Stock Option Plan (Exhibit (10) of the 1987 10-K)(1), (2) 10.3 1991 Stock Option Plan (Exhibit 10.1 of the 1991 10-K) (1), (2) 10.4 Employment Agreement between John W. Peth and the Registrant dated March 21, 1991 (Exhibit 10.2 of the 1991 10-K)(1), (2) 10.5 Agreement between John W. Peth and the Registrant dated August 18, 1991 (Exhibit 10.3 of the 1991 10-K)(1), (2) 10.6 Agreement between Michael A. Dering and the Registrant dated May 15, 1989 (Exhibit 10.4 of the 1991 10-K)(1), (2) 10.7 Amendment to Agreement between Michael A. Dering and the Registrant dated August 28, 1991 (Exhibit 10.5 of the 1991 10-K)(1), (2) 10.8 Common Stock Purchase Agreement (Exhibit 10.2 of the 1992 10-K)(2) 10.9 Promissory Note dated October 18, 1991 (Exhibit 10.3 of the 1992 10-K)(2) 10.10 Bank of America Business Loan Agreement dated October 24, 1991 (Exhibit 10.4 of the 1992 10-K)(2) 10.11 Note Agreement of Tab Products Co. dated as of March 20, 1992 in the aggregate principal amount of $15,000,000 (Exhibit 10.5 of the 1992 10-K)(2) 10.12 Bank of America Revision Agreement dated March 20, 1992 (Exhibit 10.6 of the 1992 10-K)(2) 10.13 Agreement for Purchase and Sale of Assets (Exhibit 10.7 of the 1992 10-K)(2) 10.14 Amendment dated September 15, 1992 to Business Loan Agreement dated October 24, 1991 (Exhibit 10.4 filed with Form 10-Q for the quarter ended November 30, 1993) (2) 10.15 Business Loan Agreement dated August 20, 1993 (Exhibit 10.15 filed with Form 10-Q for the quarter ended November 30, 1993)(2) 10.16 Amendment dated July 27, 1993 to Note Agreement of Tab Products Co. dated as of March 20, 1992 (Exhibit 10.16 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10.17 Bank of America Business Loan Agreement dated August 20, 1993 (Exhibit 10.17 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10.18 Bank of America Amendment No. 1 dated October 6, 1993 to Business Loan Agreement (Exhibit 10.18 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10.19 Bank of America Amendment No. 2 dated October 13, 1993 to Business Loan Agreement (Exhibit 10.19 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10 10.20 Note Agreement of Tab Products Co. dated October 7, 1993 (Exhibit 10.20 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10.21 Letter dated October 7, 1993 amending the Note Agreement dated March 20, 1992 (Exhibit 10.21 filed with Form 10-Q for the quarter ended August 31, 1993)(2) 10.22 Bank of America Amendment No. 3 dated December 3, 1993 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.22 filed with Form 10-Q for the quarter ended February 28, 1994)(2) 10.23 Bank of America Amendment No. 4 dated February 9, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.23 filed with Form 10-Q for the quarter ended February 28, 1994)(2) 10.24 Bank of America Amendment No. 5 dated February 28, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.24 filed with Form 10-Q for the quarter ended February 28, 1994)(2) 10.25 Bank of America Amendment No. 6 dated March 30, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.25 filed with Form 10-Q for the quarter ended February 28, 1994)(2) 10.26 Bank of America Amendment No. 7 dated April 5, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.26 filed with Form 10-Q for the quarter ended February 28, 1994)(2) 10.27 Letter dated October 27, 1993 amending the Prudential Note Agreement dated March 20, 1992 (Exhibit 10.27 filed with the 1994 Form 10-K)(2) 10.28 Bank of America Amendment No. 8 dated May 9, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.28 filed with the 1994 Form 10-K)(2) 10.29 Bank of America Amendment No. 9 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.29 filed with the 1994 Form 10-K)(2) 10.30 Bank of America Amendment No. 10 dated August 8, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.30 filed with the 1994 Form 10-K)(2) 10.31 Bank of America Amendment No. 11 dated August 22, 1994 to Business Loan Agreement dated August 20, 1993 (Exhibit 10.31 filed with the 1994 Form 10-K)(2) 10.32 Letter dated June 15, 1995 amending the Prudential Note Agreement dated March 20, 1992 (Exhibit 10.32 filed with the 1995 Form 10-K)(2) 10.33 Letter dated July 21, 1995 amending the Prudential Note Agreement dated March 20, 1992 (Exhibit 10.33 filed with the 1995 Form 10-K)(2) 10.34 Bank of America Business Loan Agreement dated December 7, 1995 10.35 Letter dated December 13, 1995 amending the Prudential Note Agreement dated March 20, 1992 (1) Compensatory Plan or Arrangement. (2) Incorporated by reference from the noted previously filed document. (b) None
11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the under- signed thereunto duly authorized. TAB PRODUCTS CO. ------------------------------------- (Registrant) Date: January 12, 1996 /s/ John M. Palmer ------------------------------------- John M. Palmer, Vice President, Finance and Chief Financial Officer Date: January 12, 1996 /s/ James L. Anderson ------------------------------------- James L. Anderson, Controller 12 EX-10.34 2 EXHIBIT 10-34 - ------------------------------------------------------------------------------- [LOGO] BANK OF AMERICA BUSINESS LOAN AGREEMENT NATIONAL TRUST AND SAVINGS ASSOCIATION - ------------------------------------------------------------------------------- This Agreement dated as of December 7, 1995, is between Bank of America National Trust and Savings Association (the "Bank") and Tab Products Co. (the "Borrower"). 1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS 1.1 LINE OF CREDIT AMOUNT. (a) During the availability period described below, the Bank will provide a line of credit to the Borrower. The amount of the line of credit (the "Facility 1 Commitment") is Ten Million Dollars ($10,000,000). (b) This is a revolving line of credit. During the availability period, the Borrower may repay principal amounts and reborrow them. (c) The Borrower agrees not to permit the outstanding principal balance of the line of credit to exceed the Facility 1 Commitment. 1.2 AVAILABILITY PERIOD. The line of credit is available between the date of this Agreement and October 31, 1996 (the "Facility No. 1 Expiration Date") unless the Borrower is in default. 1.3 INTEREST RATE. (a) Unless the Borrower elects an optional interest rate as described below, the interest rate is the Bank's Reference Rate. (b) The Reference Rate is the rate of interest publicly announced from time to time by the Bank in San Francisco, California, as its Reference Rate. The Reference Rate is set by the Bank based on various factors, including the Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below the Reference Rate. Any change in the Reference Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank's Reference Rate. 1.4 REPAYMENT TERMS. (a) The Borrower will pay interest on January 1, 1996, and then monthly thereafter until payment in full of any principal outstanding under this line of credit. (b) The Borrower will repay in full all principal and any unpaid interest or other charges outstanding under this line of credit no later than the Facility No. 1 Expiration Date. (c) Any amount bearing interest at an optional interest rate (as described below) may be repaid at the end of the applicable interest period, which shall be no later than the Facility No. 1 Expiration Date. 1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's Reference Rate, the Borrower may elect to have all or portions of the line of credit (during the availability period) bear interest at the rate(s) described below during an interest period agreed to by the Bank and the Borrower. Each interest rate is a rate per year. Interest will be paid on the last day of each interest period, and on the first day each month during the interest period. At the end of any interest period, the interest rate will revert to the rate based on the Reference Rate, unless the Borrower has designated another optional interest rate for the portion. - ------------------------------------------------------------------------------- BUSLA (7/93) -1- T2-0760.DOC 1.6 FIXED RATE. The Borrower may elect to have all or portions of the principal balance of the line of credit bear interest at the Fixed Rate, subject to the following requirements: (a) The "Fixed Rate" means the fixed interest rate the Bank and the Borrower agree will apply to the portion during the applicable interest period. (b) The interest period during which the Fixed Rate will be in effect will be no shorter than 30 days and no longer than 180 days. (c) Each Fixed Rate portion will be for an amount not less than Five Hundred Thousand Dollars ($500,000). (d) The Borrower may not elect a Fixed Rate with respect to any portion of the principal balance of the line of credit which is scheduled to be repaid before the last day of the applicable interest period. (e) Any portion of the principal balance of the line of credit already bearing interest at the Fixed Rate will not be converted to a different rate during its interest period. (f) Each prepayment of a Fixed Rate portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee equal to the amount (if any) by which: (i) the additional interest which would have been payable on the amount prepaid had it not been paid until the last day of the interest period, exceeds (ii) the interest which would have been recoverable by the Bank by placing the amount prepaid on deposit in the certificate of deposit market for a period starting on the date on which it was prepaid and ending on the last day of the interest period for such portion. 1.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the principal balance of the line of credit bear interest at the Offshore Rate, subject to the following requirements: (a) The "Offshore Rate" means the interest rate the Bank and the Borrower agree will apply to the portion during the applicable interest period. (b) The interest period during which the Offshore Rate will be in effect will be no shorter than 30 days and no longer than 180 days. The last day of the interest period will be determined by the Bank using the practices of the offshore dollar inter-bank market. (c) Each Offshore Rate portion will be for an amount not less than Five Hundred Thousand Dollars ($500,000). (d) The Borrower may not elect an Offshore Rate with respect to any portion of the principal balance of the line of credit which is scheduled to be repaid before the last day of the applicable interest period. (e) Any portion of the principal balance of the line of credit already bearing interest at the Offshore Rate will not be converted to a different rate during its interest period. (f) Each prepayment of an Offshore Rate portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee equal to the amount (if any) by which: (i) the additional interest which would have been payable on the amount prepaid had it not been paid until the last day of the interest period, exceeds (ii) the interest which would have been recoverable by the Bank by placing the amount prepaid on deposit in the offshore dollar market for a period starting on the date on which it was prepaid and ending on the last day of the interest period for such portion. - ------------------------------------------------------------------------------- BUSLA (7/93) -2- T2-0760.DOC (g) The Bank will have no obligation to accept an election for an Offshore Rate portion if any of the following described events has occurred and is continuing: (i) Dollar deposits in the principal amount, and for periods equal to the interest period, of an Offshore Rate portion are not available in the offshore dollar inter-bank markets; or (ii) the Offshore Rate does not accurately reflect the cost of an Offshore Rate portion. 1.8 FOREIGN EXCHANGE FACILITY. (a) During the availability period, the Bank at its discretion may enter into spot and forward foreign exchange contracts with the Borrower. The foreign exchange contract limit will be Four Million U.S. Dollars (U.S. $4,000,000), and the settlement limit will be One Million U.S. Dollars (U.S. $1,000,000). The "foreign exchange contract limit" is the maximum limit on the net difference between the total foreign exchange contracts outstanding less the total foreign exchange contracts for which the Borrower has already compensated the Bank. The "settlement limit" is the maximum limit on the gross total amount of all sale and purchase contracts on which delivery is to be effected and settlement allowed on any one banking day. (b) The Bank shall not be required to pay the Borrower or deliver any foreign currency to the Borrower under any foreign exchange contract until the Bank receives evidence satisfactory to it that the Borrower has paid the Bank the required U.S. Dollars in immediately available funds or delivered the required foreign currency to the Bank under such foreign exchange contract. The Bank shall not be liable for interest or other damages caused by any such failure to pay or deliver or any such delay in payment or delivery. (c) The Borrower will pay the Bank on demand the Bank's then standard foreign exchange contract fees for each contract. (d) Foreign exchange contracts will be in form and substance satisfactory to the Bank. (e) No foreign exchange contracts will mature later than ninety (90) days after the Facility No. 1 Expiration Date. (f) The Borrower understands the risks of, and is financially able to bear any losses resulting from, entering into foreign exchange contracts. The Bank shall not be liable for any loss suffered by the Borrower as a result of the Borrower's foreign exchange trading. The Borrower will enter into each foreign exchange contract in reliance only upon the Borrower's own judgment. The Borrower acknowledges that in entering into foreign exchange contracts with the Borrower, the Bank is not acting as a fiduciary. The Borrower understands that neither the Bank nor the Borrower has any obligation to enter into any particular foreign exchange contract with the other. (g) The Borrower hereby requests the Bank to rely upon and execute the Borrower's telephonic instructions regarding foreign exchange contracts, and the Borrower agrees that the Bank shall incur no liability for its acts or omissions which result from interruption of communications, misunderstood communications or instructions from unauthorized persons, unless caused by the wilful misconduct of the Bank or its officers or employees. The Borrower agrees to protect the Bank and hold it harmless from any and all loss, damage, claim, expense (including the reasonable fees of outside counsel and the allocated costs of staff counsel) or inconvenience, however arising, which the Bank suffers or incurs or might suffer or incur, based on or arising out of said acts or omissions. (h) The Borrower agrees to promptly review all confirmations sent to the Borrower by the Bank. The Borrower understands that these confirmations are not legal contracts but only evidence of the valid and binding oral contract which the Borrower has already entered into with the Bank. The Borrower agrees - ------------------------------------------------------------------------------- BUSLA (7/93) -3- T2-0760.DOC to promptly execute and return to the Bank confirmations which accurately reflect the terms of a foreign exchange contract, and immediately contact the Bank if the Borrower believes a confirmation is not accurate. In the event of a conflict, inconsistency or ambiguity between the provisions of this Agreement and the provisions of a confirmation, the provisions of this Agreement will prevail. (i) The Borrower agrees that the Bank may electronically record all telephonic conversations with the Borrower relating to foreign exchange contracts and that such tape recordings may be submitted in evidence to any court or in any other proceedings relating to such contracts. The Borrower agrees that in the event of a conflict, inconsistency or ambiguity between the terms of a foreign exchange contract as reflected in a tape recording and the terms stated on a confirmation, the terms reflected in the tape recording shall control. (j) Any sum owed to the Bank under a foreign exchange contract may, at the option of the Bank, be added to the principal amount outstanding under this Agreement. The amount will bear interest and be due as described elsewhere in this Agreement. The Borrower hereby authorizes the Bank to debit the Borrower's account with the Bank for payments due from the Borrower to the Bank with respect to any foreign exchange contract. (k) In addition to any other rights or remedies which the Bank may have under this Agreement or otherwise, upon the occurrence of an event of default under this Agreement, the Bank may: (i) Suspend performance of its obligations to the Borrower under any foreign exchange contract; (ii) Declare all foreign exchange contracts, interest and any other amounts which are payable by the Borrower to the Bank immediately due and payable; and (iii) Without notice to the Borrower, close out any or all foreign exchange contracts or positions of the Borrower with the Bank. The Bank shall not be under any obligation to exercise any such rights or remedies or to exercise them at a time or in a manner beneficial to the Borrower. The Borrower shall be liable for any amounts owing to the Bank after exercise of any such rights and remedies. 2. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS 2.1 OUTSTANDING TERM LOAN. There is outstanding from the Bank to the Borrower a term loan in the original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000). This term loan is currently subject to the terms and conditions of Facility No. 2 of the Business Loan Agreement dated August 20, 1993. As of the date of this Agreement, the term loan shall be deemed to be outstanding as Facility No. 2 under this Agreement, and shall be subject to all the terms and conditions stated in this Agreement. 2.2 INTEREST RATE. Unless the Borrower elects an optional interest rate as described below, the interest rate is the Bank's Reference Rate plus 0.75 percentage point. 2.3 REPAYMENT TERMS. (a) The Borrower will pay all accrued but unpaid interest on January 1, 1996, and then monthly thereafter and upon payment in full of the principal of the loan. (b) The Borrower will repay principal in 80 successive monthly installments of Twenty-Six Thousand Forty-One and 67/100 Dollars ($26,041.67) starting January 1, 1996. On August 1, 2002, the Borrower will repay the remaining principal balance plus any interest then due. (c) The Borrower may repay the loan in full or in part at any time. The prepayment will be applied to the most remote installment of principal due under Paragraph 2.3(b). _______________________________________________________________________________ BUSLA (7/93) -4- TS-0760.DOC 2.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's Reference Rate, the Borrower may elect to have all or portions of the loan bear interest at the rate(s) described below during an interest period agreed to by the Bank and the Borrower. Each interest rate is a rate per year. Interest will be paid on the last day of each interest period, and on the first day each month during the interest period. At the end of any interest period, the interest rate will revert to the rate based on the Reference Rate, unless the Borrower has designated another optional interest rate for the portion. 2.5 FIXED RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Fixed Rate, subject to the same requirements set forth in subparagraphs (a) through (f) of Paragraph 1.6 (except for purposes of this Facility No. 2, the term "loan" is substituted for the term "line of credit" in subparagraphs (d) and (e) of Paragraph 1.6). 2.6 LONG TERM RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Long Term Rate, subject to the following requirements: (a) The interest period during which the Long Term Rate will be in effect will be one year or more. (b) The "Long Term Rate" means the fixed interest rate the Bank and the Borrower agree will apply to the portion during the applicable interest period. (c) Each Long Term Rate portion will be for an amount not less than Five Hundred Thousand Dollars ($500,000). (d) Any portion of the principal balance of the loan already bearing interest at the Long Term Rate will not be converted to a different rate during its interest period. (e) The Borrower may prepay the Long Term Rate portion in whole or in part in the minimum amount of One Hundred Thousand Dollars ($100,000). The Borrower will give the Bank irrevocable written notice of the Borrower's intention to make the prepayment, specifying the date and amount of the prepayment. The notice must be received by the Bank at least 5 banking days in advance of the prepayment. All prepayments of principal on the Long Term Rate portion will be applied on the most remote principal installment or installments then unpaid (f) Each prepayment of a Long Term Rate portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by payment of all accrued interest on the amount of the prepayment and the prepayment fee described below. (g) The prepayment fee will be the sum of fees calculated separately for each Prepaid Installment, as follows: (i) The Bank will first determine the amount of interest which would have accrued each month for the Prepaid Installment had it remained outstanding until the applicable Original Payment Date, using the Long Term Rate; (ii) The Bank will then subtract from each monthly interest amount determined in (i), above, the amount of interest which would accrue for that Prepaid Installment if it were reinvested from the date of prepayment through the Original Payment Date, using the following rate: (A) If the Original Payment Date is more than 5 years after the date of prepayment: the Treasury Rate plus one-quarter of one percentage point; (B) If the Original Payment Date is 5 years or less after the date of prepayment: the Money Market Rate. (iii) If (i) minus (ii) for the Prepaid Installment is greater than zero, the Bank will discount the monthly differences to the date of prepayment by the rate used in (ii) above. The sum of the discounted monthly differences is the prepayment fee for that Prepaid Installment. - ------------------------------------------------------------------------------- BUSLA (7/93) -5- T2-0760.DOC (h) The following definitions will apply to the calculation of the prepayment fee: "Money Market" means the domestic certificate of deposit market, the eurodollar deposit market or other appropriate money market selected by the Bank. "Money Market Rate" means the fixed interest rate per annum which the Bank determines could be obtained by reinvesting a specified Prepaid Installment in the Money Market from the date of prepayment through the Original Payment Date. "Original Payment Dates" means the dates on which principal of the Long Term Rate portion would have been paid if there had been no prepayment. If a portion of the principal would have been paid later than the end of the interest period in effect at the time of prepayment, then the Original Payment Date for that portion will be the last day of the interest period. "Prepaid Installment" means the amount of the prepaid principal of the Long Term Rate portion which would have been paid on a single Original Payment Date. "Treasury Rate" means the interest rate yield for U.S. Government Treasury Securities which the Bank determines could be obtained by reinvesting a specified Prepaid Installment in such securities from the date of prepayment through the Original Payment Date. (i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the compounding, accrual basis, or other costs of the Long Term Rate portion. Each of the rates is the Bank's estimate only and the Bank is under no obligation to actually reinvest any prepayment. The rates will be based on information from either the Telerate or Reuters information services, THE WALL STREET JOURNAL, or other information sources the Bank deems appropriate. 2.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Offshore Rate, subject to the same requirements set forth in subparagraphs (a) through (g) of paragraph 1.7 (except for purposes of this Facility No. 2, the term "loan" is substituted for the term "line of credit" in subparagraphs (d) and (e) of Paragraph 1.7). 3. FACILITY NO. 3: TERM LOAN AMOUNT AND TERMS 3.1 OUTSTANDING TERM LOAN. There is outstanding from the Bank to the Borrower a term loan. As of December 4, 1995, the principal amount outstanding was Seven Hundred Eighty Thousand Dollars ($780,000). This term loan is currently subject to the terms and conditions of Facility No. 4 of the Business Loan Agreement dated August 20, 1993. As of the date of this Agreement, the term loan shall be deemed to be outstanding as Facility No. 3 under this Agreement, and shall be subject to all the terms and conditions stated in this Agreement. 3.2 INTEREST RATE. Unless the Borrower elects an optional interest rate as described below, the interest rate is the Bank's Reference Rate plus 0.75 percentage point. 3.3 REPAYMENT TERMS. (a) The Borrower will pay all accrued but unpaid interest on January 1, 1996, and then monthly thereafter until payment in full of the principal of the loan. (b) The Borrower will repay in full any principal, interest or other outstanding charges on the loan no later than September 20, 1996. (c) The Borrower may prepay the loan in full or in part at any time in an amount not less than Twenty-Five Thousand Dollars ($25,000). 3.4 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's Reference Rate, the Borrower may elect to have all or portions of the loan bear interest at the rate(s) described below during an - ------------------------------------------------------------------------------ BUSLA (7/93) -6- T2-0760.DOC interest period agreed to by the Bank and the Borrower. Each interest rate is a rate per year. Interest will be paid on the last day of each interest period, and on the first day each month during the interest period. At the end of any interest period, the interest rate will revert to the rate based on the Reference Rate, unless the Borrower has designated another optional interest rate for the portion. 3.5 FIXED RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Fixed Rate, subject to the same requirements set forth in subparagraphs (a) through (f) of Paragraph 1.6 (except for purposes of this Facility No. 3, the term "loan" is substituted for the term "line of credit" in subparagraphs (d) and (e) of Paragraph 1.6). 3.6 LONG TERM RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Long Term Rate, subject to the same requirements set forth in subparagraphs (a) through (i) of Paragraph 2.6. 3.7 OFFSHORE RATE. The Borrower may elect to have all or portions of the principal balance of the loan bear interest at the Offshore Rate, subject to the same requirements set forth in subparagraphs (a) through (g) of Paragraph 1.7 (except for purposes of this Facility No. 3, the term "loan" is substituted for the term "line of credit" in subparagraphs (d) and (e) of Paragraph 1.7). 4. FEES AND EXPENSES 4.1 LOAN FEE. The Borrower agrees to pay a Thirty-Seven Thousand Five Hundred Dollar ($37,500) fee due on or before the date of this Agreement. 4.2 EXPENSES. The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any allocated costs of the Bank's in-house counsel. 5. DISBURSEMENTS, PAYMENTS AND COSTS 5.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be made in writing in a manner acceptable to the Bank, or by another means acceptable to the Bank. 5.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each payment by the Borrower will be: (a) made at the Bank's branch (or other location) selected by the Bank from time to time; (b) made for the account of the Bank's branch selected by the Bank from time to time; (c) made in immediately available funds, or such other type of funds selected by the Bank; (d) evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes. 5.3 TELEPHONE AUTHORIZATION. (a) The Bank may honor telephone instructions for advances or repayments or for the designation of optional interest rates given by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers. (b) Advances will be deposited in and repayments will be withdrawn from the Borrower's account number 14934-03755, or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower. (c) The Borrower indemnifies and excuses the Bank (including its officers, employees, and agents) from all liability, loss, and costs in connection with any act resulting from telephone instructions it reasonably - ------------------------------------------------------------------------------- BUSLA (7/93) -7- T2-0760.DOC believes are made by any individual authorized by the Borrower to give such instructions. This indemnity and excuse will survive this Agreement. 5.4 DIRECT DEBIT. (a) The Borrower agrees that interest and principal payments and any fees will be deducted automatically on the due date from checking account number 14934-03755. (b) The Bank will debit the account on the dates the payments become due. If a due date does not fall on a banking day, the Bank will debit the account on the first banking day following the due date. (c) The Borrower will maintain sufficient funds in the account on the dates the Bank enters debits authorized by this Agreement. If there are insufficient funds in the account on the date the Bank enters any debit authorized by this Agreement, the debit will be reversed. 5.5 BANKING DAYS. Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday or a Sunday on which the Bank is open for business in California. For amounts bearing interest at an offshore rate (if any), a banking day is a day other than a Saturday or a Sunday on which the Bank is open for business in California and dealing in offshore dollars. All payments and disbursements which would be due on a day which is not a banking day will be due on the next banking day. All payments received on a day which is not a banking day will be applied to the credit on the next banking day. 5.6 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's costs or losses arising from any statute or regulation, or any request or requirement of a regulatory agency which is applicable to all national banks or a class of all national banks. The costs and losses will be allocated to the loan in a manner determined by the Bank, using any reasonable method. The costs include the following: (a) any reserve or deposit requirements; and (b) any capital requirements relating to the Bank's assets and commitments for credit. 5.7 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. 5.8 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any amount not paid when due under this Agreement (including interest) shall bear interest from the due date at the Bank's Reference Rate for Facility No. 1 and at the Bank's Reference Rate plus 0.75 percentage point for Facility No. 2 and Facility No. 3. This may result in compounding of interest. 5.9 DEFAULT RATE. Upon the occurrence and during the continuation of any default under this Agreement, advances under this Agreement will at the option of the Bank bear interest at a rate per annum which is 2.0 percentage point(s) higher than the rate of interest otherwise provided under this Agreement. This will not constitute a waiver of any default. 6. CONDITIONS The Bank must receive the following items, in form and content acceptable to the Bank, before it is required to extend any credit to the Borrower under this Agreement: 6.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the Borrower (and any guarantor) of this Agreement and any instrument or agreement required under this Agreement have been duly authorized. 6.2 GUARANTY. A guaranty signed by Tab Products of Canada, Limited ("Tab Canada") in the amount of Two Million Nine Hundred Thousand Dollars ($2,900,000). - ----------------------------------------------------------------------------- BUSLA (7/93) -8- T2-0760.DOC 6.3 OTHER ITEMS. Any other items that the Bank reasonably requires. 7. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewed representation. 7.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed and existing under the laws of the state where organized. 7.2 AUTHORIZATION. This Agreement, and any instrument or agreement required hereunder, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers. 7.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable. 7.4 GOOD STANDING. In each state in which the Borrower does business, it is property licensed, in good standing, and, where required, in compliance with fictitious name statutes. 7.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement, or obligation by which the Borrower is bound. 7.6 FINANCIAL INFORMATION. All financial and other information that has been or will be supplied to the Bank is: (a) sufficiently complete to give the Bank accurate knowledge of the Borrower's (and any guarantor's) financial condition. (b) in form and content required by the Bank. (c) in compliance with all government regulations that apply. 7.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower, which, if lost, would impair the Borrower's financial condition or ability to repay the loan, except as have been disclosed in writing to the Bank. 7.8 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged. 7.9 OTHER OBLIGATIONS. The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation. 7.10 INCOME TAX RETURNS. The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year. 7.11 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement. 7.12 ERISA PLANS. (a) The Borrower has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and has not incurred any liability with respect to any Plan under Title IV of ERISA. - ------------------------------------------------------------------------------- BUSLA (7/93) -9- T2-0760.DOC (b) No reportable event has occurred under Section 4043(b) of ERISA for which the PBGC requires 30 day notice. (c) No action by the Borrower to terminate or withdraw from any Plan has been taken and no notice of intent to terminate a Plan has been filed under Section 4041 of ERISA. (d) No proceeding has been commenced with respect to a Plan under Section 4042 of ERISA, and no event has occurred or condition exists which might constitute grounds for the commencement of such a proceeding. (e) The following terms have the meanings indicated for purposes of this Agreement: (i) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (ii) "ERISA" means the Employee Retirement Income Act of 1974, as amended from time to time. (iii) "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. (iv) "Plan" means any employee pension benefit plan maintained or contributed to by the Borrower and insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA. 7.13 LOCATION OF BORROWER. The Borrower's place of business (or, if the Borrower has more than one place of business, its chief executive office) is located at the address listed under the Borrower's signature on this Agreement. 8. COVENANTS The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full: 8.1 USE OF PROCEEDS (FACILITY NO. 1). To use the proceeds of Facility No. 1 only for working capital. 8.2 FINANCIAL INFORMATION. To provide the following financial information and statements and such additional information as requested by the Bank from time to time: (a) Within 90 days of the Borrower's fiscal year end, the Borrower's annual financial statements. These financial statements must be audited (with an unqualified opinion) by a Certified Public Accountant ("CPA") acceptable to the Bank. The statements shall be prepared on a consolidated basis and must include a supplemental consolidating schedule detailing the assets, liabilities, income and expenses of each subsidiary, domestic or foreign, of the Borrower. (b) Within 45 days of the period's end, the Borrower's quarterly financial statements. These financial statements may be Borrower prepared. The statements shall be prepared on a consolidated and consolidating basis. (c) Within the periods provided in (a) and (b) above, a compliance certificate of the Borrower signed by an authorized officer of the Borrower setting forth the information and computations (in sufficient detail) to establish that the Borrower is in compliance with all financial covenants at the end of the period covered by the financial statements then being furnished. (d) Copies of the Borrower's Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K Current Report within 15 days after the date of filing with the Securities and Exchange Commission. 8.3 QUICK RATIO. To maintain on a consolidated basis as of the end of each quarterly accounting period a ratio of quick assets to current liabilities of at least 1.20:1.0. - ------------------------------------------------------------------------------ BUSLA (7/93) -10- T2-0760.DOC "Quick assets" means cash, short-term cash investments, net trade receivables and marketable securities not classified as long-term investments. "Current liabilities" includes all debt outstanding to the Bank except the long-term portion of debt under Facility No. 2 of this Agreement. 8.4 QUICK ASSETS. To maintain on a consolidated basis as of the end of each quarterly accounting period quick assets in excess in excess of current liabilities by at least Ten Million Dollars ($10,000,000). 8.5 TANGIBLE NET WORTH. To maintain on a consolidated basis as of the end of each quarterly accounting period tangible net worth equal to at least the sum of the following: (a) Twenty-Eight Million Dollars ($28,000,000); plus (b) the sum of 50% of net income after income taxes (without subtracting losses) earned in each quarterly accounting period commencing May 31, 1993. "Tangible net worth" means the gross book value of the Borrower's assets (excluding goodwill, patents, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and expense, deferred research and development costs, deferred marketing expenses, and other like intangibles) less total liabilities, including but not limited to accrued and deferred income taxes, and any reserves against assets. 8.6 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain on a consolidated basis as of the end of each quarterly accounting period that ends within the time periods specified below a ratio of total liabilities to tangible net worth not exceeding the corresponding ratios specified below:
Period Ratio ------ ----- From the date of this Agreement through May 30, 1996 1.60:1.0 On May 31, 1996 and thereafter 1.35:1.0
"Total liabilities" means the sum of current liabilities plus long term liabilities including deferred taxes. 8.7 FIXED CHARGE COVERAGE RATIO. To maintain on a consolidated basis a fixed charge coverage ratio of at least the amounts indicated for each period specified below:
Period Ratio ------ ----- From the date of this Agreement through May 30, 1997 1.15:1.0 From May 31, 1997 through February 28, 1998 1.10:1.0 From March 1, 1998 and thereafter 1.15:1.0
"Fixed charge coverage ratio" means the ratio of cash flow to fixed charges. "Fixed charges" means the sum of (i) the principal payments on debt (including, without limitation, prepayments and regularly scheduled payments of the Senior Notes and the Senior Guaranteed Notes (both as defined below) and regularly scheduled payments (but not prepayments) of debt to the Bank), (ii) interest expense, and (iii) capital lease expense. "Cash flow" means (a) the sum of (i) net income after taxes, (ii) depreciation, (iii) amortization, (iv) interest expense, (v) capital lease expense, and (vi) net proceeds received by the Borrower resulting from its issuance of any equity securities after the date of this Agreement (including, without limitation, proceeds resulting from the exercise of their options by the holders of options to purchase the Borrower's shares), LESS (b) the sum of (i) any amounts paid by the Borrower to purchase, redeem or otherwise acquire any of its shares, (ii) capital expenditures (excluding capital expenditures for the fiscal year ending May 31, 1996) and (iii) dividends paid by the Borrower. - ------------------------------------------------------------------------------ BUSLA (7/93) -11- T2-0760.DOC "Senior Notes" means the Borrower's 8.73% senior promissory note(s) in the original principal amount of Fifteen Million Dollars ($15,000,000) due March 20, 2001, authorized by and subject to the terms and conditions of that certain Note Agreement executed as of March 20, 1992, by the Borrower in favor of The Prudential Insurance Company of America ("Prudential"), as now in effect and as hereafter amended or restated (the "Note Agreement"). "Senior Guaranteed Notes" means the Borrower's 6.90% senior promissory note(s) in the original principal amount of Five Million Dollars ($5,000,000) due September 20, 2002, authorized by and subject to the terms and conditions of the certain Note Agreement executed as of October 7, 1993, by the Borrower in favor of Prudential, as now in effect and as hereafter amended or restated (the "Guaranteed Note Agreement"). This ratio will be calculated at the end of each fiscal quarter, using the results of that quarter and each of the 3 immediately preceding quarters. 8.8 LIMITATION ON LOSSES. Not incur on a consolidated basis a net loss before taxes and extraordinary items in any two (2) consecutive quarterly accounting periods after the quarterly accounting period ending May 31, 1995. 8.9 PROFITABILITY. To maintain on a consolidated basis a positive net income before taxes and extraordinary items and a positive net income after taxes and extraordinary items (i) as of the end of each quarterly accounting period on a fiscal year-to-date basis and (ii) for each annual accounting period. 8.10 OTHER DEBTS. Not to have outstanding or incur any direct or contingent debts (other than those to the Bank), or become liable for the debts of others without the Bank's written consent. This does not prohibit: (a) Acquiring goods, supplies, or merchandise on normal trade credit. (b) Endorsing negotiable instruments received in the usual course of business. (c) Obtaining surety bonds in the usual course of business. (d) Debts in existence on the date of this Agreement disclosed in writing to the Bank in the Borrower's financial statement dated May 31, 1995. (e) Additional debts for business purposes which do not exceed a total principal amount of Five Hundred Thousand Dollars ($500,000) outstanding at any one time. (f) Contingent debts of the Borrower under its guaranty in the amount of Two Hundred Thousand U.S. Dollars (U.S. $200,000) in favor of the Australian and New Zealand Banking Company guarantying debt of Tab Products Pty. Ltd. 8.11 OTHER LIENS. Not to create, assume, or allow any security interest or lien (including judicial liens) on property the Borrower now or later owns, except: (a) Deeds of trust and security agreements in favor of the Bank. (b) Liens for taxes not yet due. (c) Liens outstanding on the date of this Agreement disclosed in writing to the Bank. (d) Additional purchase money security interests in personal property acquired after the date of this Agreement if the total principal amount of debts secured by such liens does not exceed Five Hundred Thousand Dollars ($500,000) at any one time. 8.12 CAPITAL EXPENDITURES. Not to spend (including the total amount of any capital leases) more than Three Million Dollars ($3,000,000) in any single fiscal year to acquire fixed or capital assets. - ------------------------------------------------------------------------------ BUSLA (7/93) -12- T2-0760.DOC 8.13 RESTRICTED PAYMENTS LIMITATION. Not to directly or indirectly make, declare, pay or set apart any sum of money or other property for any restricted payments unless after giving effect thereto (a) no default exists under this Agreement and (b) the aggregate amount of restricted payments made after May 31, 1993, does not exceed the sum of (i) Two Million Dollars ($2,000,000) plus (ii) on a cumulative basis, the product of (A) consolidated net income after taxes for each fiscal quarter commencing with the fiscal quarter beginning June 1, 1993, and terminating at the end of the last fiscal quarter preceding the date of any proposed restricted payment multiplied by (B) the applicable rate. "Restricted payments" means (a) any dividend payments or other distributions of cash, assets, properties, or other property rights, obligations or securities on account of any shares of any class of capital stock of the Borrower (other than stock dividends) and (b) any repurchases, redemptions, retirement or other acquisitions of the Borrower's capital stock or the establishment of any sinking fund or other fund for any such purpose. "Applicable rate" means (a) for any fiscal period between June 1, 1993 and May 31, 1995, inclusive, 40% and (b) for any fiscal period after May 31, 1995, 50%. For purposes of this covenant, "consolidated net income after taxes" does not include (a) gains and losses on any sale, lease, exchange or other transfer or disposal of capital assets, (b) extraordinary items, (c) income from changes in accounting principles, (d) undistributed share of earnings from non-subsidiary investments, (e) gains or losses from the acquisition of securities or the retirement of debt, and (f) any gains from write-up of assets. 8.14 LOANS TO SUBSIDIARIES. Not to make any loans or advances to any of the Borrower's subsidiaries. 8.15 OUT OF DEBT PERIOD. To repay any advances in full, and not to draw any additional advances on its revolving line of credit, for a period of at least 30 consecutive days in each line-year. "Line-year" means the period between October 31, 1995, and October 31, 1996, and each subsequent one-year period (if any). 8.16 NOTICES TO BANK. To promptly notify the Bank in writing of: (a) any lawsuit over One Million Dollars ($1,000,000) against the Borrower (or any guarantor). (b) any substantial dispute between the Borrower (or any guarantor) and any government authority. (c) any failure to comply with this Agreement. (d) any material adverse change in the Borrower's (or any guarantor's) financial condition or operations. (e) any change in the Borrower's name, legal structure, place of business, or chief executive office if the Borrrower has more than one place of business. 8.17 BOOKS AND RECORDS. To maintain adequate books and records. 8.18 AUDITS. To allow the Bank and its agents to inspect the Borrower's properties and examine, audit and make copies of books and records at any reasonable time. If any of the Borrower's properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, books and records. 8.19 COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious name statute), regulations, and orders of any government body with authority over the Borrower's business. 8.20 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges, and franchises the Borrower now has. 8.21 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements to keep the Borrower's properties in good working condition. - ------------------------------------------------------------------------------- BUSLA (7/93) -13- T2-0760.DOC 8.22 COOPERATION. To take any action requested by the Bank to carry out the intent of this Agreement. 8.23 INSURANCE. To maintain insurance as is usual for the business it is in. 8.24 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent: (a) engage in any business activities substantially different from the Borrower's present business. (b) liquidate or dissolve the Borrower's business. (c) enter into any consolidation, merger, pool, joint venture, syndicate, or other combination. (d) lease, or dispose of all or a substantial part of the Borrower's business or the Borrower's assets. (e) acquire or purchase a business or its assets. (f) sell or otherwise dispose of any assets for less than fair market value, or enter into any sale and leaseback agreement covering any of its fixed or capital assets. (g) voluntarily suspend its business for more than 5 days in any 30 day period. 8.25 ERISA PLANS. To give prompt written notice to the Bank of: (a) The occurrence of any reportable event under Section 4043(b) of ERISA for which the PBGC requires 30 day notice. (b) Any action by the Borrower to terminate or withdraw from a Plan or the filing of any notice of intent to terminate under Section 4041 of ERISA. (c) Any notice of noncompliance made with respect to a Plan under Section 4041(b) of ERISA. (d) The commencement of any proceeding with respect to a Plan under Section 4042 of ERISA. 9. HAZARDOUS WASTE INDEMNIFICATION The Borrower will indemnify and hold harmless the Bank from any loss or liability directly or indirectly arising out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's property or operations or property leased to the Borrower. The indemnity includes but is not limited to attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. For these purposes, the term "hazardous substances" means any substance which is or becomes designated as "hazardous" or "toxic" under any federal, state or local law. This indemnity will survive repayment of the Borrower's obligations to the Bank. 10. DEFAULT If any of the following events occur, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. With respect to Paragraphs 10.1, 10.4, 10.5, 10.6, 10.9 and 10.11, the Bank agrees that it will not have the right to exercise its rights under the immediately preceding sentence unless the Borrower has failed to cure such event of default in a manner acceptable to the Bank within 5 days of its occurrence (for Paragraphs 10.1, 10.4 and 10.5) or within 5 banking days of the Borrower's receipt of notice of such event of default (for Paragraphs 10.6, 10.9 and 10.11). If an event of default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately. - ------------------------------------------------------------------------------ BUSLA (7/93) -14- T2-0760.DOC 10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement when due. 10.2 FALSE INFORMATION. The Borrower has given the Bank false or misleading information or representations. 10.3 BANKRUPTCY. The Borrower (or any guarantor) files bankruptcy petition, a bankruptcy petition is filed against the Borrower (or any guarantor), or the Borrower (or any guarantor) makes a general assignment for the benefit of creditors. The default will be deemed cured if any bankruptcy petition filed against the Borrower (or any guarantor) is dismissed within a period of 30 days after the filing; provided, however, that the Bank will not be obligated to extend any additional credit to the Borrower during that period. 10.4 RECEIVERS. A receiver or similar official is appointed for the Borrower's (or any guarantor's) business, or the business is terminated. 10.5 JUDGMENTS. Any judgments or arbitration awards are entered against the Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance coverage. 10.6 GOVERNMENT ACTION. Any government authority takes action that the Bank believes materially adversely affects the Borrower's (or any guarantor's) financial condition or ability to repay. 10.7 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the Borrower's (or any guarantor's) financial condition, properties or prospects, or ability to repay the loan, including, without limitation, any material adverse change evidenced by the comparison of the Borrower's CPA-audited annual financial statements dated as of May 31, 1995 to the Borrower's draft financial statements for such period as previously submitted to the Bank. 10.8 CROSS-DEFAULT. Any default occurs and has not been cured or waived in a manner acceptable to the Bank under any agreement in connection with any credit the Borrower (or any guarantor) has obtained from anyone else or which the Borrower (or any guarantor) has guaranteed. 10.9 OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet the conditions of, or fails to perform any obligation under any other agreement the Borrower (or any guarantor) has with the Bank or any affiliate of the Bank. 10.10 ERISA PLANS. The occurrence of any one or more of the following events with respect to the Borrower, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject the Borrower to any tax, penalty or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of the Borrower with respect to a Plan: (a) A reportable event shall occur with respect to a Plan which is, in the reasonable judgement of the Bank likely to result in the termination of such Plan for purposes of Title IV of ERISA. (b) Any Plan termination (or commencement of proceedings to terminate a Plan) or the Borrower's full or partial withdrawal from a Plan. 10.11 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article. 10.12 PREPAYMENT OF DEBT TO PRUDENTIAL. The Borrower fails, upon making any partial or full prepayment (whether mandatory, voluntary, by acceleration or otherwise) of the Senior Notes or the Senior Guaranteed Notes, to simultaneously prepay, in the order and manner required by the Bank, its loan under Facility No. 2 in an amount at least equal to 27% of the amount of the prepayment(s) to Prudential. 10.13 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination agreement, security agreement, deed of trust, or other document required by this Agreement is violated or no longer in effect. - ------------------------------------------------------------------------------- BUSLA (7/93) -15- T2-0760.DOC 10.14 DEBTS OF SUBSIDIARIES. Any subsidiary of the Borrower has outstanding or incurs any direct or contingent debts (others than those to the Bank), or becomes liable for the debts of other without the Bank's written consent. This does not prohibit: (a) Acquiring goods, supplies, or merchandise on normal trade credit. (b) Endorsing negotiable instruments received in the usual course of business. (c) Obtaining surety bonds in the usual course of business. (d) Debts and lines of credit in existence on the date of this Agreement disclosed in writing to the Bank in the Borrower's consolidated financial statement dated May 31, 1995. (e) Contingent debts of Tab Canada under a guaranty in the maximum amount of Five Million Dollars ($5,000,000) in favor of Prudential. (f) Debts of Tab Products Pty. Ltd. owed to the Australian and New Zealand Banking Company in the maximum amount of Two Hundred Thousand U.S. Dollars (U.S. $200,000). 10.15 PRUDENTIAL DOCUMENTS. The Borrower fails to promptly provide the Bank with copies of any extensions, amendments, revisions, renewals, or restatements of the Senior Notes, Senior Guaranteed Notes, Note Agreement or Guaranteed Note Agreement. 10.16 FINANCIAL COVENANTS. Any financial covenant under any loan or other agreement executed by the Borrower evidencing indebtedness permitted in Paragraph 8.10 is more restrictive than any financial covenant under this Agreement. 11. ENFORCING THIS AGREEMENT; MISCELLANEOUS 11.1 GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied. 11.2 CALIFORNIA LAW. This Agreement is governed by California law. 11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or assign this loan, and may exchange financial information about the Borrower with actual or potential participants or assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower. 11.4 ARBITRATION. (a) This paragraph concerns the resolution of any controversies or claims between the Borrower and the Bank, including but not limited to those that arise from: (i) This Agreement (including any renewals, extensions or modifications of this Agreement); (ii) Any document, agreement or procedure related to or delivered in connection with this Agreement; (iii) Any violation of this Agreement; or (iv) Any claims for damages resulting from any business conducted between the Borrower and the Bank, including claims for injury to persons, property or business interests (torts). - ------------------------------------------------------------------------------ BULSA (7/93) -16- T2-0760.DOC (b) At the request of the Borrower or the Bank, any such controversies or claims will be settled by arbitration in accordance with the United States Arbitration Act. The United States Arbitration Act will apply even though this Agreement provides that it is governed by California law. (c) Arbitration proceedings will be administered by the American Arbitration Association and will be subject to its commercial rules of arbitration. (d) For purposes of the application of the statute of limitations, the filing of an arbitration pursuant to this paragraph is the equivalent of the filing of a lawsuit, and any claim or controversy which may be arbitrated under this paragraph is subject to any applicable statute of limitations. The arbitrators will have the authority to decide whether any such claim or controversy is barred by the statute of limitations and, if so, to dismiss the arbitration on that basis. (e) If there is a dispute as to whether an issue is arbitrable, the arbitrators will have the authority to resolve any such dispute. (f) The decision that results from an arbitration proceeding may be submitted to any authorized court of law to be confirmed and enforced. (g) The procedure described above will not apply if the controversy or claim, at the time of the proposed submission to arbitration, arises from or relates to an obligation to the Bank secured by real property located in California. In this case, both the Borrower and the Bank must consent to submission of the claim or controversy to arbitration. If both parties do not consent to arbitration, the controversy or claim will be settled as follows: (i) The Borrower and the Bank will designate a referee (or a panel of referees) selected under the auspices of the American Arbitration Association in the same manner as arbitrators are selected in Association-sponsored proceedings; (ii) The designated referee (or the panel of referees) will be appointed by a court as provided in California Code of Civil Procedure Section 638 and the following related sections; (iii) The referee (or the presiding referee of the panel) will be an active attorney or a retired judge; and (iv) The award that results from the decision of the referee (or the panel) will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of California Code of Civil Procedure Sections 644 and 645. (h) This provision does not limit the right of the Borrower or the Bank to: (i) exercise self-help remedies such as setoff; (ii) foreclose against or sell any real or personal property collateral; or (iii) act in a court of law, before, during or after the arbitration proceeding to obtain: (A) an interim remedy; and/or (B) additional or supplementary remedies. (i) The pursuit of or a successful action for interim, additional or supplementary remedies, or the filing of a court action, does not constitute a waiver of the right of the Borrower or the Bank, including the suing party, to submit the controversy or claim to arbitration if the other party contests the lawsuit. However, if the controversy or claim arises from or relates to an obligation to the Bank which is secured by real property located in California at the time of the proposed submission to arbitration, this right is limited according to the provision above requiring the consent of both the Borrower and the Bank to seek resolution through arbitration. - ------------------------------------------------------------------------------- BUSLA (7/93) -17- T2-0760.DOC (j) If the Bank forecloses against any real property securing this Agreement, the Bank has the option to exercise the power of sale under the deed of trust or mortgage, or to proceed by judicial foreclosure. 11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing. 11.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable costs incurred by the Bank in connection with administering this Agreement. 11.7 ATTORNEY'S FEES. The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of any rights or remedies under this Agreement any any other documents executed in connection with this Agreement, and including any amendment, waiver, "workout" or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. As used in this paragraph, "attorneys' fees" includes the allocated costs of in-house counsel. 11.8 ONE AGREEMENT. This Agreement and any related security or other agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit; and (b) replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and (c) are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them. In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. 11.9 NOTICES. All notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, to the addresses on the signature page of this Agreement, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. 11.10 HEADINGS. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement. 11.11 COUNTERPARTS. This Agreement may be executed in as many counterparts as neccessary or convenient, any by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. 11.12 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Business Loan Agreement entered into as of August 20, 1993, between the Bank and the Borrower, and any credit outstanding thereunder shall be deemed to be outstanding under this Agreement. - ------------------------------------------------------------------------------ BUSLA (7/93) -18- T2-0760.DOC This Agreement is executed as of the date stated at the top of the first page. Bank of America National Trust and Savings Association Tab Products Co. X /s/ C.P. Giannotti X /s/ John Palmer ----------------------------------- --------------------------------- By: Chris P. Giannotti By: Title: Vice President Title: V.P. Finance & CFO X /s/ Robert Sexton --------------------------------- By: Title: Treasurer & Secretary ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER ARE TO BE SENT: ARE TO BE SENT: Palo Alto Commercial Banking Office #1493 P.O. Box 180 1400 Page Mill Road Palo Alto, CA 94301 Palo Alto, CA 94304 - ------------------------------------------------------------------------------ BUSLA (7/93) -19- T2-0760.DOC EX-10.35 3 EXHIBIT 10.35 [Logo] RAYMOND G. KENNEDY, CFA VICE PRESIDENT PRUDENTIAL CAPITAL GROUP 777 South Figueroa Street, Suite 2950 Los Angeles, CA 90017 213 486-5376 Fax: 213 623-9764 December 13, 1995 Tab Products Co. Tab Canada Limited 1400 Page Mill Road Palo Alto, California 94304 Ladies and Gentlemen: Reference is made to the Note Agreement between Tab Products Co. (the "Company") and The Prudential Insurance Company of America ("Prudential") dated as of (i) March 20, 1992 (the "1992 Agreement"), pursuant to which the Company issued and sold and Prudential purchased the Company's 8.73% Senior Notes due March 20, 2001 in the principal amount of $15,000,000 and (ii) October 7, 1993 (the "1993 Agreement"), pursuant to which the Company issued and sold and Prudential purchased the Company's 6.90% Senior Guaranteed Notes due September 20, 2002. The 1992 Agreement and the 1993 Agreement are together are together referred to as the "Agreements," and each is an "Agreement." Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the applicable Agreement. Pursuant to the request of the Company and the provisions of paragraph 11C of each Agreement, Prudential and the Company agree with respect to each Agreement as follows: 1. Paragraph 6L of each Agreement is hereby amended and restated in its entirety to read as follows: "6.L. FIXED CHARGE COVERAGE. Permit its Fixed Charge Coverage Ratio calculated at the end of each fiscal quarter commencing with the fiscal quarter ending May 30, 1994, on the basis of the consolidated results of operations of the Company and its Subsidiaries, to be less than (A) 1.15 from May 30, 1994 through and including May 30, 1997; (B) 1.00 from May 31, 1997 through February 28, 1998, inclusive; and (C) 1.15 at all times from and after March 1, 1998." Tab Products Co. Tab Canada Limited December 13, 1995 Page -2- 2. Notwithstanding anything to the contrary contained in the Agreements, for purposes of calculating the Fixed Charge Coverage Ratio, for the periods ending November 30, 1995, through May 31, 1996, capital expenditures of the Company or any Subsidiary shall not be subtracted from Consolidated Net Earnings. If you agree with the foregoing, please sign below and return a copy of this letter to the undersigned. Upon such execution, this letter shall become a binding agreement between the Company and Prudential amending the 1992 Agreement and the 1993 Agreement in the manner and to the extent herein provided. Execpt as otherwise set forth herein, the 1992 Agreement and the 1993 Agreement shall each continue unmodified and in full force and effect. Very truly yours, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Raymond G. Kennedy ------------------------- Vice President ACCEPTED AND AGREED TAB PRODUCTS CO. By: /s/ Robert J. Sexton --------------------------- Name: Robert J. Sexton Title: Treasurer & Secretary Tab Products Co. Tab Canada Limited December 13, 1995 Page -3- The undersigned, as a guarantor of the 6.90% Notes pursuant to its Guaranty thereof dated October 7, 1993, expressly agrees with and consents to the amendments set forth in this letter and confirms that its Guaranty remains in full force and effect as originally executed and is expressly reaffirmed hereby. TAB CANADA LIMITED By /s/ J.W. Peth -------------------- Its Secretary -------------------- EX-27 4 FDS EXH 27
5 1,000 6-MOS MAY-31-1996 JUN-01-1995 NOV-30-1995 5522 2540 28320 695 15563 53671 55999 34613 83820 23956 17297 0 0 40245 485 83820 71825 76276 42287 46315 26643 87 807 2511 1092 1419 0 0 0 1419 .29 .29 Tag #14 Inventory detail at November 30,1995 was finished goods $9916; work in process $649; raw materials $4998
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