SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d )

                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2000     Commission file number  1-8689
                          ------------------                            -------

                           DIXON TICONDEROGA COMPANY
--------------------------------------------------------------------------------
             (Exact name of  Company as specified in its charter)
Form 10-K

 X    Annual Report Pursuant to Section 13 or 15 (d) of the Securities  Exchange
---   Act of 1934 (Fee Required) for the fiscal year ended September 30, 2000 .

---   Transition  Report  Pursuant  to  Section  13 or 15 (d) of the  Securities
      Exchange Act of 1934 (No Fee  Required)  for the  transaction  period from
      _____ to _____ .

                  Delaware                                 23-0973760
---------------------------------------------  ---------------------------------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                Identification Number)

  195 International Parkway, Heathrow, FL                     32746
---------------------------------------------  ---------------------------------
  (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code    (407) 829-9000
                                                      --------------

         Title of each class           Name of each exchange on which registered

    Common Stock, $1.00 par value              American Stock Exchange
    -----------------------------              -----------------------

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 company was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [ X ] No [ ]

Based on the closing sales price on December 6, 2000, the aggregate market value
of the voting stock held by non-affiliates of the Company was $7,437,634.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of December 3, 2000:  3,168,047  shares of common stock,  $1.00
Par Value.

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 Form 10-K or any amendment to this Form
10-K. [ ]

Documents Incorporated by Reference:

Proxy statement to security  holders  incorporated  into Part III for the fiscal
year ended September 30, 2000.


<PAGE>


                                     PART I

ITEM 1.   BUSINESS
          --------

                          RECENT EVENTS AND STRATEGIES
                          ----------------------------

      In fiscal 2000,  Dixon  Ticonderoga  Company  (hereinafter  the "Company")
continued its aggressive restructuring and cost reduction efforts begun in 1999.
The Company completed the consolidation of its Deer Lake,  Pennsylvania Consumer
plant into other  facilities  in Mexico and the U.S.  and carried out  personnel
reduction activities as planned in the first phase of its Restructuring and Cost
Reduction  Program,  designed to improve  overall  financial  performance in the
future.  In the fourth  quarter of fiscal 2000,  the Company  embarked  upon the
second phase of its cost reduction program, which includes further consolidation
of certain U.S.  manufacturing  processes into Mexico,  the consolidation of its
Mexico  operations  into a new  300,000  square  foot  facility  and  additional
personnel   reductions  in   manufacturing,   sales,   marketing  and  corporate
activities.  In connection with the program's second phase, the Company recorded
approximately  $1.6 million in  restructuring  and related costs.  Overall,  the
Company  reported a net loss of $(0.8)  million (and net income of $0.3 million,
exclusive of the effects of restructuring and related costs) in fiscal 2000.
      The Company also initiated a strict U.S. working capital  reduction / cash
flow  enhancement  program  in fiscal  2000.  The  program  emphasized  enhanced
inventory  control and  reduction,  improved  accounts  payable  management  and
continued accounts receivable improvement. The Company implemented new inventory
management systems and processes and successfully reduced its U.S.  inventories;
improved the days outstanding of its accounts payable;  and continued its strong
accounts  receivable  collection   practices.   However,  the  strict  inventory
reduction efforts resulted in significant plant manufacturing  inefficiencies as
production  levels were cut back,  contributing to poor operating results in the
U.S.  Consumer  division.  Despite the lower  level of  operating  profits,  the
aforementioned  programs resulted in an increase in cash flow from operations of
approximately $13 million when compared with fiscal 1999.
      In addition,  in 2000, the Company  created a  wholly-owned  subsidiary in
China.  Beijing Dixon Ticonderoga  Stationery  Company,  Ltd., is engaged in the
manufacture  of  wood  slats  for  pencil  manufacturing  and the  sourcing  and
distribution of certain consumer products for international sale by the Company.
      In 2000, the Company also  successfully  completed the  disposition of its
graphite and  lubricants  business  with the wind-up of the  operations of Dixon
Industrial  Mexico,  S.A. de C.V.  The Company sold the majority of its graphite
and lubricants business for $23.5 million in March 1999.
      The Company also  successfully  negotiated  amendments to its subordinated
and senior debt  agreements to cure covenant  defaults that occurred  earlier in
fiscal 2000 and to avoid a complete refinancing of its debt.
      Further information  regarding these matters is included elsewhere in this
Annual Report on Form 10-K.


<PAGE>

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                 COMPANY ORGANIZATION
                                 --------------------
                              Dixon Ticonderoga Company
                                       (Parent)
                                          |
                                          |
                                          |
       _________________________________________________________________________
       |               |                  |                  |                 |
       |               |                  |                  |                 |
       |               |                  |                  |                 |
     Dixon           Dixon        Dixon Industrial      Beijing Dixon     Ticonderoga
 Ticonderoga,    Europe, Ltd.   Mexico, S.A. de C.V.     Ticonderoga       Graphite,
  Inc. Canada    (Wholly-Owned)    (Wholly-Owned)        Stationery      Inc./Inactive
(Wholly-Owned)                                          Company, Ltd.    (Wholly-Owned)
       |                                               (Wholly-Owned)
       |
       |
  Grupo Dixon
 S.A. de C.V.
      and
 subsidiaries
  (97% Owned)

</TABLE>


                                INDUSTRY SEGMENTS
                                -----------------

     The Company has two principal  continuing  business segments:  its Consumer
Group and Industrial Group. These segments,  and the primary operations of each,
are as follows:
<TABLE>
<CAPTION>

      BUSINESS SEGMENTS                           OPERATIONS
      -----------------                           ----------
<S> <C>              <C>     <C>                                             <C>

       Consumer               Group  Manufacture and sale of writing and drawing
                              pencils, pens, artist materials, felt tip markers,
                              industrial  markers,  lumber  crayons,  correction
                              materials and allied products.

       Industrial             Group   Manufacture   and  sale  to   industry  of
                              amorphous  graphite,  clay  and  graphite  stopper
                              heads,    firebrick,     silicon-carbide    brick,
                              non-graphitic   refractory   kiln   furniture  and
                              furnace linings.
</TABLE>

      Financial  information  regarding  net  revenues,  operating  profits  and
identifiable  assets  related to the Company's  industry  segments for the years
ended September 30, 2000, 1999 and 1998, is contained in Note 13 to Consolidated
Financial Statements.
      The  Company's  international  operations  are  subject to  certain  risks
inherent  in  carrying  on  business  abroad,  including  the  risk of  currency
fluctuations,   currency  remittance   restrictions  and  unfavorable  political
conditions.  It is the  Company's  opinion that there are  presently no material
political  risks  involved  in doing  business in the  foreign  countries  (i.e.
Mexico, Canada and Europe) in which its operations are being conducted.


<PAGE>


CONSUMER GROUP
--------------

      The Company  manufactures its leading brand Ticonderoga(R) and a full line
of pencils  in  Versailles,  Missouri.  The  Company  manufactures  and  markets
advertising specialty pencils, pens and markers through its promotional products
division. The Company also manufactures and markets Wearever(R) and Dixon(R) pen
writing  products  as well as  Prang(R)  and  Ticonderoga(R)  lines of  markers,
mechanical pencils and allied products.
      In Sandusky,  Ohio, the Company  manufactures (mainly for wholesale school
suppliers and  retailers)  its Prang(R) brand of soy-bean based and wax crayons,
chalks,  dry and liquid tempera,  water colors and art materials.  This division
also manufactures  special markers for industrial use, all of which are marketed
and sold  together  with the  products  discussed  above,  by the U.S.  Consumer
division.
      Under an agreement with Warner Bros.  Consumer Products,  the Company also
manufactures and markets in the U.S., Canada, and Mexico a complete product line
of pencils, pens, crayons,  chalks, markers,  paints, art kits and related items
featuring the famous Looney Tunes(R) and Scooby Doo(R) characters.  (See Note 14
to Consolidated Financial Statements.)
      Dixon  Ticonderoga  Inc., a  wholly-owned  subsidiary  with a distribution
center in Newmarket,  Ontario,  and a manufacturing plant in Acton Vale, Quebec,
Canada,  is engaged in the sale in Canada of black and color writing and drawing
pencils, pens, lumber crayons,  correction materials,  erasers, rubber bands and
allied products.  It also  distributes  certain of the school product lines. The
Acton Vale plant also  produces  eraser  products and  correction  materials for
distribution by the U.S. Consumer group.
      Grupo Dixon, S.A. de C.V., a majority-owned  subsidiary (97%), is engaged,
through its  subsidiaries,  in the  manufacture  and sale in Mexico of black and
color writing and drawing  pencils,  correction  materials,  lumber  crayons and
allied products.  Grupo Dixon also  manufactures and sells in Mexico,  under its
Vinci(R)  brand,  certain  products  of the type  manufactured  at the  Sandusky
facility, as well as marker products and modeling clay.
      Dixon  Europe,  Limited,  a  wholly-owned  subsidiary  of the Company,  is
engaged  in the  distribution  of many  Dixon  consumer  products  in the United
Kingdom and other European countries.
      Beijing  Dixon  Ticonderoga   Stationery Company,   Ltd.,  a  wholly-owned
subsidiary  of the  Company,  is  engaged in the  manufacture  of wood slats for
pencil  manufacturing  and the sourcing  and  distribution  of certain  consumer
products for international sale by the Company.





INDUSTRIAL GROUP
----------------

      The New  Castle  Refractories  division,  with  plants  located  in  Ohio,
Pennsylvania  and West  Virginia,  manufactures  various types of  non-graphitic
refractory kiln furniture used by the ceramic and glass  industries;  firebrick,
silicon-carbide  brick,  various types and designs of  non-graphitic  refractory
special shapes for ferrous and nonferrous metal  industries;  refractory  shapes
for furnace  linings and  industrial  furnace  construction;  various  grades of
insulating firebrick and graphite stopper heads.
      Prior to the sale of the  Company's  Graphite and  Lubricants  division in
March 1999, the Industrial  Group  manufactured  and sold processed  natural and
synthetic bulk graphite,  graphite oil,  solvent and water-based  lubricants and
colloidal graphitic suspensions.


<PAGE>


                                  DISTRIBUTION
                                  ------------

      Consumer  products  manufactured  in the  Company's  U.S.  facilities  are
distributed  nationally  through  wholesale,  commercial and retail  stationers,
school supply  houses,  industrial  supply  houses,  blueprint and  reproduction
supply firms, art material  distributors and retailers.  In an effort to enhance
service levels  (especially with large retail  customers),  the Company leased a
central   distribution   center  in  Macon,   Georgia.   The  consumer  products
manufactured  at the Canadian and Mexican plants are  distributed  nationally in
these  countries  through  wholesalers,  distributors,  school supply houses and
retailers.  The Mexico subsidiary has recently moved its distribution operations
to a new facility in Mexico City.
      The industrial products  manufactured at various plants are sold by direct
sales,  manufacturers'  representatives  and  industrial  distributors  in North
America.

                                  RAW MATERIALS
                                  -------------

      Wood slats for pencil  manufacturing  can be  considered  a strategic  raw
material for the Company's  business and are purchased from various suppliers in
the U.S.,  Indonesia  and China  (including  the  Company's  wholly-owned  China
subsidiary).  Graphite, used in the manufacture of refractory products and leads
for  wood-cased  pencils,  is purchased  principally  in the U.S.  There were no
significant raw material  shortages of any  consequence  during 2000 nor are any
expected in the near future.

                       TRADEMARKS, PATENTS AND COPYRIGHTS
                       ----------------------------------

      The Company owns a large number of  trademarks,  patents and copyrights in
each industry segment related to products manufactured and marketed by it, which
have been secured over many years. These have been of value in the growth of the
business  and should  continue  to be of value in the  future.  However,  in the
opinion  of the  Company,  its  business  generally  is not  dependent  upon the
protection of any patent or patent application or the expiration of any patent.

                        SEASONAL ASPECTS OF THE BUSINESS
                        --------------------------------

      The Consumer Group reflects greater portions  (approximately  58% in 2000)
of its  sales  in the  third  and  fourth  fiscal  quarters  of the  year due to
shipments of school orders to its distribution network. This practice,  which is
standard for this industry,  usually causes the Company to incur additional bank
borrowings during the period between shipment and payment.
      The Industrial Group has no material seasonal aspects.

                                   COMPETITION
                                   -----------

      Both  of  the  Company's   industry  segments  are  engaged  in  a  highly
competitive  business with a number of competitors,  some of whom are larger and
have greater  resources  than the Company.  Important  to the  Company's  market
position are the quality and  performance  of its  products,  its  marketing and
distribution  systems, and the reputation developed over the many years that the
Company has been in business.

                            RESEARCH AND DEVELOPMENT
                            ------------------------

      The Company employs approximately 16 full-time  professional  employees in
the area of quality control and product development. The Company has established
a  centralized  research  and  development  laboratory  in  its  Sandusky,  Ohio
facility. For accounting purposes, research and development expenses in any year
presented in the accompanying  Consolidated  Financial Statements represent less
than 1% of revenues.



<PAGE>
                                    EMPLOYEES
                                    ---------

      The total  number of persons  employed by the  Company  was  approximately
1,412 of which 535 were employed in the United States.


ITEM 2.  PROPERTIES
         ----------

      The properties of the Company,  set forth in the following table are owned
and are  collateralized  or pledged under the Company's  loan  agreement  with a
consortium  of lenders  (First  Union  Capital  Corporation  as agent),  and its
Heathrow,  Florida,  property, is subject to a separate mortgage agreement.  See
Note 4 to Consolidated Financial Statements.  Most of the buildings are of steel
frame and masonry or concrete construction.

                                                                   SQUARE FEET
                             LOCATION                            OF FLOOR SPACE
                             --------                            ---------------

  Heathrow, Florida (Corporate Headquarters)                         33,000
  Sandusky, Ohio (Consumer)                                         276,000
  Versailles, Missouri (Consumer)                                   120,000
  Deer Lake, Pennsylvania (Consumer)                                150,000
  New Castle, Pennsylvania (Refractories division)                  131,000
  Newell, West Virginia (Refractories division)                      45,000
  Massillon, Ohio (Refractories division)                           113,000
  Zoar, Ohio (Refractories division)                                 65,000
  Acton Vale, Quebec, Canada (Dixon Ticonderoga Inc.) (Consumer)     32,000
  Tlalnepantla, D.F., Mexico (Grupo  Dixon, S.A. de C.V.)(Consumer)  55,000
  Mexico City, D.F., Mexico (Grupo Dixon, S.A. de C.V.)(Consumer)    64,000
  Beijing, China (Beijing Dixon Ticonderoga Stationery Company,
   Ltd.) (Consumer)                                                  25,000


      The Company leases approximately 100,000 square feet in Macon, Georgia for
its U.S. Consumer central  distribution  center. The Company's Mexico subsidiary
recently entered into a lease of a 300,000  square-foot  facility in Mexico City
to be used for distribution and certain manufacturing operations, as well as its
corporate headquarters.


<PAGE>


ITEM 3.  LEGAL   PROCEEDINGS
         -------------------

      In March 1986, The Dixon Venture  ("Venture") (an unrelated company) filed
a civil action in the New Jersey Superior Court seeking  recovery of damages and
costs  allegedly  incurred  by  Venture  in  connection  with  the  clean-up  of
industrial  property  acquired  from the Company in Jersey  City,  New Jersey in
February,  1984.  Venture's  claims  were  brought  pursuant  to the New  Jersey
Environmental  Clean-up  Responsibility Act ("ECRA"), an environmental  remedial
statute dealing with the transfer of industrial property.
      On April 24, 1996,  a decision  was rendered by the Superior  Court of New
Jersey in Hudson  County  finding the Company  responsible  for $1.94 million in
certain  environmental  clean-up costs relating to this matter. In January 1998,
the  Company  paid $3.6  million to satisfy  this claim in full,  including  all
accrued interest.  The Company continued to pursue other responsible parties for
indemnification  and/or contribution to the payment of this claim (including its
insurance  carriers) and in fiscal 2000 the Company reached settlements with its
various insurers for reimbursement of legal costs in the amount of $653,000.  In
1999, a pending  malpractice suit against its former attorneys was dismissed and
the  Company  has  appealed  the  decision.  Also  see  Note 14 to  Consolidated
Financial Statements.
      Additionally,  in May  2000 a news  article  alleged  that the talc in all
domestic brands of crayons, including the Company's,  contained trace amounts of
a fiber  resembling  asbestos.  In response to these  allegations,  all domestic
crayon  manufacturers,  including the Company,  the talc supplier and the United
States  Consumer  Product  Safety   Commission  (CPSC)  engaged  in  independent
laboratory  testing for asbestos fibers in crayons.  All test results  reflected
the unequivocal absence of asbestos in domestically made crayons,  including the
test  results  from the  Government's  own OSHA  laboratory.  In any event,  all
domestic  crayon  manufacturers,  including the Company,  voluntarily  agreed to
reformulate  their  crayons and  discontinue  the use of talc to  eradicate  any
persistent  public concerns  regarding  crayon safety.  The Company  anticipates
releasing a reformulated crayon by late summer of 2001.
      Each of the domestic crayon manufacturers,  including the Company, and the
CPSC released press statements  verifying the safety and non-toxicity of crayons
both on store and consumer  shelves.  Nevertheless,  the Company became aware of
seven  legal  actions  threatened  against  itself  and  other  domestic  crayon
manufacturers as a result of the erroneous report. Of the seven threatened legal
actions, six were filed against the Company,  four of which have been dismissed.
The two legal  actions  remaining  involve a class  action suit and a misleading
advertising  claim. The Company  continues to deny the essential  allegations of
these complaints and will vigorously  continue its defense.  Significantly,  the
Company  expects  the class  action  claim to be  dismissed  during a hearing in
January 2001.
      The Company believes that none of the pending actions will have a material
adverse effect on the Company's financial condition or results of operations.


ITEM 4. SUBMISSION  OF  MATTERS  TO  VOTE  OF  SECURITY  HOLDERS
        --------------------------------------------------------

      None.



<PAGE>


                                     PART II


ITEM 5. MARKET FOR THE COMPANY'S  COMMON STOCK AND RELATED  SECURITY HOLDER
        --------------------------------------------------------------------
        MATTERS
        -------

      Dixon  Ticonderoga  Company  common stock is traded on the American  Stock
Exchange under the symbol "DXT". The following table sets forth the low and high
per share  prices as per the  American  Stock  Exchange  closing  prices for the
applicable quarter.

                                    FISCAL               FISCAL
       QUARTER ENDING                 2000                 1999
       --------------                 ----                 ----
                                 LOW       HIGH       LOW        HIGH
                                 ---       ----       ---        ----
December 31                     $5.88     $10.00     $7.88      $11.75
March 31                         3.88       7.13      8.56       11.75
June 30                          2.88       4.19      9.81       12.13
September 30                     2.75       5.44      8.00       11.85


      Since  fiscal  1990,  the Board of  Directors  has  suspended  payment  of
dividends.  The Board will continue to review the Company's  future  performance
and determine the dividend policy on a  quarter-to-quarter  basis. The Company's
debt  agreements  restrict  the  amount of  dividends,  which can be paid in the
future. (See Note 4 to Consolidated Financial Statements).
      The number of record holders of the Company's  common stock at December 6,
2000 was 433.



<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA
         -----------------------
                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   FOR THE FIVE YEARS ENDED SEPTEMBER 30, 2000
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                2000        1999       1998        1997       1996
                              ----------  ---------  ---------   ---------  ---------
<S>                          <C>          <C>        <C>        <C>         <C>      <C>
REVENUES                       $102,879   $114,689   $124,722    $115,055   $106,696
                              ==========  =========  =========   =========  =========
INCOME (LOSS) FROM
   CONTINUING OPERATIONS      ($    798)  $  6,682   $  3,136    $  3,601   $  1,168

EXTRAORDINARY ITEM                   -          -          -           -        (282)
                              ----------  ---------  ---------   ---------  ---------
NET INCOME (LOSS)             ($    798)  $  6,682   $  3,136    $  3,601   $    886
                              ==========  =========  =========   =========  =========
EARNINGS (LOSS) PER
   COMMON SHARE (BASIC):
     CONTINUING OPERATIONS    ($    .25)  $   1.95   $    .93    $   1.08   $    .36

     EXTRAORDINARY ITEM              -          -          -           -        (.09)
                              ----------  ---------  ---------   ---------  ---------
      NET INCOME (LOSS)       ($    .25)  $   1.95   $    .93    $   1.08   $    .27
                              ==========  =========  =========   =========  =========
EARNINGS (LOSS) PER
   COMMON SHARE (DILUTED):
     CONTINUING OPERATIONS    ($    .25)  $   1.87   $    .85    $   1.05   $    .36

     EXTRAORDINARY ITEM              -          -          -           -        (.09)
                              ----------  ---------  ---------   ---------  ---------
      NET INCOME (LOSS)       ($    .25)  $   1.87   $    .85    $   1.05   $    .27
                              ==========  =========  =========   =========  =========
TOTAL ASSETS                   $ 86,718   $ 92,888   $ 92,630    $ 84,161   $ 77,848
                              ==========  =========  =========   =========  =========
LONG-TERM DEBT                 $ 30,210   $ 39,400 1 $ 21,927    $ 23,556   $ 25,119
                              ==========  =========  =========   =========  =========
DIVIDENDS PER
   COMMON SHARE               $      -    $     -    $     -     $     -    $     -
                              ==========  =========  =========   =========  =========
</TABLE>

1 The increase in long-term debt in 1999 is  attributable to the  refinancing of
the  Company's  previous  revolving  credit  agreement  under  a  new  five-year
facility. (See Note 4 to Consolidated Financial Statements.)


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        -----------------------------------------------------------------------
        OF OPERATIONS
        -------------


SUMMARY OF RESULTS OF OPERATIONS
--------------------------------

2000 vs. 1999:
--------------

   Income before taxes and minority interest  decreased  $12,922,000 in 2000 (or
$3,286,000,  exclusive of the 1999 gain on sale of the  Graphite and  Lubricants
division of $9,636,000).  The Company recorded pre-tax  provisions of $1,641,000
and $1,917,000 in 2000 and 1999,  respectively,  for  restructuring  and related
costs  for a  company-wide  cost  reduction  program  and  plant  consolidation.
Restructuring  costs in 2000  include  $1,173,000  for  employee  severance  and
related costs and $468,000 for the sale or abandonment of Mexico properties.  In
fiscal  2000,  approximately  $367,000  was charged to the 2000  severance  cost
accrual and $156,000 against the accrual for property abandonment.  In addition,
$1,704,000  was charged  against the  remaining  1999  accrual.  (See Note 12 to
Consolidated  Financial  Statements.) U.S. Consumer  operating profits decreased
primarily due to lower revenue and higher  manufacturing  inefficiencies  due to
strict  inventory  reduction  efforts  and  consolidation  activities.   Foreign
Consumer  operating  profits  reflected  a decrease  in Mexico  due to  start-up
inefficiencies  relating to the  transfer of certain U.S.  production  and lower
margins due to  competitive  pricing  pressures.  Industrial  operating  profits
decreased  principally  due to lower  Refractories  division sales and operating
profits.  Interest  expense  decreased  $500,000  primarily due to lower foreign
borrowings  and interest  rates.  Income taxes  decreased due to the decrease in
pre-tax income.


1999 vs. 1998:
--------------

   Income  before  income taxes and minority  interest  increased  $6,274,000 in
1999.  Gain from the sale of the  Graphite and  Lubricants  division in 1999 was
$9,636,000.  In 1999, the Company  recorded a $1,917,000  pre-tax  provision for
restructuring  and  related  costs  associated  with plant  consolidation  and a
company-wide  cost  reduction  program  designed  to improve  overall  financial
performance in the future.  Restructuring  costs principally include anticipated
losses from the sale or  abandonment  of property and  equipment  (approximating
$1,330,000) and severance costs for affected employees (approximating $587,000).
In 1999,  approximately $213,000 was charged against the severance cost accrual,
substantially  related to costs  associated with planned  personnel  reductions.
(See Note 12 to  Consolidated  Financial  Statements.)  There  was a  $2,163,000
decrease in the Industrial  operating  profits  primarily due to the sale of the
Graphite and Lubricants  division and weakness in the  industries  served by the
Refractories  division.  Decreased  U.S.  interest  expense,  primarily  due  to
proceeds  from the  division  sale were  offset by higher  interest  expense  in
Mexico,  reflecting increased borrowings since it acquisition of Vinci (see Note
10 to Consolidated  Financial  Statements) and higher inventory  levels.  Income
taxes increased principally due to significantly higher pre-tax income.




<PAGE>


REVENUES
--------

      Overall  2000  revenues  decreased  $11,811,000 from the prior year.  The
changes by segment are as follows:

                         Increase(Decrease)       % Increase (Decrease)
                          (in thousands)    Total     Volume  Price / Mix
                          --------------    -----     ------  -----------
      Consumer U.S.         $(8,725)        (13)       (12)       (1)
      Consumer Foreign        3,043          10         12        (2)
      Industrial             (6,129)        (35)       (33)       (2)


      U.S.  Consumer  revenue  decreased  principally  in the  mass  retail  and
wholesale  club markets  reflecting  the effects of reduced  customer  inventory
levels  and  increased  competition  from  imports.   Foreign  Consumer  revenue
increased primarily in the Mexico and Canada mass markets reflecting  additional
product  distribution  in these  channels.  Industrial  revenue  decreased  $4.6
million due to the disposition of the Graphite and Lubricants  business with the
balance  of  the  decrease  due to  weakness  in the  industries  served  by the
Refractories division.
      While  the  Company  has  operations  in  Canada,  Mexico  and  the  U.K.,
historically only the operating results in Mexico have been materially  impacted
by  currency  fluctuations.  There  has been a  significant  devaluation  of the
Mexican peso at least once in each of the last three decades, the last one being
in  August  of  1998.  In the  short  term  after  such  devaluations,  consumer
confidence has been shaken, leading to an immediate reduction in revenues in the
months  following the  devaluation.  Then, after the immediate shock, and as the
peso  stabilizes,  revenues tend to grow.  Selling  prices tend to rise over the
long term to offset any  inflationary  increases in costs.  The peso, as well as
any currency  value,  depends on many  factors  including  international  trade,
investor  confidence  and  government  policy,  to name a few. These factors are
impossible for the Company to predict, and thus, an estimate of potential effect
on results of operations  for the future  cannot be made.  This currency risk in
Mexico is presently managed through occassional  foreign currency hedges,  local
currency financing and by export sales to the U.S. denominated in U.S. dollars.
      Overall  1999  revenues  decreased  $10,033,000  from the prior year.  The
changes by segment are as follows:

                         Increase(Decrease)       % Increase (Decrease)
                          (in thousands)    Total     Volume  Price / Mix
                          --------------    -----     ------  -----------
      Consumer U.S.         $(3,875)         (6)        (5)       (1)
      Consumer Foreign        1,373           5          2         3
      Industrial             (7,531)        (30)       (29)       (1)

      The U.S.  Consumer  revenue  decrease  was  strictly  in the  mass  retail
(principally  mega-store)  market where  customer  consolidation  and  inventory
reductions  affected  sales during the  back-to-school  buying  season.  Foreign
Consumer  revenues  increased  in Mexico by $944,000  and in Canada by $406,000,
reflecting  continuing  success in their  respective  mass retail  markets.  The
decrease in Industrial revenue was primarily due to the sale of the Graphite and
Lubricants  division and, to a lesser degree,  weakness in the industries served
by the Refractories division.


OPERATING PROFITS
-----------------

      Operating profits decreased $3,787,000  (exclusive of the gain on the sale
of assets) from 1999. U.S. Consumer decreased  $1,560,000 due principally to the
decrease in revenues and higher manufacturing  inefficiencies.  Foreign Consumer
decreased $1,660,000 primarily due to competitive pricing pressures and start-up
costs  resulting  from  production  moving from the U.S.  to Mexico.  The higher
manufacturing  costs in the U.S.  and Mexico  substantially  contributed  to the
relative  increase  in  total  cost of  goods  sold in 2000  (64.6%  of sales as
compared with 62.9% in 1999).  Industrial  operating profits decreased  $340,000

<PAGE>
due to the sale of the  Graphite  and  Lubricants  division  in 1999  and  lower
Refractories  income.  General corporate expenses increased $230,000,  primarily
due to  higher  restructuring  and  related  personnel  costs.  Due to the lower
revenues,  selling and  administrative  costs increased as a percentage of sales
(30.9%  in  2000  compared  to  29.5%  in  1999).  However,  total  selling  and
administrative  expenses  decreased over $2 million in 2000,  reflecting ongoing
cost reduction efforts and the sale of the Graphite and Lubricants division.
      Operating  profits  in 1999  (exclusive  of the gain on sale of  assets of
$9,636,000  and provision  for  restructuring  and related costs of  $1,917,000)
decreased   $1,346,000  from  1998.   Industrial   operating  profits  decreased
$2,163,000, primarily due to the sale of the Graphite and Lubricants division in
March,  1999 and lower  Refractories  division  profits  due to  weakness in the
industries it serves.  The reduction in Industrial  gross profits  substantially
contributed to the relative  increase in total cost of goods sold in 1999 (62.9%
of sales as compared  with 61.2% in 1998).  As discussed  above,  U.S.  Consumer
revenue decreased  significantly,  yet operating profits only decreased $206,000
due to lower selling and  administrative  expenses from cost reduction  efforts.
Foreign operating profits  increased  $659,000  primarily due to higher revenues
and more favorable  foreign currency effects.  General  corporate  expenses were
also   reduced  by  $364,000   reflecting   cost   reduction   activities.   The
aforementioned  gain on sale of assets  relates to the sale of the  Graphite and
Lubricants division. The provision for restructuring and related costs under the
Company's cost reduction program principally  represents  anticipated impairment
losses due to plant closures and  consolidation,  as well as employee  severance
costs. The aforementioned  cost reduction efforts  contributed to lower relative
selling and  administrative  costs (29.5% of sales in 1999  compared to 30.8% of
sales in 1998).


MINORITY INTEREST
-----------------

      Minority  interest  represents  3% of the net  income of the  consolidated
subsidiary,  Grupo Dixon,  S.A. de C.V., since  September,  1999 and 20.2% prior
thereto  ($23,938,  $402,135,  and  $704,940  in fiscal  2000,  1999,  and 1998,
respectively),  equivalent  to the  extent  of the  investment  of the  minority
shareholders.  As described in Note 8 to Consolidated Financial Statements, this
minority interest was created by an initial public offering in 1994.


EFFECT OF CERTAIN NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------------------------
      In December  1999, the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101 summarizing its views of applying generally accepted
accounting  principles  to revenue  recognition  in  financial  statements.  The
Company's policy of revenue recognition is consistent with this bulletin.
      In 1998,  the FASB issued  Statement No. 133  "Accounting  for  Derivative
Instruments and Hedging Activities" which is effective for the Company in fiscal
2001. This statement requires all derivative instruments to be recognized in the
balance  sheet as either  assets  or  liabilities  at fair  value.  The  Company
currently uses cash flow hedges to convert variable rate debt to fixed rate debt
and to occasionally  hedge certain foreign  currencies,  but does not expect the
prescribed  accounting for these  instruments to materially affect its financial
position or results of operations when adopted.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

      The Company's cash flows from operating  activities improved  dramatically
(by approximately  $13.2 million) despite a net loss of $798,000 in fiscal 2000.
The Company's strict inventory  control and reduction efforts in the U.S. led to
an increase in cash flows  related to  inventories  of $3.1 million in 2000,  as
compared  with a  decrease  of $7.3  million  in the prior  year.  In  addition,
improved accounts payable management in the U.S. and Mexico and continued strong
U.S. accounts  receivable  collection  practices more than offset the effects of
higher Mexico accounts receivable in 2000.
      The  Company's  2000  investing  activities  included  approximately  $1.4
million in net  purchases of property and equipment as compared with $638,000 in
1999.  This was an  historically  lower level of purchases in the prior year and

<PAGE>
2000  purchases  include the  acquisition  of equipment  for the start-up of the
Company's China operation.  Management believes that capital expenditures levels
have been reduced over the past several  years due to better  capital  budgeting
and control and the  continued  use of leasing as an  alternative  to  acquiring
equipment. Generally, all major capital projects are discretionary in nature and
thus no material purchase  commitments exist. Capital expenditures will continue
to be funded from operations and existing financing or new leasing arrangements.
Total cash provided from investing activities decreased  dramatically due to the
cash proceeds of  approximately  $19.6 million from the sale of the Graphite and
Lubricants  division in 1999. A note  receivable from the sale (in the amount of
$3.25 million) was collected in 2000.
      The  Company's  primary  financing  arrangements  are with a consortium of
lenders, providing a total of up to $42.5 million in financing through September
2004. In August 2000,  certain financial  covenants  contained in the underlying
loan and  security  agreements  were  revised to cure a previous  default and to
allow the Company to execute its reorganization and consolidation plans, as well
as other strategic initiatives. The agreements were also amended to increase the
rate of interest by 0.5% and require the payment of certain  fees,  including an
amendment  fee of $206,875.  The  financing  agreements,  as amended,  include a
revolving  line of credit  facility  in the amount of $35  million  which  bears
interest at either the prime rate plus 0.75%, or the prevailing  LIBOR rate plus
2.25% through September 2004. Borrowings under the revolving credit facility are
based upon eligible  accounts  receivable and  inventories of the Company's U.S.
and Canada  operations,  as defined.  The Company has executed an interest  rate
swap  agreement  that  effectively  fixed the rate of  interest on $8 million of
these borrowings at 8.98% through August 2005. The loan and security  agreements
also include a term loan in the initial amount of $7.5 million. The term loan is
payable in monthly  installments of $125,000,  plus interest,  through September
2004.  The loan bears  interest  based upon the same  prevailing  rate described
above  in  connection  with the  revolving  credit  facility.  The  Company  has
previously  executed an interest rate swap agreement that effectively  fixes the
rate of interest on approximately  $1.1 million of the term loan at 8.5% through
May 2001.
     These  financing  arrangements  are  collateralized  by  the  tangible  and
intangible  assets  of  the  U.S.  and  Canada  operations  (including  accounts
receivable,  inventories, property, plant and equipment, patents and trademarks)
and a pledge of the capital  stock of the Company's  subsidiaries.  The loan and
security agreement contains provisions  pertaining to the maintenance of certain
financial ratios and annual capital  expenditure levels, as well as restrictions
as to payment of cash  dividends.  As of September  30, 2000,  the Company is in
compliance  with all such  provisions,  as  amended.  On January 10,  2001,  the
agreement was amended to revise one financial  ratio  requirement for the period
ending December 31, 2000 due to the Company's expectation that it would not meet
the previous  requirement as of that date. As of September 30, 2000, the Company
had  approximately  $23 million of unused  lines of credit  available  under the
revolving credit facility. In addition,  the Company's Mexico subsidiary has $14
million in bank lines of credit ($10 million  unused as of  September  30, 2000)
which bear interest at a rate based upon either a floating U.S. bank rate or the
rate of certain Mexican government securities.
     The Company also has outstanding  $16.5 million of 12% Senior  Subordinated
Notes valued at their face amount,  due 2003. In August 2000,  the  subordinated
note  agreement  was amended to revise  certain  financial  covenants and cure a
previous default,  as well as to provide the Company  flexibility to execute its
strategic  initiatives.  The interest  rate was  increased to 13.5% through June
2002 and 12.25% though maturity in 2003. The exercise price of 300,000  warrants
held by the  noteholders  was reduced from $7.24 to $4.28.  The  amendment  also
required payment of a fee of $50,000. The note agreement,  as amended,  contains
provisions that limit dividends and other payments,  and require the maintenance
of certain financial covenants and ratios. The Company is in compliance with all
such provisions, as amended. The Company also incurred approximately $200,000 in
legal costs  associated  with the  aforementioned  amendments  to its senior and
subordinated debt agreements.
      The subordinated and senior debt have been classified,  in accordance with
their  terms  and  management's  expectations  as  to  Company  performance,  as
long-term in the accompanying  consolidated  financial statements.  However, the
Company cannot assure that it will be in compliance with all covenant provisions
of its debt  agreements  in all future  quarters and cannot  assure that it will
receive waivers or amendments of any such provisions should that occur.
      The Company entered into the aforementioned  interest rate swap agreements
to balance and manage overall  interest rate exposure and minimize  overall cost
of borrowings. The swaps are not presently expected to have a material effect on

<PAGE>
total interest expense over the term of the underlying agreements.
      In  March  1999,  the  Company's  Board  of  Directors  approved  a  Stock
Repurchase  Program  authorizing  the  acquisition  of up to $3 million in Dixon
Ticonderoga  Company stock. Under this program,  the Company repurchased 337,000
shares at a cost of $2.8 million ($2 million in fiscal 2000).  These repurchases
were financed  through the  aforementioned  and previous U.S.  revolving line of
credit facilities.
      Refer to Notes 3 and 4 to  Consolidated  Financial  Statements for further
description of the aforementioned financing arrangements.
      The existing sources of financing  described above and cash expected to be
generated  from future  operations and / or asset sales would,  in  management's
opinion,  be sufficient to fulfill all current and  anticipated  requirements of
the Company's  ongoing business and to meet all of it obligations.  However,  if
future  covenant   violations  occur  with  respect  to  its  current  financing
arrangements,  the  Company may need to pursue  other  sources of  financing  to
satisfy certain obligations before their due date.


FORWARD-LOOKING STATEMENTS
--------------------------

      The  statements  in this  Annual  Report on Form 10-K that are not  purely
historical are "forward-looking statements" within the meaning of section 27A of
the  Securities  Act of 1933 and section 21E of the  Securities  Exchange Act of
1934, including statements about the Company's expectations, beliefs, intentions
or  strategies   regarding  the  future.   Forward-looking   statements  include
statements regarding,  among other things, the effects of the devaluation of the
Mexican peso; the Company's ability to meet its loan covenants in the future and
its current and anticipated  obligations;  management's inventory reduction plan
and expectation for savings from the restructuring and  cost-reduction  program;
the Company's ability to increase sales in its core businesses; its expectations
as to the effect of new accounting  pronouncements;  and its  expectations  with
regards   to  legal   proceedings.   Readers   are   cautioned   that  any  such
forward-looking  statements are not guarantees of future performance and involve
known and unknown  risks,  uncertainties  and other factors that could cause the
actual  results to differ  materially  from those  expressed  or implied by such
forward-looking  statements.  Such  risks  include  (but  are  not  limited  to)
manufacturing  inefficiencies  as a  result  of the  inventory  reduction  plan,
difficulties  encountered with the  consolidation  and  cost-reduction  program,
increased  competition,  U.S. and foreign  economic  factors,  foreign  currency
exchange risk and interest rate fluctuation risk, among others.


<PAGE>


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
           ----------------------------------------------------------

      As discussed elsewhere,  the Company is exposed to the following principal
market risks (i.e.  risks of loss arising from adverse changes in market rates):
foreign exchange rates and interest rates on debt.
      The  Company's  exposure  to foreign  currency  exchange  rate risk in its
international  operations  is  principally  limited to Mexico  and,  to a lesser
degree, Canada. Approximately 33% of the Company's fiscal 2000 net revenues were
derived in Mexico and Canada,  combined (exclusive of intercompany  activities).
Foreign  exchange  transaction  gains and losses arise from monetary  assets and
liabilities  denominated in currencies other than the business unit's functional
local  currency.  It is estimated that a 10% change in both the Mexican peso and
Canadian  dollar  would  impact  reported  operating  profit by  $500,000.  This
quantitative  measure  has  inherent  limitations  because it does not take into
account the changes in customer  purchasing  patterns or any  adjustment  to the
Company's  financing  or  operating  strategies  in response to such a change in
rates.  Moreover,  this measure does not take into account the possibility  that
these currency rates can move in opposite  directions,  such that gains from one
may offset losses from another.
      In addition,  the Company's cash flows and earnings are subject to changes
in interest  rates. As of September 30, 2000,  approximately  46% of total short
and long-term debt is fixed,  at rates between 8% and 13.5%.  The balance of the
Company debt is variable,  principally based upon the prevailing U.S. bank prime
rate or LIBOR rate.  Certain interest rate swaps, which expire in 2001 and 2005,
fix the rate of interest  on $9.1  million of this debt at  approximately  9%. A
change in the average  prevailing  interest  rates of the  remaining  debt of 1%
would not have a material  effect upon the  Company's  results of  operations or
cash flows. This quantitative measure does not take into account the possibility
that the  prevailing  rates  (U.S.  bank prime and  LIBOR) can move in  opposite
directions  and that the Company has, in most cases,  the option to elect either
as the determining interest rate factor.




<PAGE>


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


<TABLE>
<S>                                                                 <C>    <C>
                                                                       PAGE
                                                                       ----
Report of Independent Certified Public Accountants                      17

Consolidated Balance Sheets as of
  September 30, 2000 and 1999                                          18-19

Consolidated Statements of Operations For the
  Years Ended September 30, 2000, 1999 and 1998                         20

Consolidated Statements of Comprehensive Income (Loss) For the
  Years Ended September 30, 2000, 1999 and 1998                         21

Consolidated Statements of Shareholders' Equity
  For the Years Ended September 30, 2000, 1999 and 1998                 22

Consolidated  Statements  of  Cash  Flows  For the
  Years Ended September 30, 2000, 1999 and 1998                        23-24

Notes to Consolidated Financial Statements                             25-42

Schedule For the Years Ended September 30, 2000, 1999 and 1998:

      II. Valuation and Qualifying Accounts                             43

          Information required by other schedules called for
          under  Regulation  S-X is either not applicable or
          is   included   in  the   Consolidated   Financial
          Statements or Notes thereto.

Consent of Independent Certified Public Accountants                     44
</TABLE>


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Shareholders and Board of Directors of
Dixon Ticonderoga Company


      In our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of Dixon Ticonderoga Company and its subsidiaries at September 30, 2000
and 1999, and the results of their operations,  their  comprehensive  income and
their cash flows for each of the three years in the period ended  September  30,
2000, in conformity with generally accepted accounting  principles in the United
States of America. In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all material respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule 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 of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.






PricewaterhouseCoopers LLP
Tampa, Florida
December 6, 2000, except as to Note 4
 for which the date is January 10, 2001


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 2000 AND 1999


                                                     2000             1999
                                                  ------------    -------------
         ASSETS:
         -------

CURRENT ASSETS:

   Cash and cash equivalents                       $  448,452       $  935,413
   Receivables, less allowance for doubtful
     accounts of $1,418,908 in 2000 and
     $1,428,541 in 1999                            30,881,626       29,343,196
   Inventories                                     36,215,931       39,425,594
   Other current assets                             4,171,064        2,381,518
                                                  ------------    -------------
      Total current assets                         71,717,073       72,085,721
                                                  ------------    -------------
PROPERTY, PLANT AND EQUIPMENT:

   Land and buildings                              10,145,872       13,413,125
   Machinery and equipment                         16,054,327       17,661,335
   Furniture and fixtures                           1,654,404        1,753,765
                                                  ------------    -------------

                                                   27,854,603       32,828,225
      Less accumulated depreciation               (17,572,320)     (19,004,402)
                                                  ------------    -------------
                                                   10,282,283       13,823,823
                                                  ------------    -------------
OTHER ASSETS                                        4,718,379        6,978,123
                                                  ------------    -------------

                                                  $86,717,735      $92,887,667
                                                  ============    =============


<PAGE>

      LIABILITIES AND SHAREHOLDERS' EQUITY:          2000             1999
      -------------------------------------       ------------   -------------


CURRENT LIABILITIES:

   Notes payable                                  $  3,574,929    $   2,578,467
   Current maturities of long-term debt              7,135,198        1,638,835
   Accounts payable                                  8,068,133        6,143,136
   Accrued liabilities                              10,056,935       12,268,095
                                                  -------------   -------------

      Total current liabilities                     28,835,195       22,628,533
                                                  -------------   -------------

LONG-TERM DEBT                                      30,210,410       39,399,795
                                                  -------------   -------------

DEFERRED INCOME TAXES AND OTHER                        177,248           96,843
                                                  -------------   -------------

MINORITY INTEREST                                      552,215          533,390
                                                  -------------   -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

   Preferred stock, par $1, authorized 100,000
     shares, none issued                                 -                -
   Common stock, par $1, authorized 8,000,000
     shares, issued 3,710,309 shares in 2000 and
     3,688,559 shares in 1999                        3,710,309        3,688,559
   Capital in excess of par value                    3,700,272        3,586,471
   Retained earnings                                26,147,547       26,945,792
   Accumulated comprehensive income (loss)          (3,093,577)      (2,416,475)
                                                  -------------   -------------
                                                    30,464,551       31,804,347

   Less treasury stock, at cost (542,262 shares
     in 2000 and 292,789 shares in 1999)            (3,521,884)      (1,575,241)
                                                  -------------   -------------

                                                    26,942,667       30,229,106
                                                  -------------   -------------

                                                  $ 86,717,735    $  92,887,667
                                                  ============    =============








                   The accompanying notes are an integral part
                    of the consolidated financial statements.



<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998

<TABLE>
<CAPTION>

                                                   2000           1999           1998
                                               -------------  -------------   ------------
<S>                                         <C>             <C>             <C>            <C>

REVENUES                                       $102,878,905   $114,689,474    $124,721,758
                                               -------------  -------------   ------------

COSTS AND EXPENSES:
  Cost of goods sold                             66,454,513     72,170,810      76,296,877
  Selling and administrative expenses            31,758,925     33,789,975      38,349,867
  Provision  for   restructuring  and
   related costs                                  1,640,895      1,916,800          -
                                               -------------  -------------   ------------

                                                 99,854,333    107,877,585     114,646,744
                                               -------------  -------------   ------------

GAIN ON SALE OF ASSETS                                -          9,636,318          -
                                               -------------  -------------   ------------

OPERATING INCOME                                  3,024,572     16,448,207      10,075,014

INTEREST EXPENSE                                  4,269,771      4,771,109       4,671,646
                                               -------------  -------------   ------------

INCOME (LOSS) BEFORE INCOME TAXES
  AND MINORITY INTEREST                          (1,245,199)    11,677,098       5,403,368

INCOME TAXES (BENEFIT)                             (470,892)     4,593,228       1,562,069
                                               -------------  -------------   ------------
                                                   (774,307)     7,083,870       3,841,299

MINORITY INTEREST                                    23,938        402,135         704,940
                                               -------------  -------------   ------------

NET INCOME (LOSS)                              $   (798,245)  $  6,681,735    $  3,136,359
                                               =============  =============   ============

EARNINGS (LOSS) PER COMMON SHARE (BASIC)       $       (.25)  $       1.95    $        .93
                                               =============  =============   ============

EARNINGS (LOSS) PER COMMON SHARE (DILUTED)
                                               $       (.25)  $       1.87    $        .85
                                               =============  =============   ============

</TABLE>














                   The accompanying notes are an integral part
                    of the consolidated financial statements.


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
             FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998



<TABLE>
<CAPTION>


                                           2000             1999              1998
                                        -----------      ------------      -----------
<S>                                  <C>              <C>               <C>           <C>

NET INCOME (LOSS)                       $  (798,245)      $ 6,681,735       $ 3,136,359

OTHER COMPREHENSIVE INCOME (LOSS):

   Foreign currency translation
    adjustments                            (677,102)          957,362         (604,981)
                                        ------------      ------------      -----------

TOTAL COMPREHENSIVE INCOME (LOSS)       $(1,475,347)      $ 7,639,097       $ 2,531,378
                                        ============      ============      ===========
</TABLE>




                   The accompanying notes are an integral part
                    of the consolidated financial statements.



<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                                  Common       Capital in                   Accumulated
                                 Stock $1       Excess of     Retained     Comprehensive      Treasury
                                 Par Value      Par Value     Earnings     Income (Loss)       Stock
                                ------------   ------------  ------------  ---------------  -------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

BALANCE, September 30, 1997     $ 3,591,681    $ 2,770,668   $17,127,698   $  (2,768,856)   $  (858,566)
   Net income                                                  3,136,359
   Cumulative translation
     adjustment                                                                 (604,981)
   Employee stock options
     exercised (62,877 shares)       62,877        529,013
   Employee Stock Purchase Plan
      (11,253 shares)                               28,074                                       41,271
                                 ------------   ------------  ------------  ---------------  -------------



BALANCE, September 30, 1998       3,654,558      3,327,755    20,264,057      (3,373,837)      (817,295)
   Net income                                                  6,681,735
   Cumulative translation
     adjustment                                                                  957,362
   Employee stock options
     exercised (34,001 shares)       34,001        227,094
   Employee Stock Purchase
      Plan (6,619 shares)                           31,622                                       31,672
   Purchase of treasury stock
      (76,567 shares)                                                                          (789,618)
                                ------------   ------------  ------------  ---------------  -------------



BALANCE, September 30, 1999       3,688,559      3,586,471    26,945,792      (2,416,475)    (1,575,241)
   Net loss                                                     (798,245)
   Cumulative translation
     adjustment                                                                 (677,102)
   Employee stock options
    exercised (21,750  shares)       21,750        147,094
   Employee Stock Purchase
      Plan (10,757  shares)                        (33,293)                                      69,867
   Purchase of treasury stock
      (260,230  shares)                                                                      (2,016,510)
                                ------------   ------------  ------------  ---------------  -------------
BALANCE, September 30, 2000     $ 3,710,309    $ 3,700,272   $26,147,547   $  (3,093,577)   $(3,521,884)
                                ============   ============  ============  ===============  =============
</TABLE>


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
<TABLE>
<CAPTION>

                                                   2000         1999           1998
                                              ------------  ------------   ----------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Cash flows from operating activities:

Net income (loss)                             $  (798,245)  $ 6,681,735    $3,136,359

Adjustments to reconcile net income (loss) to
 net cash provided by (used in) operating
 activities:
   Depreciation and amortization                2,521,400     2,607,425     2,933,660
   Deferred taxes                                (639,000)     (889,000)    1,448,626
   Provision for doubtful accounts receivable     218,795       191,356       105,126
   Gain on sale of assets                             -      (9,636,318)          -
   Income attributable to minority interest        23,938       402,135       704,940
   (Income) loss  attributable to foreign
    currency  exchange                            (78,888)     (127,299)    1,798,357
   Changes in assets [(increase)decrease]
    and liabilities [increase (decrease)]:
   Receivables, net                            (1,994,505)    1,677,182    (5,726,094)
   Inventories                                  3,087,532    (7,279,117)   (5,326,301)
   Other current assets                            17,422      (781,505)      253,571
   Accounts payable and accrued liabilities       646,793    (1,787,274)   (4,558,206)
   Other assets                                  (228,794)   (1,480,679)     (437,785)
                                              ------------  ------------   ----------

Net cash  provided by (used in) operating
 activities                                     2,776,448   (10,421,359)   (5,667,747)
                                              ------------  ------------   ----------

Cash flows from investing activities:

   Purchases of plant and equipment, net       (1,399,403)     (638,384)   (1,350,855)
   Proceeds on sale of assets                   3,250,000    19,596,710     1,089,399
   Payment  for   purchase  of  Vinci  de
    Mexico, S.A. de C.V., net of cash acquired        -             -      (3,289,200)
                                              ------------  ------------   ----------
Net cash  provided by (used in) investing
 activities                                     1,850,597    18,958,326    (3,550,656)
                                              ------------  ------------   ----------

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                                  2000          1999           1998
                                              ------------  ------------   ------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Cash flows from financing activities:

Principal reductions of notes payable                 -     (23,361,167)           -
Proceeds from additions to long-term debt          70,715    17,523,741            -
Proceeds from additions to notes payable        1,023,554           -        8,672,323
Principal reductions of long-term debt         (3,693,022)     (320,471)    (1,672,606)
Debt refinancing costs                           (369,842)          -              -
Purchase of treasury stock                     (2,016,510)     (789,618)           -
Purchase of subsidiary stock                          -      (3,734,668)           -
Other non-current liabilities                     (42,975)     (465,169)        44,044
Employee Stock Purchase Plan                       36,574        63,294         69,345
Exercise of stock options                         168,844       261,095        368,103
                                              ------------  ------------   ------------

Net cash  provided by (used in) financing
 activities                                    (4,822,662)  (10,822,963)     7,481,209
                                              ------------  ------------   ------------

Effect of exchange rate changes on cash          (291,344)      368,128     (1,017,112)
                                              ------------  ------------   ------------

Net decrease in cash and cash equivalents        (486,961)   (1,917,868)    (2,754,306)

Cash and cash  equivalents,  beginning of
 year                                             935,413     2,853,281      5,607,587
                                              ------------  ------------   ------------

Cash and cash equivalents, end of year        $   448,452   $   935,413    $ 2,853,281
                                              ============  ============   ============

Supplemental disclosures:

Cash paid during the year for:
   Interest                                   $ 3,148,398   $ 4,887,426    $ 4,690,538
   Income taxes                                 1,518,291     5,100,663        893,756
</TABLE>


      During fiscal 1999, the Company  accepted a note  receivable of $3,250,000
as partial  consideration  for the sale of assets of its Graphite and Lubricants
division. This note was paid in 2000.
















                   The accompanying notes are an integral part
                    of the consolidated financial statements.


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
      -------------------------------------------

      Business:
      ---------

      Dixon  Ticonderoga  Company is a diversified  manufacturer and marketer of
      writing and art products as well as a producer of refractory products. Its
      largest  principal  customers  are  school  products  distributors,   mass
      merchandisers and industrial manufacturers, although none account for over
      5% of revenues.

      Estimates:
      ----------

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  dates of the
      financial  statements,  and the reported  amounts of revenues and expenses
      during the  reporting  periods.  Actual  results  could  differ from those
      estimates.

      Loss contingencies:
      -------------------

      The  Company  recognizes  loss  contingencies,   including   environmental
      liabilities,  when they become  probable  and the  related  amounts can be
      reasonably estimated.

      Principles of consolidation:
      ----------------------------

      The  consolidated  financial  statements  include  the  accounts  of Dixon
      Ticonderoga  Company  and all of its  subsidiaries  (the  "Company").  All
      significant intercompany transactions and balances have been eliminated in
      consolidation.  Minority  interest  represents the minority  shareholders'
      proportionate  share of the equity of the Company's  Grupo Dixon,  S.A. de
      C.V.,  subsidiary.  In  1999,  the  Company  repurchased  shares  of  this
      subsidiary on the open market,  reducing the minority  interest from 20.2%
      to 3%.

      Translation of foreign currencies:
      ----------------------------------

      In accordance with Financial  Accounting  Standards Board (FASB) Statement
      No.  52,  the  Company  has  determined  that  each  foreign  subsidiary's
      functional  currency is their local  currency.  All assets and liabilities
      are translated at period-end exchange rates. All revenues and expenses are
      translated  using average  exchange rates during that period.  Translation
      gains  and  losses  are  reflected  as  a  separate   component  of  other
      comprehensive  income (loss),  except for Mexico for the period January 1,
      1997  through  December  31,  1998.  As of  January  1,  1997  Mexico  was
      considered a highly  inflationary  economy for  purposes of applying  this
      statement.  Mexico  translation  gains  and  losses,  therefore,  affected
      results of  operations  through  December 31, 1998.  Gains and losses from
      foreign currency  transactions are included in the Consolidated  Statement
      of Operations.  Total foreign currency exchange gains (losses) included in
      operating income were approximately $79,000, $127,000 and $(1,798,000) for
      fiscal years 2000, 1999 and 1998 respectively.

      Cash and cash equivalents:
      --------------------------

      Cash and cash equivalents  include investment  instruments with a maturity
      of three months or less at time of purchase.



<PAGE>


      Inventories:
      ------------

      Inventories are stated at the lower of cost or market. Certain inventories
      amounting to $13,813,000  and  $16,144,000 at September 30, 2000 and 1999,
      respectively,  are  stated  on the  last-in,  first-out  (LIFO)  method of
      determining  inventory costs. Under the first-in,  first-out (FIFO) method
      of accounting,  these inventories would be $805,000 and $962,000 higher at
      September  30,  2000 and 1999,  respectively.  All other  inventories  are
      accounted for using the FIFO method.

      Inventories consist of (in thousands):

                                              September 30,

                                             2000       1999
                                           ---------  ---------

            Raw material                    $12,839    $15,246
            Work in process                   3,656      5,016
            Finished goods                   19,721     19,164
                                           ---------  ---------

                                            $36,216    $39,426
                                           =========  =========


      Property, plant and equipment:
      ------------------------------

      Property, plant and equipment are stated at cost. Depreciation is provided
      principally on a  straight-line  basis over the estimated  useful lives of
      the  respective  assets.  The range of estimated  useful lives by class of
      property, plant and equipment are as follows:

            Buildings and improvements             10 - 25 years
            Machinery and equipment                 5 - 15 years
            Furniture and fixtures                  3 -  5 years

      When  assets  are sold or  retired,  their  cost and  related  accumulated
      depreciation  are removed from the accounts.  Any gain or loss is included
      in income.


      Impairment of long-lived assets:
      --------------------------------

      Long-lived  assets used in the  Company's  operations,  including  cost in
      excess of net assets of businesses  acquired,  are reviewed for impairment
      when events and  circumstances  indicate  that the  carrying  amount of an
      asset may not be recoverable. The primary indicators of recoverability are
      the associated current and forecasted  undiscounted  operating cash flows.
      Asset impairments in connection with the Company's  restructuring programs
      are  identified  and measured  using the estimated net proceeds from their
      ultimate sale or  abandonment.  (See Note 12.) The Company's  policy is to
      record an  impairment  loss when it is  determined it is probable that the
      carrying amount of the asset exceeds its fair value.




<PAGE>


      Stock-based compensation:
      -------------------------

      The Company  accounts  for  compensation  cost  related to employee  stock
      options  and other  forms of employee  stock-based  compensation  plans in
      accordance  with the  requirements  of Accounting  Principles  Board (APB)
      Opinion 25 and related interpretations.  APB 25 requires compensation cost
      for  stock-based   compensation  plans  to  be  recognized  based  on  the
      difference, if any, between the fair market value of the stock on the date
      of grant and the option exercise price.  The Company  provides  additional
      proforma disclosures as required under FASB Statement No. 123, "Accounting
      For Stock-Based Compensation".


      Income taxes:
      -------------

      The Company recognizes  deferred tax assets and liabilities for future tax
      consequences of events that have been included in the financial statements
      or tax  returns.  Under this  method,  amounts for deferred tax assets and
      liabilities are determined based on the differences  between the financial
      statement and tax bases of assets and liabilities using enacted tax rates.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount  expected to be  realized.  Income tax expense is the
      tax  payable  for the period and the change  during the period in deferred
      tax assets and liabilities.


(2)   ACCRUED LIABILITIES:
      --------------------

      The major components of accrued liabilities are as follows (in thousands):

                                              September 30,
                                              -------------
                                             2000       1999
                                           ---------  ---------

            Salaries and wages             $  1,462   $  1,603
            Employee benefit plans              449        594
            Income taxes                      1,940      2,540
            Other                             6,206      7,531
                                           ---------  ---------

                                           $ 10,057   $ 12,268
                                           =========  =========


(3)   NOTES PAYABLE:
      --------------

      The  Company's  Mexico  subsidiary  has  bank  lines  of  credit  totaling
      approximately $14 million,  under which $3.6 and $2.6 million of unsecured
      notes  payable  were  outstanding  as of  September  30,  2000  and  1999,
      respectively.  The notes bear interest  (weighted average interest rate of
      approximately 11.6% and 9.2% at September 30, 2000 and 1999, respectively)
      based upon either a floating U.S. bank rate or the rate of certain Mexican
      government securities and are renewable annually.



<PAGE>


(4)   LONG-TERM DEBT:
      ---------------

      Long-term debt consists of the following (in thousands):

                                              September 30,
                                              -------------
                                             2000        1999
                                           ---------  ---------

            Senior Subordinated Notes      $ 16,500   $ 16,500
            Bank notes payable               12,280     14,468
            Bank term loan                    6,125      7,500
            Building mortgage                 2,273      2,398
            Other                               167        173
                                           ---------  ---------
                                             37,345     41,039
            Less current maturities          (7,135)    (1,639)
                                           ---------  ---------

                                           $ 30,210   $ 39,400
                                           =========  =========

      The  Company's  primary  financing  arrangements  are with a consortium of
      lenders,  providing a total of up to $42.5  million in  financing  through
      September 2004. In August 2000, certain financial  covenants  contained in
      the  underlying  loan  and  security  agreements  were  revised  to cure a
      previous  default and to allow the  Company to execute its  reorganization
      and  consolidation  plans,  as well as other  strategic  initiatives.  The
      agreements  were also amended to increase the rate of interest by 0.5% and
      require  the  payment of  certain  fees,  including  an  amendment  fee of
      $206,875. The financing agreements,  as amended,  include a revolving line
      of credit  facility in the amount of $35 million  which bears  interest at
      either the prime rate (9.5% at  September  30,  2000) plus  0.75%,  or the
      prevailing  LIBOR rate  (approximately  6.6% at  September  30, 2000) plus
      2.25%  through  September  2004.  Borrowings  under the  revolving  credit
      facility are based upon eligible  accounts  receivable and  inventories of
      the  Company's  U.S. and Canada  operations,  as defined.  The Company has
      executed an interest rate swap agreement that  effectively  fixed the rate
      of  interest on $8 million of these  borrowings  at 8.98%  through  August
      2005.

      The loan and security  agreements  also include a term loan in the initial
      amount of $7.5 million.  The term loan is payable in monthly  installments
      of  $125,000,  plus  interest,  through  September  2004.  The loan  bears
      interest based upon the same prevailing rate described above in connection
      with the revolving credit facility. The Company has previously executed an
      interest rate swap agreement that  effectively  fixes the rate of interest
      on approximately $1.1 million of the term loan at 8.5% through May 2001.

      These  financing  arrangements  are  collateralized  by the  tangible  and
      intangible  assets of the U.S. and Canada operations  (including  accounts
      receivable,  inventories,  property,  plant  and  equipment,  patents  and
      trademarks)   and  a  pledge  of  the  capital   stock  of  the  Company's
      subsidiaries.   The  loan  and  security  agreement  contains   provisions
      pertaining  to the  maintenance  of  certain  financial  ratios and annual
      capital  expenditure levels, as well as restrictions as to payment of cash
      dividends.  On January 10, 2001,  the  agreement was amended to revise one
      financial ratio requirement for the period ending December 31, 2000. As of
      September 30, 2000,  the Company had  approximately  $23 million of unused
      lines of credit available under the revolving credit facility.

      The Company also has outstanding $16.5 million of 12% Senior  Subordinated
      Notes valued at their face amount, due 2003. In 1998, the Company canceled
      a reverse interest rate swap agreement (which had originally converted $10
      million  of the  notes to a  floating  rate of  interest)  resulting  in a
      deferred gain of  approximately  $375,000,  which is being recognized over
      the remaining original term of the notes. In August 2000, the subordinated
      note agreement was also amended to revise certain financial  covenants and
      cure a previous default,  as well as to provide the Company flexibility to
      execute its  strategic  initiatives.  The interest  rate was  increased to
      13.5% through June 2002 and 12.25% though  maturity in 2003.  The exercise

<PAGE>
      price of 300,000 warrants held by the noteholders was reduced to $4.28. No
      value was  assigned to the  warrants  (which  expire in 2003) based upon a
      fair  market  value  determination  at  the  original  date  of  issue.  A
      revaluation of the warrants  based on the adjusted  exercise price yielded
      nominal value.  The amendment  also required  payment of a fee of $50,000.
      The note agreement,  as amended,  contains provisions that limit dividends
      and other  payments,  and require  the  maintenance  of certain  financial
      covenants and ratios.

      In 1996, the Company entered into a mortgage agreement with respect to its
      corporate headquarters building in Heathrow, Florida. The mortgage (in the
      original  amount of $2.73  million)  is for a period of 15 years and bears
      interest at 8.1%.

      Carrying values of the Senior  Subordinated  Notes, the bank notes payable
      and term loan and the building  mortgage are reasonable  estimates of fair
      value  as  interest  rates  are  based on  prevailing  market  rates.  The
      aggregate  fair value of the Company's  two interest rate swap  agreements
      (discussed  above  ) is an  unrecognized  loss of  approximately  $86,000,
      representing  the net  cost to  cancel  the  underlying  agreements  as of
      September 30, 2000.

      In 1998,  the FASB issued  Statement No. 133  "Accounting  for  Derivative
      Instruments and Hedging  Activities" which is effective for the Company in
      fiscal 2001.  This  statement  requires all  derivative  instruments to be
      recognized in the balance sheet as either  assets or  liabilities  at fair
      value.  The Company  currently  uses cash flow hedges to convert  variable
      rate debt to fixed rate debt and to  occasionally  hedge  certain  foreign
      currencies,  but does not  expect  the  prescribed  accounting  for  these
      instruments  to  materially  affect its  financial  position or results of
      operations when adopted.

      Aggregate maturities of long-term debt are as follows (in thousands):


                                 2001          $ 7,135
                                 2002            7,227
                                 2003            7,218
                                 2004           13,979
                                 Thereafter      1,786
                                               --------
                                               $37,345
                                               ========



<PAGE>


(5)   INCOME TAXES:
      --------------

      The  components of net deferred tax asset  recognized in the  accompanying
      consolidated balance sheet are as follows (in thousands):

                                                    2000           1999
                                                 ------------   ------------
      U.S. current deferred tax assets
         (included in other current assets)          $  831         $  258
      Foreign current deferred tax liability
         (included in accrued liabilities)           (1,434)        (1,343)
      U.S. and foreign, noncurrent deferred tax
         asset (liability) (included in other
         assets and deferred income taxes and
         other, respectively)                         1,486          1,156
                                                 ------------   ------------

         Net deferred tax asset                      $  883         $   71
                                                 ============   ============

      Deferred tax assets:
         Depreciation                                $  257         $   -
         Vacation pay                                    75            135
         Accrued pension                                635            466
         Accrued restructuring and related costs        558            357
         Accrued environmental costs                     49            148
         Installment sale and related expenses          702            434
         Other                                          255            126
         Foreign net operating loss carryforward        511            509
         Valuation allowance                           (511)          (509)
                                                 ------------   ------------

         Total deferred tax asset                     2,531          1,666
                                                 ------------   ------------

      Deferred tax liabilities:
         Inventories                                 (1,128)          (962)
         Depreciation                                    -            (105)
         Property, plant and equipment                 (520)          (528)
                                                 ------------   ------------

         Total deferred tax liability                (1,648)        (1,595)
                                                 ------------   ------------

      Net deferred tax asset                         $  883         $   71
                                                 ============   ============

      It is the  policy  of the  Company  to  accrue  deferred  income  taxes on
      temporary  differences related to the financial statement carrying amounts
      and tax bases of investments in foreign subsidiaries which are expected to
      reverse in the  foreseeable  future.  Certain  undistributed  earnings  of
      foreign  subsidiaries  that are essentially  permanent in duration and not
      expected to reverse in the foreseeable future  approximate  $24,730,000 as
      of September 30, 2000. The determination of the unrecognized  deferred tax
      liability for such temporary differences is not practicable.

      At  September  30, 2000 and 1999,  the Company  had  valuation  allowances
      against  certain  deferred  tax assets  totaling  $511,000  and  $509,000,
      respectively.   These  valuation   allowances  relate  to  tax  assets  in
      jurisdictions  where it is management's  best estimate that there is not a
      greater  than 50%  probability  that the  benefit  of the  assets  will be
      realized in the associated tax returns.



<PAGE>


      The provision (benefit) for income taxes is comprised of the following (in
thousands):

                                              2000       1999       1998
                                             --------   --------  ---------
              Current:
                 U.S. Federal                $ (553)    $ 3,463    $  (656)
                 State                         (124)        491         41
                 Foreign                        845       1,528        728
                                             --------   --------  ---------
                                                168       5,482       113
                                             --------   --------  ---------
              Deferred:
                 U.S. Federal                  (900)       (929)       916
                 State                           -         (110)        -
                 Foreign                        261         150        533
                                             --------   --------  ---------

                                               (639)       (889)     1,449
                                             --------   --------  ---------
                                             $ (471)    $ 4,593    $ 1,562
                                             ========   ========  =========


      Foreign  deferred  tax  provision is  comprised  principally  of temporary
      differences related to Mexico asset purchases.  U.S. deferred provision in
      1998 results  primarily from legal expenses deducted on the books in prior
      years that were  deductible for tax purposes that year. The U.S.  deferred
      (benefit) in 2000 and 1999 result  primarily from expenses accrued but not
      yet deductible for taxes.

      The differences  between the provision (benefit) for income taxes computed
      at the U.S. statutory federal income tax rate and the provision  (benefit)
      in the consolidated financial statements are as follows (in thousands):

                                              2000       1999       1998
                                             --------   --------  ---------

              Amount computed using
               statutory rate                $ (405)    $ 3,970   $  1,837

              Foreign income                   (169)        (26)      (557)

              State  taxes,  net of  federal
               benefit                          (82)        252         27

              Permanent differences             254         231        239

              Others                            (69)        166         16
                                             --------   --------  ---------

              Provision (benefit) for
               income taxes                  $ (471)    $ 4,593   $  1,562
                                             ========   ========  =========

      A Revenue Canada  examination with respect to its 1994 and 1995 tax years,
      resulted in an assessment  which was paid in fiscal 1999.  The Company has
      agreed with  Revenue  Canada on an amended  assessment  and the  resultant
      refund of $540,000 is reflected in the consolidated  financial  statements
      as other current assets at September 30, 2000.


<PAGE>


(6)   EMPLOYEE BENEFIT PLANS:
      -----------------------

      The Company  maintains  several  defined  benefit  pension plans  covering
      substantially  all union  employees.  The  benefits  are based  upon fixed
      dollar  amounts  per years of  service.  The assets of the  various  plans
      (principally  corporate  stocks and bonds,  insurance  contracts  and cash
      equivalents)  are  managed  by  independent  trustees.  The  policy of the
      Company and its  subsidiaries is to fund the minimum annual  contributions
      required by applicable regulations.

      The  following  tables set forth the  plans'  funded  status  (accumulated
      benefits exceed assets in all plans) and other  information for the fiscal
      years ended September 30, 2000 and 1999 (in thousands):

                                                       September 30,
                                                      2000       1999
                                                    ---------  ---------
         Change in benefit obligation:

         Obligation at beginning of year             $4,275     $4,123

         Service cost                                   180        311

         Interest cost                                  238        235

         Actuarial gain                                (495)       (74)

         Benefit payments                              (311)      (320)
                                                    ---------  ---------

         Obligation at end of year                   $3,887     $4,275
                                                    =========  =========




         Change in market value of plan assets:

         Market value at beginning of year           $2,906     $2,692

         Actual return on plan assets                   219         45

         Employer contributions                         524        489

         Benefit payments                              (311)      (320)
                                                    ---------  ---------

         Market value at end of year                 $3,338     $2,906
                                                    =========  =========





<PAGE>
                                                        September 30,
                                                      2000       1999
                                                    ---------  ---------
         Actuarial present value of:

         Accumulated benefit obligation             $(3,887)   $(4,275)
                                                    =========  =========

         Projected benefit obligation               $(3,887)   $(4,275)

         Plan assets at market value                  3,338      2,906
                                                    ---------  ---------

         Projected benefit obligation in excess of
         plan assets                                   (549)    (1,369)

         Unrecognized net gain from past
            experience different from assumptions       334        875

         Unrecognized net obligation being
            recognized over periods from 10 to 16
            years                                       631        730
                                                    ---------  ---------

         Prepaid pension expense                      $ 415      $ 236
                                                    =========  =========

      Net  periodic  pension  costs  include  the  following  components  (in
      thousands):

                                                      2000       1999      1998
                                                   ---------  ---------  -------

         Service  costs -  benefits  earned  during
         period                                       $ 180      $ 311    $ 126
         Interest   cost   on   projected   benefit
         obligation                                     237        235      217
         Expected return on plan assets                (214)      (203)    (269)
         Net amortization and deferral                  141        139      190
                                                   ---------  ---------  -------
         Net periodic pension cost                    $ 344      $ 482    $ 264
                                                   =========  =========  =======

      In determining  the projected  benefit  obligation,  the weighted  average
      discount  rates  utilized  were 6.4%,  6.7% and 6.3% for the periods ended
      September 30, 2000, 1999 and 1998,  respectively.  The expected  long-term
      rates of return on assets used in  determining  net periodic  pension cost
      ranged  from 7.5 % to 8.5 % in all  years  presented  above.  There are no
      assumed rates of increase in compensation expense in any year, as benefits
      are fixed and do not vary with compensation levels.

      The  Company  also  maintains a  defined-contribution  plan (401k) for all
      non-union  domestic  employees who meet minimum service  requirements,  as
      well as a supplemental  deferred contribution plan for certain executives.
      Company  contributions  under  the  plans  consist  of a  basic  3% of the
      compensation of participants for the plan year, and for those participants
      who  elected  to  make  voluntary  contributions  to  the  plan,  matching
      contributions  up to an additional 4 %, as specified in the plan.  Charges
      to operations for these plans for the years ended September 30, 2000, 1999
      and 1998 were $610,000, $871,000 and $875,000, respectively.



<PAGE>


(7)   SHAREHOLDERS' EQUITY:
      ----------------------

      The Company provides an Employee Stock Purchase Plan under which shares of
      its common stock can be issued to eligible  employees.  Among the terms of
      this plan,  eligible  employees may purchase  through  payroll  deductions
      shares of the Company's  common stock up to 10 % of their  compensation at
      the  lower of 85 % of the fair  market  value of the stock on the first or
      last day of the plan year (May 1 and April 30).  On May 1, 2000,  1999 and
      1998,  10,757,  6,619 and 11,253 shares,  respectively,  were issued under
      this plan.  At September 30, 2000,  there are 81,721 shares  available for
      future purchases under the plan.

      The Company has also granted non-qualified options to key employees, under
      the 1988 Dixon Ticonderoga Company Executive Stock Plan to purchase shares
      of its common  stock at the market  price on the date of grant.  Under the
      1988 Plan (as amended)  options  vest 25 % after one year;  25 % after two
      years; and 50 % after three years, and remain  exercisable for a period of
      five years from the date of vesting. All options expire three months after
      termination  of  employment.  At September  30,  2000,  there were 342,375
      options  outstanding  and no shares  available for future grants under the
      1988 Plan.

      In  addition,  the Dixon  Ticonderoga  Company 1999 Stock Option Plan (the
      "New  Plan") was  adopted  in fiscal  1999,  covering a maximum  aggregate
      300,000 shares.  Under the New Plan,  qualified incentive stock options or
      non-qualified  stock  options  can be granted to  employees  at the market
      price on the date of grant  and which  will vest on the same  basis as the
      1988 Plan described  above.  Non-qualified  options under the New Plan may
      also be issued to Company  outside  directors  at the market  price on the
      date of grant and which may vest over  varying  periods.  In 2000,  10,000
      non-qualified  options  were  granted  to  employees  and in 1999,  30,000
      non-qualified  options  were  granted to outside  directors  under the New
      Plan. The granted  options vest over a two-year  period.  At September 30,
      2000 there were 262,500  shares  available for future grants under the New
      Plan. The following table  summarizes the combined stock options  activity
      for 2000, 1999 and 1998.


<PAGE>
<TABLE>
<CAPTION>




                             2000                  1999                 1998
                      --------------------  -------------------  --------------------
                       Number     Option     Number    Option     Number     Option
                      of Shares   Price     of Shares  Price     of Shares   Price
                      --------------------  -------------------  --------------------
<S>                  <C>        <C>          <C>       <C>       <C>        <C>


   Options outstanding
    at beginning of year                         312     $7.75     18,935      $7.75
                                                                    2,000       6.13
                        41,750     $8.63      44,250      8.63     72,750       8.63
                        48,625      6.75      60,125      6.75     72,750       6.75
                        10,750      7.13      15,250      7.13     15,750       7.13
                       273,000      8.88     317,000      8.88    351,000       8.88
                                              10,000     14.13
                         5,500     12.88      18,500     12.88
                        10,000     11.38
                        40,000     11.00


   Options exercised    (10,000)    6.75     (10,250)     6.75     (9,500)      6.75
                                              (2,000)     7.13       (500)      7.13
                                                (312)     7.75    (18,623)      7.75
                        (11,750)    8.63      (1,750)     8.63    (28,000)      8.63
                                                                   (2,000)      6.13
                                             (19,688)     8.88     (4,250)      8.88
   Options granted                                                 10,000      14.13
                                                                   18,500      12.88
                                              10,000     11.38
                                              40,000     11.00
                        10,000      4.25
   Options expired
    or canceled          (2,500)    4.25
                         (3,000)    8.63        (750)     8.63       (500)      8.63
                         (4,500)    6.75      (1,250)     6.75     (3,125)      6.75
                        (15,000)    8.88     (24,312)     8.88    (29,750)      8.88
                                              (2,500)     7.13
                        (10,000)   11.00
                         (3,000)   12.88     (13,000)    12.88
                                             (10,000)    14.13
                      ----------            ----------           ----------
                         379,875              429,625             465,437
                      ==========            ==========           ==========
</TABLE>

      The Company has adopted the  disclosure-only  provisions of FASB Statement
      No. 123 and, accordingly,  there is no compensation expense recognized for
      its stock option plans.  Pro forma net income  (loss) and earnings  (loss)
      per share would have been as follows if the fair value estimates were used
      to record compensation expense:

                                         2000           1999          1998
                                     ------------   ------------  ------------
      Net income (loss)              $(1,048,842)   $ 6,476,269   $ 2,990,726
                                     ============   ============  ============

      Earnings (loss) per share:
          Basic                      $      (.33)   $      1.89   $       .88
                                     ============   ============  ============
          Diluted                    $      (.33)   $      1.81   $       .81
                                     ============   ============  ============



<PAGE>


      These pro forma amounts were estimated using the  Black-Scholes  valuation
      model  assuming  no  dividends,  expected  volatility  of 33%,  an average
      risk-free  interest rate of 6.7% and expected lives of  approximately  six
      years for all grants. The weighted average fair value estimates of options
      granted  during  2000,   1999  and  1998  was  $2.92,   $3.67  and  $4.45,
      respectively.  The weighted  average  remaining lives are 5.6, 5.6 and 6.5
      years for options granted in 2000, 1999 and 1998, respectively.

      In 1995,  the Company  declared a dividend  distribution  of one Preferred
      Stock  Purchase  Right on each share of Company  common stock.  Each Right
      will entitle the holder to buy  one-thousandth  of a share of a new series
      of  preferred  stock at a price of $30.00  per share.  The Rights  will be
      exercisable only if a person or group (other than the Company's  chairman,
      Gino  N.  Pala,  and  his  family  members)  acquires  20% or  more of the
      outstanding  shares of common  stock of the Company or  announces a tender
      offer following which it would hold 30% or more of such outstanding common
      stock.  The Rights entitle the holders other than the acquiring  person to
      purchase  Company  common  stock  having a market  value of two  times the
      exercise prices of the Right. If, following the acquisition by a person or
      group of 20% or more of the Company's  outstanding shares of common stock,
      the Company were acquired in a merger or other business combination,  each
      Right  would be  exercisable  for that number of the  acquiring  company's
      shares of common  stock  having a market  value of two times the  exercise
      prices of the  Right.  The  Company  may redeem the Rights at one cent per
      Right at any time until ten days following the occurrence of an event that
      causes  the Rights to become  exercisable  for  common  stock.  The Rights
      expire ten years from the date of distribution.

      In  March,   1999,  the  Company  announced  a  Stock  Repurchase  Program
      authorizing  the  acquisition  of up to $3  million  in Dixon  Ticonderoga
      Company stock. Under this program,  the Company repurchased  approximately
      337,000  shares at a cost of $2.8  million  through  March 2000,  when the
      program was terminated.


(8)   SUBSIDIARY STOCK REPURCHASE:
      ----------------------------

      In fiscal 1999, the Company  purchased  5,722,760 shares (or 17.2%) of its
      subsidiary,  Grupo Dixon,  S.A. de C.V., for  approximately  $3.7 million,
      bringing  its total  ownership in its  subsidiary  to 97%. The shares were
      originally  issued in 1994, when the Company sold 16,627,760 shares of the
      subsidiary  in an  initial  public  offering  on the  Mexico  Intermediate
      Market.  The Company  applied the purchase  method of accounting to record
      these repurchases of subsidiary stock.


(9)   EARNINGS PER COMMON SHARE:
      --------------------------

      Basic  earnings  (loss) per common  share is  calculated  by dividing  net
      income  (loss) by the  weighted  average  number  of  shares  outstanding.
      Diluted  earnings  per  common  share is based upon the  weighted  average
      number of shares  outstanding,  plus the effects of  potentially  dilutive
      common shares  [consisting  of stock  options (Note 7) and stock  warrants
      (Note 4)]. For years ended September 30, 2000, 1999 and 1998,  options and
      warrants to purchase  679,875,  68,500 and 10,000  shares of common stock,
      respectively,  were  excluded  from the  computation  of diluted  earnings
      (loss) per share as such options and warrants were anti-dilutive.

      Average common shares used in the calculation of earnings (loss) per share
      are as follows:

              Year                 Basic      Diluted
              ----               ----------  ----------
              2000               3,202,582   3,202,582
              1999               3,420,779   3,581,062
              1998               3,387,202   3,708,026



<PAGE>


(10)  ACQUISITION:
      ------------

      In December 1997,  the Company's  Mexican  subsidiary  acquired all of the
      capital  stock of Vinci de Mexico,  S.A. de C.V.,  ("Vinci"),  and certain
      assets  of  a  related   entity  for  a  final  total  purchase  price  of
      approximately  28.3 million  pesos  (approximately  $3.5 million) in cash.
      Vinci is a well-known  manufacturer  of tempera and oil paints,  chalk and
      modeling clay in Mexico.  The company also  manufactured  plastic products
      (such as rulers  and  geometric  sets),  water  colors  and  crayons.  The
      acquisition was accounted for under the purchase method of accounting and,
      accordingly, the accompanying consolidated balance sheet includes the fair
      value of Vinci's  specific  assets  and  liabilities,  including  goodwill
      approximating  $320,000.  Goodwill is being  amortized  over the estimated
      period of benefit of 20 years. The results of Vinci's operations have been
      included  in the  consolidated  results  of  operations  since the date of
      acquisition.


(11)  SALE OF ASSETS:
      ---------------

      On March 2, 1999,  the  Company  completed  the sale of its  Graphite  and
      Lubricants  division for $23.5  million,  plus the  assumption  of certain
      trade obligations  related to the division.  Except as provided for in the
      Asset  Purchase  Agreement,  the  Company  generally  retained  all  other
      liabilities of the business  through the closing date,  including  various
      environmental  liabilities.  The purchaser paid $20.25 million in cash and
      executed a five-year  subordinated  note for the balance of $3.25 million.
      The note was unsecured with interest payable at 9%, deferred as additional
      principal  until  September 2, 2001.  This note was prepaid in  September,
      2000 at its full amount, plus $139,000 in accrued interest.  In connection
      with this sale,  the Company  retained or accrued  additional  liabilities
      approximating $4 million for ongoing maintenance of unsold real estate and
      environmental  expenses,  employee  severance  and benefit costs and other
      post-closing  obligations.   The  balance  of  these  accrued  liabilities
      remaining at September 30, 2000 was $1,856,000. The Company realized a net
      pre-tax gain of approximately $9.6 million on the sale.


(12)  RESTRUCTURING AND RELATED COSTS:
      --------------------------------

      In  fiscal  1999,  the  Company  provided   approximately   $1,917,000  in
      connection with Phase 1 of its Restructuring  and Cost Reduction  Program,
      which is intended to improve overall financial  performance in the future.
      The program included  manufacturing  plant closure and  consolidation,  as
      well as personnel  reduction in  manufacturing,  sales and  marketing  and
      corporate  activities.  Approximately  125  employees  (principally  plant
      workers)   were   affected  by  this  phase  of  the  program.   In  1999,
      approximately  $213,000  was charged  against the  restructuring  cost and
      impairment  reserves,  as set forth below. The carrying amount of property
      and equipment  held for disposal in Phase 1  approximated  $3 million with
      the estimated fair value  principally based upon assessments of value made
      by local realtors or appraisals.  Management  anticipates  disposal of the
      remaining assets from Phase 1 by January 2001.

      In  fiscal  2000,   approximately   $1,910,000  was  charged  against  the
      restructuring cost and impairment reserves for finalization of the Phase 1
      program (net of $234,000 in credits  representing  higher than anticipated
      proceeds  from  the  sale  and   abandonment  of  property  and  equipment
      identified  in the Phase 1  program).  As set  forth  below,  the  Company
      incurred  approximately  $206,000 in net additional  charges,  principally
      related to  unanticipated  employee costs and other costs directly related
      to the  restructuring  program which were not eligible for  recognition in
      1999 and thus expensed as incurred in 2000.

      Also in fiscal 2000,  the Company  provided  approximately  $1,435,000  of
      impairment and  restructuring  related costs in connection with Phase 2 of
      its  restructuring  and Cost Reduction  Program,  which  includes  further

<PAGE>
      consolidation of certain U.S. manufacturing  processes,  the consolidation
      of it Mexico  operations  into a new  facility  and  additional  personnel
      reductions in manufacturing, sales, marketing and corporate activities. An
      additional 170 employees  (principally  plant workers) are affected by the
      second phase of the program.  The carrying  amount of additional  property
      held for disposal under Phase 2 of the program is $1.1 million. Management
      expects to dispose of this additional property by June 2001.

      The   restructuring   and  impairment   related   charges  and  subsequent
      utilization through fiscal 2000 are summarized below (in thousands):
<TABLE>
<CAPTION>

                                                        Losses from
                                         Employee      impairment, sale
                                        severance      and abandonment
                                        and related      of property
                                          costs         and equipment      Total
                                      --------------  -----------------  ----------
<S>                                 <C>               <C>                <C>        <C>
1999 restructuring and impairment
 related charges (Phase 1)                $ 587            $ 1,330        $1,917
Utilized in fiscal 1999                    (199)               (14)         (213)
                                      --------------  -----------------  ----------
Reserve balances at September 30, 1999      388              1,316         1,704
Utilized in fiscal 2000 (Phase 1)          (594)            (1,316)       (1,910)
                                      --------------  -----------------  ----------
                                           (206)               -            (206)
                                      --------------  -----------------  ----------
Additional fiscal 2000 provisions
 (Phase 1)                                  206                -             206
2000 restructuring and impairment
 related charges (Phase 2)                  967                468         1,435
                                      --------------  -----------------  ----------
Total 2000 restructuring and
 impairment related charges               1,173                468         1,641
                                      --------------  -----------------  ----------
                                            967                468         1,435

Utilized in fiscal 2000 (Phase 2)          (161)              (156)         (317)
                                      --------------  -----------------  ----------

Reserve balances at September 30, 2000    $ 806            $   312        $1,118
                                      ==============  =================  ==========
</TABLE>


(13)  LINE OF BUSINESS REPORTING:
      ---------------------------

      The Company has adopted FASB Statement No. 131 "Disclosures About Segments
      of an Enterprise and Related  Information".  This  statement  requires the
      Company  to report  information  about its  operating  segments  under the
      "management  approach".  The management approach is based on the manner in
      which management reports segment information within the Company for making
      operating decisions and assessments.

      The Company has two principal  business segments -- its Consumer Group and
      Industrial  Group.  The  following  information  sets forth  certain  data
      pertaining  to each line of business as of September  30,  2000,  1999 and
      1998, and for the years then ended (in thousands).

                                      Consumer    Industrial    Total
                                        Group       Group      Company
                                      ----------  ----------  ----------
      Net revenues:

      2000                            $ 91,691     $11,188    $ 102,879
      1999                              97,372      17,317      114,689
      1998                              99,874      24,848      124,722

<PAGE>

                                      Consumer    Industrial    Total
                                        Group       Group      Company
                                      ----------  ----------  ----------
      Income before interest, taxes
       and minority interest:
      2000                             $ 5,648     $   358     $ 6,006
      1999                               8,815      10,332      19,147
      1998                              10,279       2,859      13,138



   A reconciliation  of income before interest,  taxes and minority  interest to
    net income follows (in thousands):
                                                       2000
                                   ---------------------------------------------
                                   Consumer   Industrial                Total
                                    Group       Group     Corporate    Company
                                   ---------  ----------  ----------  ----------
   Income (loss) before interest
     taxes and minority interest    $ 5,648     $  358     $ (2,981)   $ 3,025

   Interest expense                  (3,245)      (417)        (608)    (4,270)

   Income tax (expense) benefit        (475)        15          931        471

   Minority interest                    (24)        -            -         (24)
                                   ---------  ----------  ----------  ----------

   Net income (loss)                $ 1,904     $  (44)    $ (2,658)   $  (798)
                                   =========  ==========  ==========  ==========

                                                       1999
                                   ---------------------------------------------
                                   Consumer   Industrial                Total
                                    Group       Group     Corporate    Company
                                   ---------  ----------  ----------  ----------
   Income (loss) before interest
     taxes and minority interest    $ 8,815     $10,332   ($2,699)     $16,448

   Interest expense                  (3,528)       (430)     (813)      (4,771)

   Income tax (expense) benefit      (2,112)     (3,845)    1,364       (4,593)

   Minority interest                   (402)         -         -          (402)
                                   ---------  ----------  ----------  ----------

   Net income (loss)                $ 2,773     $ 6,057   ($2,148)     $ 6,682
                                   =========  ==========  ==========  ==========

                                                       1998
                                   ---------------------------------------------
                                   Consumer   Industrial                Total
                                    Group       Group     Corporate    Company
                                   ---------  ----------  ----------  ----------
   Income (loss) before interest
     taxes and minority interest    $10,279     $ 2,859   ($3,063)     $10,075

   Interest expense                  (3,181)     (1,085)     (406)      (4,672)

   Income tax (expense) benefit      (2,199)       (667)    1,304       (1,562)

   Minority interest                   (705)         -         -          (705)
                                   ---------  ----------  ----------  ----------

   Net income (loss)                $ 4,194     $ 1,107   ($2,165)     $ 3,136
                                   =========  ==========  ==========  ==========

<PAGE>
      Operating  profit of the Consumer  Group in 2000 and 1999 includes charges
      for  restructuring  and related costs of $1,641 and $1,917,  respectively,
      and the  Industrial  Group  includes  the gain on sale of the Graphite and
      Lubricants  division of $9,636 in 1999.  Certain  corporate  expenses have
      been  allocated  based upon  respective  segment sales.  Interest  expense
      (where  not  specifically   identified)  has  been  allocated  based  upon
      identifiable assets by segment. Income taxes are determined based upon the
      respective effective tax rates.


                             Consumer   Industrial                Total
                              Group       Group     Corporate    Company
                            ---------  ----------  ----------  ----------
       Identifiable
        assets:
         2000               $ 74,093    $  5,134     $  7,491     $ 86,718
         1999                 75,609       5,978       11,301       92,888
         1998                 71,152      15,622        5,856       92,630

       Depreciation and
        amortization:
         2000               $  1,644    $    295     $    582     $  2,521
         1999                  1,485         392          730        2,607
         1998                  1,722         532          680        2,934

       Expenditures
        for plant and
        equipment:
         2000               $  1,585    $     68     $    333     $  1,986
         1999                    802         150           58        1,010
         1998                    853         502          148        1,503


                                            Operating          Identifiable
                             Revenues      Profit (Loss)          Assets
                            ------------  --------------     ----------------
      Foreign operations:
       2000:
          Canada            $  9,515        $   620             $  6,741
          Mexico              23,943          2,664               27,910
          United Kingdom       1,124            (16)                 616

       1999:
          Canada            $  8,943        $   557             $  5,784
          Mexico              22,127          4,890               22,921
          United Kingdom       1,080            (13)                 633

       1998:
          Canada            $  8,537        $   892             $  6,712
          Mexico              20,925          4,455               17,803
          United Kingdom       1,056             (4)                 789




<PAGE>


(14)  COMMITMENTS AND CONTINGENCIES:
      ------------------------------

      Under an  agreement  with  Warner  Bros.  Consumer  Products,  the Company
      manufactures  and  markets  in the  U.S.  and  Canada a  complete  line of
      products   featuring   the  famous  Looney   Tunes(R)  and   Scooby-Doo(R)
      characters.  Under the terms of the agreement,  as amended, the Company is
      obligated  to pay a total of $1 million  through  December  2000,  for the
      right to market  and sell all types of  pencils,  pens,  crayons,  chalks,
      markers,  paints, art kits and related items.  Through September 30, 2000,
      the Company has paid $931,000  ($881,000  earned by Warner Bros.)  through
      September 30, 2000.

      The Company has entered into employment  agreements with three  executives
      which  provide  for the  continuation  of  salary  (currently  aggregating
      $48,000 per month) and related employee benefits for a period of 24 months
      following their termination of employment under certain changes in control
      of the Company.  In addition,  all options  held by the  executives  would
      become  immediately  exercisable  upon the date of termination  and remain
      exercisable  for 90 days  thereafter.  The Company has also  entered  into
      various  agreements  with nine  additional  employees  which  provide  for
      continuation of salaries  (averaging $8,500 each per month) for periods up
      to 24 months under certain circumstances.

      The  Company   leases  a  distribution   center  in  Macon,   Georgia  for
      approximately  $365,000  per year  and in  November  2000  opened a leased
      manufacturing  and  distribution  facility in Mexico at an initial  annual
      rental of $792,000 per year. The Company also leases certain manufacturing
      equipment under a new five-year noncancelable operating lease arrangement.
      The rental  expense  under this lease was $262,000 in 2000.  Annual future
      minimum rental payments are  approximately  $372,000 per year through 2004
      and $93,000 in 2005.  Rental expense under a previous  equipment lease was
      $417,000 in 1999 and 1998.

      The  Company's  New  Castle  Refractories  Division  has  entered  into an
      agreement to perpetually  license certain silicon carbide refractory brick
      technology from Carborundum Corporation.  Under the terms of the perpetual
      license agreement, the Company is obligated to pay a fixed sum of $450,000
      with payments made through 2001 or earlier,  if certain  stipulated  sales
      levels are reached.  The Company also executed  related  agreements to, at
      its option,  purchase  manufactured product from Carborundum  Corporation,
      and which require Carborundum  Corporation to reimburse the Company for up
      to $225,000 for product development.

      The  Company,  in the  normal  course  of  business,  is party in  certain
      litigation.  In 1996, a decision was rendered by the Superior Court of New
      Jersey in Hudson County finding the Company  responsible for $1.94 million
      in certain  environmental  clean-up  costs  relating  to a claim under New
      Jersey's  Environmental  Clean-Up  Responsibility  Act  (ECRA)  by a  1984
      purchaser of industrial property from the Company.  All subsequent appeals
      were denied and as a result of the judgment, the Company paid $3.6 million
      in 1998 to satisfy this claim in full, including all accrued interest. The
      Company continued to pursue other responsible  parties for indemnification
      and/or  contribution to the payment of this claim (including its insurance
      carriers)  and in fiscal 2000 the  Company  reached  settlements  with its
      various  insurers  for  reimbursement  of  legal  costs in the  amount  of
      $653,000   (reflected  as  a  reduction  in  selling  and   administrative
      expenses).  In 1999,  a pending  malpractice  suit was  dismissed  and the
      Company has appealed the decision.

      The Company has  evaluated  the merits of other  litigation  and  believes
      their  outcome will not have a further  material  effect on the  Company's
      future results of operations or financial position.

      The Company  assesses  the extent of  environmental  matters on an ongoing
      basis. In the opinion of management (after taking into account accruals of

<PAGE>
      approximately  $145,000 as of September 30, 2000), the resolution of these
      matters  will not  materially  affect  the  Company's  future  results  of
      operations or financial position.


(15)  SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
      ------------------------------------------------------
      (In Thousands, Except Per Share Data):
      --------------------------------------

                2000:               First      Second      Third       Fourth
                -----             ----------  ---------   ---------   ---------

       Revenues                     $19,625    $22,392     $33,390     $27,472
       Operating income (loss)       (1,358)       612       3,489         282
       Income (loss) before taxes
          and minority interest      (2,291)      (377)      2,320        (897)
       Minority interest                 15        (27)        (44)        (31)
       Net income (loss)             (1,500)      (247)      1,516        (567)
       Earnings (loss) per share:(a)
          Basic                        (.45)      (.08)        .48        (.18)
          Diluted                      (.45)      (.08)        .48        (.18)


                1999:               First      Second      Third       Fourth
                -----             ----------  ---------   ---------   ---------

       Revenues                     $22,807    $24,916     $36,916     $30,050
       Operating income                 110      9,180       4,841       2,317
       Income (loss) before taxes
          and minority interest        (999)     7,937       3,474       1,265
       Minority interest                 35       (193)       (189)        (55)
       Net income (loss)               (600)     4,331       2,126         825
       Earnings (loss) per share:(a)
          Basic                        (.17)      1.26         .63         .24
          Diluted                      (.17)      1.20         .59         .23


(a) Calculated  independently for each period, and consequently,  the sum of the
    quarters may differ from the annual amount.




<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
           FOR THE THREE YEARS ENDED SEPTEMBER 30, 2000, 1999 and 1998

                      Balance at   Additions    Additions to         Balance
                      Beginning    Charged      (Deductions          at Close
   Description        Of Period    to Income    From) Reserves      of Period
-------------------  ------------ ----------   ---------------    --------------

Allowance for Doubtful Accounts:
--------------------------------

Year Ended
 September 30, 2000   $1,428,541   $  218,795    $ (228,428) (2)    $ 1,418,908
                      ==========   ==========    ==========         ===========

Year Ended
 September 30, 1999   $1,369,815   $  191,356    $ (132,630) (2)    $ 1,428,541
                      ==========   ==========    ==========         ===========

Year Ended                                       $  616,205  (1)
 September 30, 1998   $1,004,537   $  105,126    $ (356,053) (2)    $ 1,369,815
                      ==========   ==========    ==========         ===========

(1) Additions to reserve of Mexico subsidiary from acquisition of Vinci de
    Mexico, S.A. de C.V., and other adjustments.
(2) Write-off of accounts considered to be uncollectible (net of recoveries).



<PAGE>



                    CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



   Shareholders and Board of Directors of
   Dixon Ticonderoga Company


     We hereby  consent to the  incorporation  by reference in the  Registration
   Statements on Form S-8 (File Nos.  33-20054,  33-23380 and  333-22205) and on
   Form S-2 (File No.  333-22119)  of Dixon  Ticonderoga  Company of our report,
   dated  December  6, 2000,  except as to Note 4, for which the date is January
   10,  2001,  relating to the  financial  statements  and  financial  statement
   schedule, which appear in this Form 10-K.





   PricewaterhouseCoopers LLP
   Tampa, Florida
   January 12, 2001



<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         ---------------------------------------------------------------
         FINANCIAL  DISCLOSURES
         ----------------------

         None.






<PAGE>


                                    PART III


ITEM 10. DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  COMPANY
         -----------------------------------------------------

Certain  information  required  under this Item with  respect to  Directors  and
Executive  Officers  will be contained in the  Company's  2000 Proxy  Statement,
pursuant to Regulation 14A, which is incorporated herein by reference.

The  following  table sets forth the names and ages of the  Company's  Executive
Officers,  together with all positions and offices held with the Company by such
Executive  Officers.  All  Executive  Officers  are  subject to  re-election  or
re-appointment  by the  Board  of  Directors  at the  first  Directors'  Meeting
succeeding the next Annual Meeting of shareholders.

             Name                Age                     Title
             ----                ---                     -----

Gino N. Pala                      72    Chairman  of the  Board  since  February
(Father-in-law of Richard F.            1989;   President  and  Chief  Executive
Joyce)                                  Officer or  Co-Chief  Executive  Officer
                                        since 1978.

Richard F. Joyce                  45    Vice   Chairman   of  the  Board   since
(Son-in-law of Gino N. Pala)            January  1990;  President  and  Co-Chief
                                        Executive   Officer  since  March  1999;
                                        prior   thereto   President   and  Chief
                                        Operating Officer, Consumer Group, since
                                        March,1996; Executive Vice President and
                                        Chief  Legal  Executive  since  February
                                        1991; Corporate Counsel since July 1990.

Richard A. Asta                   44    Executive  Vice President of Finance and
                                        Chief  Financial  Officer since February
                                        1991;    prior   thereto   Senior   Vice
                                        President - Finance and Chief  Financial
                                        Officer  since March 1990;  and Director
                                        since May 1999.

Leonard D. Dahlberg, Jr.          49    Executive Vice President of operations
                                        since  August   2000:   Executive   Vice
                                        President  of  Procurement  since  April
                                        1999;  prior  there  to  Executive  Vice
                                        President, Industrial Group, since March
                                        1996;   Executive   Vice   President  of
                                        Manufacturing/Consumer Products division
                                        since August 1995; Senior Vice President
                                        of  Manufacturing  since  February 1993;
                                        Vice  President of  Manufacturing  since
                                        March 1990.

John Adornetto                    59    Vice President and Corporate  Controller
                                        since   January   1991;   prior  thereto
                                        Corporate   Controller  since  September
                                        1978.

Diego Cespedes Creixell           42    President,  Grupo  Dixon  S.A.  de C.V.,
                                        since August 1996 and Director since May
                                        2000.



<PAGE>


ITEM 11.  EXECUTIVE  COMPENSATION
          -----------------------

      Information  required  under this Item will be contained in the  Company's
2000 Proxy Statement which is incorporated herein by reference.


ITEM 12. SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT
         ---------------------------------------------------------------------

      Information  required  under this Item will be contained in the  Company's
2000 Proxy Statement which is incorporated herein by reference.


ITEM 13. CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
         --------------------------------------------------
      Information  required  under this Item will be contained in the  Company's
2000 Proxy Statement which is incorporated herein by reference.






<PAGE>


                                     PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT  SCHEDULE,  AND  REPORTS  ON  FORM 8-K
            --------------------------------------------------------------------

(a)   Documents filed as part of this report:
      --------------------------------------

        1.  Financial statements
            --------------------
            See index under Item 8. Financial Statements and Supplementary Data.

        2.  Exhibits
            --------
               The  following  exhibits are required to be filed as part of this
            Annual Report on Form 10-K:

            (2)  a.  Share Purchase  Agreement by and among Dixon Ticonderoga
                     de Mexico,  S.A. de C.V., and by Grupo Ifam,  S.A. de C.V.,
                     and  Guillermo  Almazan  Cueto with  respect to the capital
                     stock  of  Vinci  de  Mexico,   S.A.   de  C.V.,   (English
                     translation). 4

            (2)  b.  Asset Purchase  Agreement dated February 9, 1999, by and
                     between  Dixon  Ticonderoga  Company,  as Seller and Asbury
                     Carbons, Inc., as Buyer. 6

            (3)  (i) Restated Certificate of Incorporation. 2

            (3) (ii) Amended and Restated Bylaws. 1

            (4)  a.  Specimen Certificate of Company Common Stock. 2

            (4)  b.  Amended and Restated Stock Option Plan. 3

            (10) a.  First  Modification  of Amended and  Restated  Revolving
                     Credit  Loan and  Security  Agreement  by and  among  Dixon
                     Ticonderoga Company,  Dixon Ticonderoga,  Inc., First Union
                     Commercial  Corporation,  First National Bank of Boston and
                     National Bank of Canada. 1

            (10) b.  12.00% Senior  Subordinated  Notes,  Due 2003,  Note and
                     Warrant Purchase Agreement. 1

            (10) c.  12.00% Senior Subordinated Notes, Due 2003, Common Stock
                     Purchase Warrant Agreement. 1

            (10) d.  License and Technological  Agreement between Carborundum
                     Corporation and New Castle Refractories Company, a division
                     of Dixon Ticonderoga Company. 1

            (10) e.  Equipment   Option  and  Purchase   Agreement   between
                     Carborundum   Corporation   and  New  Castle   Refractories
                     Company, a division of Dixon Ticonderoga Company. 1

            (10) f.  Product   Purchase   Agreement   between   Carborundum
                     Corporation and New Castle Refractories Company, a division
                     of Dixon Ticonderoga Company. 1

            (10) g.  Second  Modification  of Amended and Restated  Revolving
                     Credit  Loan and  Security  Agreement  by and  among  Dixon
                     Ticonderoga Company,  Dixon Ticonderoga,  Inc., First Union
                     Commercial  Corporation,  First National Bank of Boston and
                     National Bank of Canada. 5

            (10) h.  Third  Modification  of Amended and  Restated  Revolving
                     Credit  Loan  and  Security  Agreement,  Amendment  to Loan
                     Documents  and  Assignment  by and among Dixon  Ticonderoga
                     Company,  Dixon  Ticonderoga,  Inc., First Union Commercial
                     Corporation,  BankBoston, N.A., National Bank of Canada and
                     LaSalle Bank. 7

            (10) i.  First  Modification  of Amended and  Restated  Term Loan
                     Agreement  and  Assignment  by and among Dixon  Ticonderoga
                     Company,  Dixon  Ticonderoga,  Inc., First Union Commercial
                     Corporation,  BankBoston, N.A., National Bank of Canada and
                     LaSalle Bank. 7

            (10) j.  Amendment No. 1 to 12.00% Senior Subordinated Notes, Due
                     2003, Note and Warrant Purchase Agreement.7

            (10) k.  Fourth  Modification  of Amended and Restated  Revolving
                     Credit Loan and Security Agreement.

            (10) l.  Second  Modification  of Amended and Restated  Term Loan
                     Agreement.

            (10) m.  Amendment No. 2 to Note and Warrant Purchase Agreement.

            (21)     Subsidiaries of the Company

1 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1996, file number 0-2655, filed in Washington, D.C.

2 Incorporated by reference to the Company's  quarterly  report on Form 10-Q for
the period ended March 31, 1997, file number 0-2655, filed in Washington, D.C.

3 Incorporated by reference to Appendix 3 to the Company's Proxy Statement dated
January 27, 1997, filed in Washington, D.C.

4  Incorporated  by reference to the Company's  current report on Form 8-K dated
December 12, 1997, filed in Washington D.C.

5 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1998, file number 0-2615, filed in Washington, D.C.

6  Incorporated  by reference to the Company's  current report on Form 8-K dated
March 2, 1999, filed in Washington D.C.

7 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1999, file number 0-2615 filed in Washington, D.C.

(b)     Reports on Form 8-K:
        -------------------

        None.


<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934,  the Company has duly caused this Annual  Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                      DIXON TICONDEROGA COMPANY


                                      /s/ Gino N. Pala
                                      ----------------------
                                      Gino N. Pala, Chairman of Board and
                                      Co-Chief Executive Officer

        Pursuant to the Securities  Exchange Act of 1934,  this Annual Report on
Form  10-K has been  signed  below by the  following  persons  on  behalf of the
Company in the capacities indicated.




        /s/  Gino N. Pala
        ----------------------------
        Gino N. Pala                Chairman of Board, Co-Chief
                                    Executive Officer and Director
                                    Date: January 12, 2001
        /s/  Richard F. Joyce
        ----------------------------
        Richard F. Joyce            Vice Chairman of Board,
                                    Co-Chief Executive Officer,
                                    President and Director
                                    Date: January 12, 2001
        /s/  Richard A. Asta
        ----------------------------
        Richard A. Asta             Executive Vice President of
                                    Finance, Chief Financial
                                    Officer and Director
                                    Date: January 12, 2001
        /s/  Diego Cespedes Creixell
        ----------------------------
        Diego Cespedes Creixell     President, Grupo Dixon S.A. de
                                    C.V., and Director
                                    Date: January 12, 2001
        /s/  Harvey L. Massey
        ----------------------------
        Harvey L. Massey            Director
                                    Date: January 12, 2001
        /s/  Philip M. Shasteen
        ----------------------------
        Philip M. Shasteen          Director
                                    Date: January 12, 2001
        /s/  Ben Berzin, Jr.
        ----------------------------
        Ben Berzin, Jr.             Director
                                    Date: January 12, 2001
        /s/  Kent Kramer
        ----------------------------
        Kent Kramer                 Director
                                    Date: January 12, 2001
        /s/  John Ritenour
        ----------------------------
        John Ritenour               Director
                                    Date: January 12, 2001






<PAGE>

                                                                  Exhibit (10) k

                   FOURTH MODIFICATION OF AMENDED AND RESTATED
                  REVOLVING CREDIT LOAN AND SECURITY AGREEMENT
                  ============================================

            THIS FOURTH  MODIFICATION  dated as of August 4, 2000 (this  "Fourth
Modification")  of Amended  and  Restated  Revolving  Credit  Loan and  Security
Agreement  dated as of July 10,  1996,  as amended by, among other  things,  the
First  Modification of Amended and Restated  Revolving  Credit Loan and Security
Agreement dated as of September 26, 1996, the Second Modification of Amended and
Restated  Revolving Credit Loan and Security Agreement dated as of May 19, 1998,
and the Third  Modification  of Amended and Restated  Revolving  Credit Loan and
Security  Agreement,  Amendment to Loan  Documents  and  Assignment  dated as of
September 30, 1999 (the "Credit  Agreement"),  among Dixon  Ticonderoga  Company
("Dixon  Ticonderoga") and Dixon Ticonderoga,  Inc. ("DT Canada"),  as Borrowers
(collectively,  the "Borrowers"),  the lenders named therein (the "Lenders") and
First Union Commercial Corporation, as Agent (in such capacity, the "Agent").

                                   W I T N E S S E T H :
                                   - - - - - - - - - -

            WHEREAS,  pursuant to the Credit  Agreement,  the Lenders  have made
Loans and other extensions of credit to the Borrowers which remain outstanding;

            WHEREAS,  the  Borrowers  have  requested  that  the  Agent  and the
Lenders,  and the Agent and the Lenders are willing to, amend certain  covenants
contained  in the Credit  Agreement,  but only on the terms and  conditions  set
forth herein;

            NOW, THEREFORE,  in consideration of the premises and for other good
and  valuable  consideration  the  receipt  and  sufficiency  of which is hereby
acknowledged, the parties hereto hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

            Section  1.1  Defined  Terms.   Unless  otherwise   defined  herein,
capitalized  terms  used  herein  have  the  meanings  assigned  in  the  Credit
Agreement.

                                   ARTICLE II
                                   AMENDMENTS

            Section 2.1.  Amendment to Section 1.1 (Defined Terms).  Section 1.1
of the Credit  Agreement is hereby amended by (a) deleting in their entirety the
following definitions: "Adjusted LIBOR Rate", "Adjusted Prime Rate", "Applicable
Percentage" and "Subordinated Debt" and (b) adding the following new definitions
in the alphabetically appropriate places:

            "Adjusted LIBOR Rate" means the LIBOR Rate plus 2.25% per annum.

            "Adjusted Prime Rate" means the Prime Rate plus 0.75% per annum.

            "Consolidated  Interest and Dividend  Coverage  Ratio" means for any
      Reference Period, the ratio of (a) EBITDA for such Reference Period to (b)
      the sum of (i) Consolidated  Interest  Expense for such Reference  Period,
      plus (ii) capitalized  interest for such Reference Period,  plus (iii) all
      cash  dividends  accrued or paid on capital  stock of the Borrower  during
      such Reference Period.

            "Consolidated  Interest  Expense"  means for any  Reference  Period,
      Interest  Expense of the Borrower and its  consolidated  Subsidiaries  for
      such Reference Period.
<PAGE>
            "Consolidated  Net Income" means for any Reference  Period,  (a) the
      net income (or  deficit) of the  Borrower  and its  Subsidiaries  for such
      period  (taken as a  cumulative  whole),  after  deducting  all  operating
      expenses,  provisions  for all taxes  and  reserves  and all other  proper
      deductions,  all  determined  in  accordance  with GAAP,  less (b) the net
      income  (or  deficit)  of any  Subsidiary  that is less than  wholly-owned
      (other than Dixon-Mexico).

            "Dixon-Mexico  Financing"  shall have the  meaning  assigned to such
      term in section 8.4.

            "Fixed  Charges"  means,  for any period,  (a) the  aggregate of (i)
      Borrower's  interest  expense,  (ii)  non-financed  Capital  Expenditures,
      including those made with proceeds from the Revolving Credit Loans and not
      subsequently  refinanced within the applicable period  (including,  to the
      extent not otherwise  included in Fixed  Charges,  payments  under Capital
      Leases),  (iii) scheduled  payments of principal on all  Indebtedness  for
      borrowed money during such period; provided, however, that for each period
      ending on or after June 30,  2001,  such  scheduled  payments of principal
      shall be  calculated  for the twelve month period  immediately  succeeding
      such period,  and (iv) payments of all taxes on or measured by income, all
      determined in accordance  with GAAP, less (b) the  then-current  amount of
      the  Subordinated  Debt  Reserve,  less  (c)  the  amount  of the  Minimum
      Availability Reserve (as defined in Exhibit A to the Credit Agreement).

            "Fourth  Modification"  means the Fourth Modification of Amended and
      Restated Revolving Credit Loan and Security Agreement,  dated as of August
      4, 2000.

            "Fourth  Modification  Effective Date" means the first date on which
      the  conditions   precedent   specified  in  Article  III  of  the  Fourth
      Modification  shall have been satisfied or the satisfaction  thereof shall
      have been waived in accordance with the terms hereof.

            "Interest  Expense" means as applied to any Person with reference to
      any period,  interest  expense of such Person for such  period,  including
      amortization of debt discount and expense and imputed  interest on Capital
      Lease  Obligations  properly  chargeable  to income  during such period in
      accordance GAAP; provided, however, Interest Expense shall not include any
      expense  chargeable to income  resulting  from a reduction of the exercise
      price of the Common Stock Purchase  Warrants  dated  September 29, 1998 to
      purchase a total of 300,000 shares of the Borrower's common stock.

            "Reference  Period" means as of any date of determination,  the four
      (4)  consecutive  full fiscal  quarters  ended most recently prior to such
      date.

            "Subordinated  Debt" means the Amended Senior Subordinated Notes Due
      September 26, 2003 of DTC payable to each of The Equitable  Life Assurance
      Society of the United  States,  John  Hancock Life  Insurance  Company and
      Signature 1A (Cayman), Ltd.

            "Subordinated  Debt Reserve" shall have the meaning assigned to such
      term in Exhibit A.

            Section 2.2. Amendment to Section 2.7 (Unused Line Fee). Section 2.7
is hereby  amended by (a)  inserting  "(a)" after the phrase "an unused line fee
equal to" and (b) inserting the following phrase immediately prior to the period
at the end of the section:  " and (b) an amount equal to $10,000 per month which
shall be due and  payable  on the first  Business  Day of each  month  beginning
January 2001 through and including December 2003".

            Section 2.3. Amendment to Section 2 (The Loans; Interest;  Fees; and
Proceeds of the Loans). (a) The following new Section 2.16 is hereby added after
Section 2.15:
<PAGE>
            "2.16 Prepayments; Commitment Reductions. (a) If the Borrower sells,
      transfers  or  otherwise  disposes  of any  Inventory  pursuant to Section
      8.4(b),  (i) the Borrowing Base Certificate then in effect shall be deemed
      to be reduced by an amount  equal to the dollar  amount  assigned  to such
      Inventory in said Borrowing Base  Certificate,  after giving effect to the
      eligibility  standards set forth in the  definition of Eligible  Inventory
      and the  advance  rates  therefor  set  forth in  Exhibit  A, and (ii) the
      Borrower shall,  simultaneously in connection with such sale,  transfer or
      other  disposition,  prepay  Revolving Credit Loans in an aggregate amount
      equal to the dollar  amount  assigned to such  Inventory in the  Borrowing
      Base  Certificate  then in effect.  Concurrently  with any prepayment made
      pursuant to clause (ii) above,  the Revolving  Credit  Commitment shall be
      permanently reduced by an amount equal to the amount of such prepayment.

            (b) If the Borrower  sells,  transfers or otherwise  disposes of any
      Equipment pursuant to Section 8.4(b),  the Borrower shall,  simultaneously
      in connection with such sale,  transfer or other  disposition,  prepay the
      Term  Loan in an amount  equal to the  greater  of (i) 80% of the  orderly
      liquidation  value  of such  Equipment,  as  determined  by the  appraisal
      performed in June 1999 by Collateral  Evaluation  Associates in connection
      with the  execution  and  delivery  of this  Agreement  and the Term  Loan
      Agreement,  or (ii) 100% of the net book value of such  Equipment as shown
      on the Borrower's most recent balance sheet delivered to the Agent and the
      Lenders. Notwithstanding the forgoing, the Borrower shall have prepaid the
      Term  Loan (x) on or before  December  31,  2001 in an amount  equal to at
      least $1,360,000  relating to the sale,  transfer or other  disposition of
      assets located at the Borrower's Versailles,  Missouri facility and (y) on
      March  31,  2003 in an  amount  equal to  $560,000  relating  to the sale,
      transfer  or  other  disposition  of  assets  located  at  the  Borrower's
      Sandusky,  Ohio  facility;  it being  understood  that to the  extent  the
      Borrower sells,  transfers or otherwise  disposes (A) Equipment located at
      the  Versailles  facility  after  December  31,  2001  and  has  made  the
      prepayment  pursuant to clause (x) above or (B)  Equipment  located at the
      Sandusky  facility  after  March  31,  2003 and has  made  the  prepayment
      pursuant to clause (y) above,  then the Borrower  shall not be required to
      prepay the Term Loan pursuant to the first sentence hereof with respect to
      Equipment  thereafter  sold,  transferred  or  otherwise  disposed at such
      facility.  Each  prepayment  of the Term  Loan  pursuant  to this  section
      2.16(b)  shall be  applied  to the  installments  of such Term Loan in the
      inverse order of the scheduled maturities of such installments.".

            Section 2.4  Amendment  to Section 7  (Affirmative  Covenants).  The
following new Section 7.14 is hereby added after Section 7.13:

            "7.14 Dixon-Mexico Certifications.  The Borrower shall, on or before
      the last day of each fiscal quarter,  deliver to the Agent and the Lenders
      a  certificate,  in form and substance  satisfactory  to the Agent and the
      Lenders,  from the chief financial or accounting  officer of the Borrower,
      certifying  to the Lenders that (i) no defaults or events of default shall
      have  occurred  and  be  continuing  with  respect  to  the   Dixon-Mexico
      Financing,  (ii)  Dixon-Mexico  has not received a notice of  termination,
      non-extension or similar notice with respect to the Dixon-Mexico Financing
      and (iii) there  shall exist no  limitation,  direct or  indirect,  on the
      ability of Dixon-Mexico to (A) declare or pay any dividend on, or make any
      payment  on  account  of,  its  capital  stock or (B) make any  payment on
      account of any intercompany loan or obligation.".

            Section  2.5.  Amendment  of Section  8.4  (Disposition  of Assets).
Section 8.4 of the Credit  Agreement is hereby  amended by deleting said section
in its entirety and inserting in lieu thereof the following:

      "Sell, lease,  transfer,  convey or otherwise dispose of any of its assets
      or property  except for (a) sales of Inventory  in the ordinary  course of
      business,  (b) sales,  transfers or other  dispositions to Dixon-Mexico of
      Inventory and Equipment in the amounts and from the locations set forth on

<PAGE>
      Exhibit R, (c) sales of Equipment during any twelve (12) month period with
      an aggregate value of less than $100,000; provided, however, that no later
      than  three  (3)  Business  Days  prior  to any  sale,  transfer  or other
      disposition  pursuant to clause (b) above,  the Borrower  shall deliver to
      the  Agent  and  the  Lenders  a   certificate,   in  form  and  substance
      satisfactory  to the Agent and the  Lenders,  from the chief  financial or
      accounting  officer  of  the  Borrower,  certifying  to the  Lenders  that
      Dixon-Mexico has obtained committed financing from a financial institution
      satisfactory  to the Agent and the  Lenders  in an  amount  sufficient  to
      accommodate  projected borrowings under the "7-up Case" referred to in the
      Projections  dated May 16, 2000 and delivered to the Agent and the Lenders
      but in no event in an aggregate  amount less than the U.S.  equivalent  of
      Fourteen   Million   U.S.   Dollars   ($14,000,000)   (the   "Dixon-Mexico
      Financing")."

            Section 2.6 Amendment to Section 8.7  (Restrictions on Dividends and
Other  Payments).  Section  8.7 of the  Credit  Agreement  is hereby  amended by
deleting the first proviso in said section.

            Section 2.7.  Amendment to Section 8.10  (Leverage  Ratio).  Section
8.10 of the Credit  Agreement is hereby  amended by deleting said section in its
entirety and inserting in lieu thereof the following:

      "Permit the  Leverage  Ratio to be greater  than the ratio shown below for
      fiscal quarters ended during the period corresponding thereto:

                     Dates                                Ratio


      March 31, 2000 through June 30, 2000             7.35 to 1.0
      July 1, 2000 through September 30, 2000          5.80 to 1.0
      October 1, 2000 through December 31, 2000        5.00 to 1.0
      January 1, 2001 through March 31, 2001           5.50 to 1.0
      April 1, 2001 through June 30, 2001              5.40 to 1.0
      July 1, 2001 through  September  30, 2001        4.40 to 1.0
      October 1, 2001 through March 31, 2002           3.80 to 1.0
      April 1, 2002 through June 30, 2002              4.40 to 1.0
      July 1, 2002 through September 30, 2002          3.60 to 1.0
      October 1, 2002 through March 31, 2003           3.00 to 1.0
      April 1, 2003 through June 30, 2003              3.60 to 1.0
      July 1, 2003 and thereafter                     3.00 to 1.0".

            Section  2.8.  Amendment  to Section  8.11  (Fixed  Charge  Coverage
Ratio).  Section 8.11 of the Credit Agreement is hereby amended by deleting said
section in its entirety and inserting in lieu thereof the following:

      "Permit the Fixed  Charge  Coverage  Ratio to be less than the ratio shown
      below for fiscal quarters ended during the period corresponding thereto:

                     Dates                              Ratio

      June 30, 2000 through March 31, 2001           1.20 to 1.0
      April 1, 2001 through June 30, 2001            1.15 to 1.0
      July 1, 2001 through September 30, 2001        1.05 to 1.0
      October 1, 2001 through March 31, 2002         1.10 to 1.0
      April 1, 2002 through June 30, 2002            1.20 to 1.0
      July 1, 2002 through March 31, 2003            1.00 to 1.0
      April 1, 2003 through June 30, 2003            1.20 to 1.0
      July 1, 2003 through March 31, 2004            1.00 to 1.0
      April 1, 2004 and thereafter                   1.20 to 1.0".

<PAGE>
            Section  2.9.   Amendment  to  Section  8.18  (Capital   Expenditure
Limitation). Section 8.18 of the Credit Agreement is hereby amended by inserting
the  following  proviso  prior to the period at the end  thereof:  ";  provided,
however,  in no event shall the aggregate amount of Capital  Expenditures exceed
Three Million U.S. Dollars ($3,000,000) in any fiscal year".

            Section  2.10.  Amendment to Section 8.21 (Funded Debt  Limitation).
Section 8.21 of the Credit Agreement is hereby amended by deleting the reference
to "$3,000,000" and inserting in lieu thereof a reference to "$15,000,000".

            Section  2.11.  Amendment  to Section 8  (Negative  Covenants).  The
following new Section 8.31 is hereby added to the end of Section 8:

            "8.31 Interest and Dividend Coverage Ratio.  Permit the Consolidated
      Interest and Dividend Coverage Ratio to be less than the ratio shown below
      for fiscal quarters ended during the period corresponding thereto:

                   Dates                                Ratio

      June 30, 2000 through June 30, 2001            1.60 to 1.0
      July 1, 2001 through June 30, 2002             1.90 to 1.0
      July 1, 2002 and thereafter                    2.30 to 1.0".

            Section 2.12. Amendment to Exhibit A (Borrowing  Base/Availability).

            (a) Exhibit A to the Credit Agreement is hereby amended by inserting
      the following at the end of Section I thereto:

      "The Agent hereby  establishes a reserve  against the Borrowing Base in an
      amount equal to Two Million U.S. Dollars  ($2,000,000) which reserve shall
      be in effect during the term of the Agreement  (the "Minimum  Availability
      Reserve").

      Until such time as the Subordinated  Debt shall have been paid in full and
      completely discharged,  in addition to the reserve established pursuant to
      the forgoing paragraph, the Agent hereby establishes an additional reserve
      against  the  Borrowing  Base  (the  "Subordinated  Debt  Reserve").   The
      Subordinated  Debt Reserve  shall be maintained in the amounts shown below
      during the period corresponding thereto:

                     Dates                                Reserve

      December 31, 2000 through June 29, 2001            $2,000,000
      June 30, 2001 through August 30,  2001             $5,000,000
      August 31, 2001 through September 29, 2001         $5,500,000
      September 30, 2001 through June 29, 2002           $4,000,000
      June 30, 2002 through August 30, 2002              $4,500,000
      August 31, 2002 through September 29, 2002         $5,000,000
      September 30, 2002 through June 29, 2003           $2,000,000
      June 30, 2003 through August 30, 2003              $4,500,000
      August 31, 2003 through September 29, 2003         $5,500,000
<PAGE>
      So long as no  Default  or Event of  Default  shall  have  occurred  or be
      continuing,  and no Default or Event of Default  shall exist after  giving
      effect to the  payment  by the  Borrower  of any  amount  owing  under the
      Subordinated  Debt, the Subordinated Debt Reserve for any period set forth
      above  may,  in the  absolute  and sole  discretion  of the  Agent and the
      Lenders,  be reduced on the date of each  payment  made by the Borrower on
      the  Subordinated  Debt by an amount equal to the amount of the payment so
      made;  provided that on the first day of any  succeeding  period set forth
      above,  the Agent shall  again  establish a reserve for such period in the
      amount set forth above.".

            (b) Exhibit A to the Credit  Agreement is hereby further  amended by
      deleting  clause (i) in Paragraph I in its entirety and  inserting in lieu
      thereof the following:  "(i) against Eligible  Inventory,  the sublimit is
      initially Twenty Million U.S. Dollars  ($20,000,000)  and shall be reduced
      in conjunction with the sale,  transfer or other  disposition of Inventory
      pursuant to Section  8.4(b) of the Credit  Agreement by an amount equal to
      57% of the dollar amount  assigned to such Inventory in the Borrowing Base
      Certificate then in effect, and".

            Section 2.13 Amendment to the Credit Agreement. The Credit Agreement
is hereby amended by inserting a new Exhibit R in the form of Exhibit A attached
hereto.

                                   ARTICLE III
                                 EFFECTIVE DATE

            This  Fourth  Modification  shall  become  effective  as of the date
hereof but only upon (a)  receipt by the Agent of  counterparts  of this  Fourth
Modification,  duly  executed  and  delivered by the  Borrowers,  the other Loan
Parties,  the Agent and the  Lenders,  (b)  receipt  by the Agent of the  Second
Modification,  dated as of the date  hereof,  to the Term Loan  Agreement,  duly
executed and delivered by the Borrowers,  the other Loan Parties,  the Agent and
the  Lenders,  (c)  receipt  by the  Agent  of a true  and  correct  copy of the
Amendment No. 2, dated as of the date hereof,  to the Note and Warrant  Purchase
Agreement,  dated as of  September  26,  1996,  as amended  (the "Note  Purchase
Agreement")  entered  into by and  among  the  Borrowers  and  the  Subordinated
Lenders,  which  amendment  shall be in form and substance  satisfactory  to the
Agent and the Lenders, (d) receipt by the Agent of that portion of the Amendment
Fee (as defined  below) due on the Fourth  Modification  Effective  Date and (e)
receipt by the Agent or its  designee of payment in full in cash of the invoiced
and unpaid fees and expenses of the Agent's professionals.

                                   ARTICLE IV
                                  MISCELLANEOUS

            Section 4.1 Continuing Effect of the Credit Agreement. The Borrowers
and the other Loan Parties,  the Agent and the Lenders  hereby  acknowledge  and
agree that the Credit  Agreement shall continue to be and shall remain unchanged
(except as  expressly  amended  herein) and shall be in full force and effect in
accordance with its terms.

            Section 4.2 No Waiver; Other Defaults or Events of Default.  Nothing
contained in this Fourth  Modification  shall be construed or  interpreted or is
intended  as a waiver of any rights,  powers,  privileges  or remedies  that the
Agent or the Lenders  have or may have under the Credit  Agreement  or any other
Loan Document.
<PAGE>
            Section 4.3  Representations  and Warranties.  The Borrowers  hereby
represent  and warrant as of the date hereof that,  after giving  effect to this
Fourth  Modification,  (a) no Default or Event of Default  has  occurred  and is
continuing and (b) all representations and warranties of the Borrowers contained
in the Loan  Documents  (with such term  being  deemed to  include  this  Fourth
Modification) are true and correct in all material respects with the same effect
as if made on and as of such date.

            Section 4.4 Payment of Fees and Expenses. (a) The Borrowers agree to
pay to the Agent,  for the account of each Lender who executes this Amendment on
a pro rata basis,  a fee in an amount equal to $206,875 (the  "Amendment  Fee").
The  Amendment  Fee shall be deemed  to be  earned  on the  Fourth  Modification
Effective  Date  and  shall  be  payable  as  follows:  (i)  1/3 on  the  Fourth
Modification  Effective  Date,  (ii) 1/3 on September  30, 2000 and (iii) 1/3 on
December 31, 2000.

            (b) The Borrowers  agree to pay or reimburse the Agent on demand for
      all its reasonable out-of-pocket costs and expenses incurred in connection
      with the preparation and execution of this Fourth Modification, including,
      without  limitation,  the reasonable fees and  disbursements of counsel to
      the Agent.

            Section 4.5 Counterparts.  This Fourth  Modification may be executed
by the parties  hereto in any number of separate  counterparts,  and all of said
counterparts  taken  together  shall be  deemed to  constitute  one and the same
instrument.

            Section 4.6 GOVERNING LAW. THIS FOURTH  MODIFICATION  AND THE RIGHTS
AND OBLIGATIONS  OF THE PARTIES UNDER THIS FOURTH MODIFICATION SHALL BE GOVERNED
BY, AND CONSTRUED AND  INTERPRETED  IN ACCORDANCE  WITH, THE LAW OF THE STATE OF
NEW YORK.

            Section  4.7  Consent of Loan  Parties.  Each Loan Party  hereby (i)
consents  to the  transactions  contemplated  hereby and (ii)  acknowledges  and
agrees that the Credit Agreement and the Guarantees (and all collateral security
therefor) are, and shall remain, in full force and effect after giving effect to
this  Fourth  Modification  and all  other  prior  modifications  to the  Credit
Agreement.
<PAGE>
            IN WITNESS  WHEREOF,  the  parties  hereto  have  caused this Fourth
Modification  to be duly  executed  and  delivered  by  their  proper  and  duly
authorized officers as of the date first above written.


                            DIXON TICONDEROGA COMPANY


                             By:    /s/ Richard A. Asta
                             Title: Treasurer


                            DIXON TICONDEROGA INC.

                             By:    /s/ Richard A. Asta
                             Title: Treasurer


                             FIRST UNION COMMERCIAL CORPORATION, as Agent and a
                             Lender


                             By:    /s/ Scott Goldstein
                             Title: Vice President


                             FLEET CAPITAL CORPORATION, as a Lender


                             By:    /s/ Christopher Nairne
                             Title: Assistant Vice President


                             LASALLE BANK, NATIONAL ASSOCIATION, as a Lender


                             By: /s/ Roger N. Arsham
                             Title: Vice President
<PAGE>
ACKNOWLEDGED AND AGREED


DIXON EUROPE, LIMITED


By:       /s/ Richard A. Asta
Title:   Secretary


GRUPO DIXON, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


VINCI de MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


VINCI MANUFACTURA, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


COMERCIALIZADORA DIXON, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


SERVIDIX, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:
<PAGE>
DIXON INDUSTRIAL MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


DIXON TICONDEROGA de MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:

<PAGE>
                                                                  Exhibit (10) l

                   SECOND MODIFICATION OF AMENDED AND RESTATED
                               TERM LOAN AGREEMENT

            THIS SECOND  MODIFICATION  dated as of August 4, 2000 (this  "Second
Modification")  of Amended and Restated Term Loan Agreement dated as of July 10,
1996,  as amended by the First  Modification  of Amended and Restated  Term Loan
Agreement  and   Assignment   dated  as  of  September  30,  1999  (the  "Credit
Agreement"),  among Dixon  Ticonderoga  Company ("Dixon  Ticonderoga") and Dixon
Ticonderoga,  Inc. ("DT Canada"), as Borrowers (collectively,  the "Borrowers"),
the  lenders  named  therein  (the   "Lenders")   and  First  Union   Commercial
Corporation, as Agent (in such capacity, the "Agent").

                                   W I T N E S S E T H :
                                   - - - - - - - - - -

            WHEREAS,  pursuant to the Credit  Agreement,  the Lenders  have made
Loans and other extensions of credit to the Borrowers which remain outstanding;

            WHEREAS,  the  Borrowers  have  requested  that  the  Agent  and the
Lenders,  and the Agent and the Lenders are willing to, amend certain  covenants
contained  in the Credit  Agreement,  but only on the terms and  conditions  set
forth herein;

            NOW, THEREFORE,  in consideration of the premises and for other good
and  valuable  consideration  the  receipt  and  sufficiency  of which is hereby
acknowledged, the parties hereto hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

            Section  1.1  Defined  Terms.   Unless  otherwise   defined  herein,
capitalized  terms  used  herein  have  the  meanings  assigned  in  the  Credit
Agreement.

                                   ARTICLE II
                                   AMENDMENTS

            Section 2.1.  Amendment to Section 1.1 (Defined Terms).  Section 1.1
of  the  Credit  Agreement  is  hereby  amended  by  adding  the  following  new
definitions in the alphabetically appropriate places:

            "Second  Modification"  means the Second Modification of Amended and
      Restated Term Loan Agreement, dated as of August 4, 2000.

            "Second  Modification  Effective Date" means the first date on which
      the  conditions   precedent   specified  in  Article  III  of  the  Second
      Modification  shall have been satisfied or the satisfaction  thereof shall
      have been waived in accordance with the terms hereof.

            Section 2.2.  Amendment to Section 3  (Payments).  The following new
Section 3.7 is hereby added after Section 3.6.

            "3.7  Prepayments.  If the  Borrower  sells,  transfers or otherwise
      disposes  of any  Equipment  pursuant to section  8.4(b) of the  Revolving
      Credit  Agreement  (as amended by the Fourth  Modification),  the Borrower
      shall,  simultaneously  in  connection  with such sale,  transfer or other
      disposition, prepay the Term Loan in an amount equal to the greater of (i)
      80% of the orderly  liquidation value of such Equipment,  as determined by
      the appraisal performed in June 1999 by Collateral  Evaluation  Associates
      in connection  with the  execution and delivery of this  Agreement and the
      Revolving  Credit  Agreement,  or (ii) 100% of the net book  value of such
      Equipment as shown on the Borrower's  most recent balance sheet  delivered
<PAGE>
      to the Agent and the Lenders  Notwithstanding  the forgoing,  the Borrower
      shall have prepaid the Term Loan (x) on or before  December 31, 2001 in an
      amount  equal to at least  $1,360,000  relating  to the sale,  transfer or
      other disposition of assets located at the Borrower's Versailles, Missouri
      facility and (y) on March 31, 2003 in an amount equal to $560,000 relating
      to the  sale,  transfer  or other  disposition  of assets  located  at the
      Borrower's Sandusky, Ohio facility; it being understood that to the extent
      the Borrower sells,  transfers or otherwise disposes (A) Equipment located
      at the  Versailles  facility  after  December  31,  2001  and has made the
      prepayment  pursuant to clause (x) above or (B)  Equipment  located at the
      Sandusky  facility  after  March  31,  2003 and has  made  the  prepayment
      pursuant to clause (y) above,  then the Borrower  shall not be required to
      prepay the Term Loan pursuant to the first sentence hereof with respect to
      Equipment  thereafter  sold,  transferred  or  otherwise  disposed at such
      facility.  Each  prepayment  of the Term Loan pursuant to this Section 3.7
      shall be  applied  to the  installments  of such Term Loan in the  inverse
      order of the scheduled maturities of such installments.".

                                   ARTICLE III
                                 EFFECTIVE DATE

            This  Second  Modification  shall  become  effective  as of the date
hereof but only upon (a)  receipt by the Agent of  counterparts  of this  Second
Modification,  duly  executed  and  delivered by the  Borrowers,  the other Loan
Parties,  the Agent and the  Lenders,  (b)  receipt  by the Agent of the  Fourth
Modification,  dated as of the date hereof,  to the Revolving Credit  Agreement,
duly executed and delivered by the Borrowers,  the other Loan Parties, the Agent
and the  Lenders,  (c)  receipt by the Agent of a true and  correct  copy of the
Amendment No. 2, dated as of the date hereof,  to the Note and Warrant  Purchase
Agreement  dated as of  September  26,  1996,  as amended  (the  "Note  Purchase
Agreement")  entered  into by and  among  the  Borrowers  and  the  Subordinated
Lenders,  which a Amendment  shall be in form and substance  satisfactory to the
Agent and the Lenders, (d) receipt by the Agent of that portion of the Amendment
Fee (as defined  below) due on the Second  Modification  Effective  Date and (e)
receipt by the Agent or its  designee of payment in full in cash of the invoiced
and unpaid fees and expenses of the Agent's professionals.

                                   ARTICLE IV
                                  MISCELLANEOUS

            Section 4.1 Continuing Effect of the Credit Agreement. The Borrowers
and the other Loan Parties,  the Agent and the Lenders  hereby  acknowledge  and
agree that the Credit  Agreement shall continue to be and shall remain unchanged
(except as  expressly  amended  herein) and shall be in full force and effect in
accordance with its terms.

            Section 4.2 No Waiver; Other Defaults or Events of Default.  Nothing
contained in this Second  Modification  shall be construed or  interpreted or is
intended  as a waiver of any rights,  powers,  privileges  or remedies  that the
Agent or the Lenders  have or may have under the Credit  Agreement  or any other
Loan Document.

            Section 4.3  Representations  and Warranties.  The Borrowers  hereby
represent  and warrant as of the date hereof that,  after giving  effect to this
Second  Modification,  (a) no Default or Event of Default  has  occurred  and is
continuing and (b) all representations and warranties of the Borrowers contained
in the Loan  Documents  (with such term  being  deemed to  include  this  Second
Modification) are true and correct in all material respects with the same effect
as if made on and as of such date.
<PAGE>
            Section 4.5 Counterparts.  This Second  Modification may be executed
by the parties  hereto in any number of separate  counterparts,  and all of said
counterparts  taken  together  shall be  deemed to  constitute  one and the same
instrument.

            Section 4.6 GOVERNING LAW. THIS SECOND  MODIFICATION  AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS SECOND  MODIFICATION SHALL BE GOVERNED
BY, AND CONSTRUED AND  INTERPRETED  IN ACCORDANCE  WITH, THE LAW OF THE STATE OF
NEW YORK.

            Section  4.7  Consent of Loan  Parties.  Each Loan Party  hereby (i)
consents  to the  transactions  contemplated  hereby and (ii)  acknowledges  and
agrees that the Credit Agreement and the Guarantees (and all collateral security
therefor) are, and shall remain, in full force and effect after giving effect to
this  Second  Modification  and all  other  prior  modifications  to the  Credit
Agreement.
<PAGE>
            IN WITNESS  WHEREOF,  the  parties  hereto  have  caused this Second
Modification  to be duly  executed  and  delivered  by  their  proper  and  duly
authorized officers as of the date first above written.


                            DIXON TICONDEROGA COMPANY


                             By:    /s/ Richard A. Asta
                             Title: Treasurer


                            DIXON TICONDEROGA INC.

                             By:    /s/ Richard A. Asta
                             Title: Treasurer


                             FIRST UNION COMMERCIAL CORPORATION, as Agent and a
                             Lender


                             By:    /s/ Scott Goldstein
                             Title: Vice President


                             FLEET CAPITAL CORPORATION, as a Lender


                             By:    /s/ Christopher Nairne
                             Title: Assistant Vice President


                             LASALLE BANK, NATIONAL ASSOCIATION, as a Lender


                             By: /s/ Roger N. Arsham
                             Title: Vice President
<PAGE>
ACKNOWLEDGED AND AGREED


DIXON EUROPE, LIMITED


By:       /s/ Richard A. Asta
Title:   Secretary


GRUPO DIXON, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


VINCI de MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


VINCI MANUFACTURA, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


COMERCIALIZADORA DIXON, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


SERVIDIX, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:
<PAGE>
DIXON INDUSTRIAL MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:


DIXON TICONDEROGA de MEXICO, S.A. de C.V.


By:       /s/ Diego Cespedes Creixell
Title:
<PAGE>
                                                                  Exhibit (10) m

                            DIXON TICONDEROGA COMPANY
                            195 INTERNATIONAL PARKWAY
                             HEATHROW, FLORIDA 32746


                                                      Dated as of August 4, 2000


TO EACH OF THE PURCHASERS LISTED IN
     THE ATTACHED SCHEDULE A

                               Amendment No. 2 to
                       Note and Warrant Purchase Agreement

Ladies and Gentlemen:

            Reference is made to the Note and Warrant Purchase Agreement,  dated
as of September  26, 1996,  as amended by Amendment  No. 1, dated as of November
18, 1999 (as so amended, the "Note Agreement"), among Dixon Ticonderoga Company,
a Delaware corporation (the "Company"), and The Equitable Life Assurance Society
of the United States,  John Hancock Mutual Life Insurance  Company and Signature
1A (Cayman), Ltd. (collectively,  the "Purchasers"). The Purchasers hold 100% of
the Notes  outstanding  under the Note Agreement.  Capitalized terms used herein
without definition have the meanings specified therefor in the Note Agreement.

            The  Company  requests  the  consent  of the  Purchasers  to certain
amendments of the Note  Agreement and the Notes,  and the Purchasers are willing
to consent to such  amendments,  on the terms and subject to the  conditions set
forth herein.

            The parties agree as follows:

            1.  Amendments.  1.1.  Amendment of Section 7. Section 7 of the Note
Agreement  is hereby  amended  by  renumbering  paragraphs  (e)  through  (j) as
paragraphs (f) through (k) and inserting a new paragraph (e) after paragraph (d)
as follows:

            "(e) not later than  thirty  days after the end of each  month,  (x)
      consolidated  balance sheets of the Company and its Subsidiaries as at the
      end of such month and related  consolidated  statements of income and cash
      flows of the Company and its Subsidiaries for such month, setting forth in
      each  case  in  comparative   form  the   consolidated   figures  for  the
      corresponding months of the previous fiscal year, all in reasonable detail
      and  certified  by  a  principal  financial  officer  of  the  Company  as
      presenting  fairly,  in  accordance  with  generally  accepted  accounting
<PAGE>
      principles  (except for the absence of notes  thereto and the statement of
      stockholders'  equity and cash flows) applied (except as specifically  set
      forth therein) on a basis  consistent with such prior fiscal periods,  the
      information  contained  therein,  subject to changes resulting from normal
      year-end  adjustments,  (y) a  comparison  of actual  results to  original
      budget and (z) such  supplemental  information as the holders of the Notes
      may reasonably request;"

            1.2  Amendment  of  Section  10.1(h).  Section  10.1(h)  of the Note
Agreement is hereby amended and restated to read in its entirety as follows:

            "(h) Dixon Mexico may become and remain  liable with respect to Debt
      in an aggregate  principal amount outstanding not to exceed at any time of
      determination $15,000,000; provided that any increase in the Debt of Dixon
      Mexico above $8,000,000 may be incurred only to the extent that assets are
      transferred to or otherwise acquired by Dixon Mexico to support such Debt;
      and provided,  further,  that the Debt of the Company and its Subsidiaries
      under the Credit  Agreement is reduced to the extent  necessary to conform
      to the limits on availability set forth therein;"

            1.3.  Amendment of Section 10.3.  Section 10.3 of the Note Agreement
is hereby amended to delete the word "and" at the end of paragraph (f), renumber
paragraph (g) as paragraph (h) and insert a new paragraph (g) as follows:

            "(g) the  Company  may make and own  Investments  in a  wholly-owned
      Subsidiary  in China  engaged in pencil  slat  manufacturing  or, if local
      requirements  prevent it from  conducting its pencil slat venture in China
      through  a  wholly-owned   Subsidiary,   the  Company  may  make  and  own
      investments in a pencil slat  manufacturing  facility in China,  in either
      case in an aggregate amount not to exceed $1,500,000; and"

            1.4.  Amendment  of  Section  10.4(a).  Section  10.4(a) of the Note
Agreement is hereby amended and restated to read in its entirety as follows:
<PAGE>
            "(a) The Company will not  directly or  indirectly  declare,  order,
pay, make or set apart any sum or property for any Restricted  Payment,  and the
Company will not and will not permit any Subsidiary to make or become  obligated
to make any Restricted Investment."

            1.5.  Amendment  of  Section  10.4(c).  Section  10.4(c) of the Note
Agreement is hereby deleted in its entirety.

            1.6.  Amendment of Section 10.6.  Section 10.6 of the Note Agreement
is hereby amended and restated to read in its entirety as follows:

            "10.6.  Interest and Dividend Coverage.  The Company will not at any
      time permit the  Consolidated  Interest and Dividend  Coverage Ratio to be
      less than 1.70 to 1.0 (if the date of determination  occurs on or prior to
      September  30,  1996);  1.85 to 1.0 (if the date of  determination  occurs
      after  September 30, 1996 and on or prior to September 30, 1997);  2.25 to
      1.0 (if the date of  determination  occurs after September 30, 1997 and on
      or prior to September 30, 1998); 2.30 to 1.0 (if the date of determination
      occurs after  September  30, 1998 and on or prior to September  30, 1999);
      1.60 to 1.0 (if the date of determination  occurs after September 30, 1999
      and  on or  prior  to  June  30,  2001);  1.9  to  1.0  (if  the  date  of
      determination  occurs  after  June  30,  2001  and on or prior to June 30,
      2002); and 2.30 to 1.0 (if the date of determination occurs after June 30,
      2002)."

            1.7.  Amendment  of  Section  10.8(c).  Section  10.8(c) of the Note
Agreement is hereby amended and restated to read in its entirety as follows:

            "(c) sell, lease,  abandon or otherwise dispose of any of its assets
      (except in a  transaction  permitted  by  subdivision  (b) of this section
      10.8), except that

                  (i)  the  Company  and its  Subsidiaries  may sell their goods
            and transfer goods to each other in the ordinary course of business;

                  (ii) the Company and its  Subsidiaries may dispose of obsolete
            inventory and equipment in the ordinary  course of business and idle
            assets,  principally  buildings,  left  vacant due to the  Company's
            consolidation program and may  transfer other assets to Dixon Mexico
<PAGE>
            in  connection with the Company's consolidation program; and

                  (iii) the Company  and its  Subsidiaries  may sell  additional
            assets, in each case for a consideration at least 85% of which is in
            the  form of  cash or cash  equivalents  of the  type  described  in
            section 10.3(a), if such consideration is at least equal to the Fair
            Market  Value of the assets to be sold and if the  proceeds  thereof
            shall,  on or prior to the 180th day following such sale, be applied
            either

                        (x)   to make a Permitted Acquisition; or

                        (y)   to the  prepayment  of Debt of the Company,  first
                to  Superior Debt of  the Company and second to the Notes in the
                manner contemplated by section 9.5;

            it being  agreed that if the  Company  shall not prior to such 180th
            day have  performed  or given  notice to the holders of the Notes of
            its election to perform  under one of the  foregoing  clauses (x) or
            (y), it shall be deemed to have  elected to perform  the  obligation
            set forth in the foregoing clause (y), and the provisions of section
            9.5 shall be applicable;

      provided that in no event shall the Company sell assets  comprising all or
      substantially  all of the assets of the Consumer  Products  Group or Dixon
      Mexico."

            1.8. Additional Section 10.17. The following section is hereby added
immediately following section 10.16 of the Note Agreement:

            "10.17.  Capital  Expenditures.  The Company  will not, and will not
      permit any of its  Subsidiaries to, make any Capital  Expenditure,  except
      that the Company and its Subsidiaries may make Capital Expenditures if the
      aggregate  amount of all such  Capital  Expenditures  in the then  current
      fiscal year of the Company, calculated as of the date of each such Capital
      Expenditure, shall not exceed $3,000,000."
<PAGE>
            1.9.  Amendment of Certain  Definitions.  The  definition of "Excess
Sale  Proceeds" in section 14 of the Note  Agreement is hereby amended to delete
the  reference  therein  to  section  10.8(c)(iv)(y)  and  insert in its place a
reference to section  10.8(c)(iii)(y),  and the following defined term is hereby
amended and restated to read in its entirety as follows:

            "Interest  Expense:  as applied to any Person with  reference to any
      period,  interest  expense  of such  Person  for  such  period,  including
      amortization of debt discount and expense and imputed  interest on Capital
      Lease  Obligations  properly  chargeable  to income  during such period in
      accordance with generally accepted  accounting  principles,  provided that
      Interest  Expense  shall not  include  any  expense  chargeable  to income
      resulting from a reduction of the exercise price of the Warrants."

            1.10. Additional Definitions. The following defined terms are hereby
added to section 14 of the Note Agreement in the appropriate alphabetical order:

            "Capital Expenditures:  for any period, the aggregate cost (less the
      amount of trade-in  allowance included in such cost) of all capital assets
      (as  defined by  generally  accepted  accounting  principles  applied on a
      consistent  basis)  acquired by the Company  during such period,  plus all
      Capital Lease  Obligations with respect to any Capital Lease entered into,
      renewed, assumed or guaranteed by the Company during such period.

            "Permitted   Acquisition:   the   acquisition  of  the  business  or
      substantially all of the assets or stock of any Person,  provided that the
      following conditions are met:

                 (a) the total purchase price for any one such acquisition shall
            not exceed $5,000,000, and the aggregate purchase price for all such
            acquisitions made in any fiscal year shall not exceed $10,000,000;

                 (b) the  Company  shall give the  holders of the Notes  written
            notice  not  less  than 15 days in  advance  of the  making  of such
            acquisition,  which  notice  shall  include  the  date  and  details
            regarding the form of the acquisition, a description of the stock or
<PAGE>
            assets to be acquired and the location of the assets to be acquired;

                  (c)  the  assets  or  business  to  be  acquired  shall  be in
            substantially  the same or similar  line of business as that engaged
            in by the Company;

                  (d) no  condition  or event shall exist which  constitutes  an
            Event  of  Default  or  Potential  Event  of  Default  prior  to  or
            immediately after giving effect to such acquisition; and

                  (e) the  Company  shall have  delivered  to the holders of the
            Notes a compliance  certificate  demonstrating  that, on a pro forma
            basis,  such  acquisition  will  not  create  a  default  under  any
            financial  covenant  contained  herein for the four fiscal  quarters
            ended immediately prior to the proposed date of such acquisition.

            "PIK Notes:  additional  Notes  issued  from time to time  hereafter
      pursuant  to the Notes as  amended,  in respect of  interest  on the Notes
      payable in kind, in the form of Exhibit E."

            1.11. Adjustment of Warrant Exercise Price. On the date which is the
day following the thirtieth Trading Day (as hereinafter  defined)  following the
date hereof,  the Warrant Price (as defined in the Warrants) will be adjusted to
the lower of (a) $6.74 and (b) the average  daily  closing  price for the Common
Stock on the American Stock Exchange during such 30 Trading Days;  whereupon the
Warrant Price will be so adjusted,  until further  adjusted from time to time in
accordance  with the terms of the  Warrants.  For purposes of this section 1.10,
"Trading  Days" means days during which the American Stock Exchange was open for
trading.

            1.12.  Amendment  of  Exhibits.  Exhibit A to the Note  Agreement is
hereby  amended and  restated to read in its  entirety as set forth in Exhibit A
attached to this  Amendment  No. 2. A new Exhibit E is hereby  added to the Note
Agreement in the form attached to this Amendment No. 2.

            1.13.  References to "Notes".  From and after the  effectiveness  of
this  Amendment  No. 2 and the  execution  and delivery of the amended  Notes as
contemplated  by Section 3.3, any reference to the "Notes" in the Note Agreement
<PAGE>
and in the Guaranty  Agreement  shall be deemed to refer to the Notes as amended
pursuant  to this  Amendment  No. 2 and shall be deemed also to refer to the PIK
Notes.

            2. Limited Waiver.  The Purchasers  hereby waive compliance with the
covenants set forth in section 10.4 of the Note Agreement for the quarters ended
December 31, 1999 and March 31,  2000,  only to the extent that such default was
caused by the Company  making  repurchases of stock through March 31, 2000 while
an Event of Default was  continuing.  The Company  represents and warrants that,
except for the Company's non-compliance with section 10.4 of the Note Agreement,
no condition or event exists which  constitutes an Event of Default or Potential
Event of Default. This waiver is limited to the matters described herein and may
not be construed to extend to any other or  subsequent  matters,  whether or not
disclosed.

            3. Conditions to Effectiveness. The effectiveness of the amendments,
waivers and other agreements  contemplated  hereby is subject to the fulfillment
to the satisfaction of the Purchasers of the following conditions:

            3.1. No Defaults.  As of the date hereof (after giving effect to the
amendments  provided herein),  no Event of Default or Potential Event of Default
shall have occurred or be continuing.

            3.2.   Representations  and  Warranties.   The  representations  and
warranties of the Company  contained in the Note Agreement shall be correct when
made and at the date hereof,  except to the extent a  particular  representation
and warranty expressly relates solely to an earlier date.

            3.3. Amended Notes. The Company shall have executed and delivered to
each of the  Purchasers  an amended Note,  substantially  in the form set out in
Exhibit A, in the principal amount specified opposite each such Purchaser's name
in Schedule A (in each case against  surrender by such Purchaser of the original
Note being  replaced by such  amended  Note),  and in each case having  attached
thereto an amended  endorsement of Guaranty  executed by the Subsidiaries of the
Company.
<PAGE>
            3.4.  Credit  Agreement.  The  amendments to the several  agreements
constituting  the Credit  Agreement  as defined in the Note  Agreement  shall be
reasonably satisfactory in form and substance to the Purchasers.  A complete and
correct signed copy of each such agreement as amended in effect on the effective
date hereof shall have been delivered to the Purchasers, and no other agreements
or instruments shall exist relating to the terms of such borrowings.

            3.5.  Guaranties.  The Company shall have caused each  Subsidiary of
Dixon  Mexico to  execute  and  deliver  to the  holders of the Notes a Guaranty
Agreement  with  respect  to the  obligations  of the  Company  under  the  Note
Agreement  and the  Notes,  substantially  in the form of  Exhibit D to the Note
Agreement,  with such changes to such form as may be  appropriate to reflect the
identity and circumstances of the guarantor.

            3.6. Consents, Agreements. The Company shall have obtained all other
consents and waivers necessary in connection with the transactions  contemplated
hereby,  and such  consents and waivers shall be in full force and effect on the
date hereof.  A complete  and correct copy of each of such  consents and waivers
shall have been delivered to the Purchasers.

            3.7. Proceedings and Documents.  All corporate and other proceedings
in  connection  with the  transactions  contemplated  by this  Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
the Purchasers and their special  counsel,  and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may reasonably request.

            3.8.  Fees. (a) The Company shall have paid to each Purchaser (or to
the Person  designated  by such  Purchaser for payment in Schedule A of the Note
Agreement),  in  immediately  available  funds,  a transaction  fee equal to the
amount  listed  under  "Fees" in  Schedule A hereof,  by  crediting  the account
specified  below its name in Schedule A of the Note Agreement for the payment of
transaction fees.

            (b) The Company  shall have paid the fees and  disbursements  of the
Purchasers'  special  counsel  incurred  in  connection  with  the  transactions
contemplated by  this  Agreement and set forth  in a  statement delivered to the
<PAGE>
Company on or prior to the date hereof.

            4. Ratification.  Except as amended hereby, all of the provisions of
the Note Agreement shall remain in full force and effect.

            5. Miscellaneous.  This Agreement shall be binding upon and inure to
the benefit of and be enforceable  by the  respective  successors and assigns of
the  parties  hereto,  whether so  expressed  or not.  THIS  AGREEMENT  SHALL BE
CONSTRUED AND ENFORCED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK.  The headings in this  Agreement are for purposes of reference only
and shall not limit or otherwise  affect the meaning hereof.  This Agreement may
be executed in any number of  counterparts,  each of which shall be an original,
but all of which together shall constitute one instrument.

                      [signatures appear on following page]
<PAGE>
            If the Purchasers  are in agreement with the foregoing,  please sign
the form of agreement on the accompanying counterparts of this letter and return
one of the same to the  Company,  whereupon  this letter  shall become a binding
agreement between the Purchasers and the Company.

                                Very truly yours,

                            DIXON TICONDEROGA COMPANY


                             By: /s/ Richard A. Asta, Treasurer

The foregoing Amendment is hereby agreed to as of the date hereof.

THE EQUITABLE LIFE ASSURANCE SOCIETY
  OF THE UNITED STATES


By:    /s/ James R. Wilson
Name:  James R. Wilson
Title: Investment Officer


JOHN HANCOCK LIFE INSURANCE COMPANY, formerly
known as JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY


By:    /s/ Daniel C. Budde
Name:  Daniel C. Budde
Title: Managing Director


SIGNATURE 1A (CAYMAN), LTD.

By:  John Hancock Life Insurance Company,
     Portfolio Advisor


By:    /s/ Daniel C. Budde
Name:  Daniel C. Budde
Title: Managing Director
<PAGE>

                                                                      SCHEDULE A


                             SCHEDULE OF PURCHASERS

                Name and Address
                  of Purchaser                                  Fees
                  ------------                                  ----

THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES                                                $27,272.73




JOHN HANCOCK LIFE INSURANCE COMPANY                          $10,606.06




SIGNATURE 1A (CAYMAN), LTD.                                  $12,121.21
<PAGE>
                                                                       EXHIBIT A

                            DIXON TICONDEROGA COMPANY

             AMENDED SENIOR SUBORDINATED NOTE DUE SEPTEMBER 26, 2003

PPN# 255860 A*9
R-                                                            New York, New York
$                                                             September 26, 1996


            DIXON TICONDEROGA  COMPANY, a Delaware  corporation (the "Company"),
for value  received,  hereby  promises to pay to  _____________,  or  registered
assigns,  the principal  amount of  $_____________  on September 26, 2003,  with
interest  (computed on the basis of twelve 30-day  months) on the unpaid balance
of such principal  amount at the Applicable Rate (as  hereinafter  defined) from
the date hereof,  payable  semi-annually on each March 31 and September 30 after
the date hereof,  commencing  March 31, 1997,  until such unpaid  balance  shall
become due and payable (whether at maturity or at a date fixed for prepayment or
by  declaration  or  otherwise),  and with  interest  on any  overdue  principal
(including any overdue prepayment of principal) and premium, if any, and (to the
extent permitted by applicable law) on any overdue interest,  at a rate equal to
the  Applicable  Rate then in effect plus 2.00% per annum  until  paid,  payable
semi-annually  as aforesaid or, at the option of the holder  hereof,  on demand.
Payments of principal and interest on this Note shall be made in lawful money of
the  United  States of America at the  principal  office of The Chase  Manhattan
Bank,  N.A., in the Borough of Manhattan,  the City and State of New York, or at
such other office or agency in such Borough as the Company shall have designated
by written notice to the holder of this Note as provided in the Note and Warrant
Purchase Agreements referred to below.

            The term  "Applicable  Rate" as used herein with respect to any date
on which interest is payable,  means an interest rate per annum equal to (a) for
the period from September 26, 1996 to July 9, 2000,  12.00%,  (b) for the period
from July 10,  2000 to June 30,  2002,  13.50% and (c) for the  period  from and
after July 1, 2002, 12.25%.

            On any interest payment date, the Company shall, with respect to any
portion  of the  interest  payable  on  such  interest  payment  date  which  is
attributable  to  the  excess  of  the  Applicable  Rate  over  12.00%  for  the
semi-annual  period ending on such interest payment date (the "Excess Portion"),
in lieu of the cash payment of the Excess  Portion,  issue to the holder of this
Note an  additional  Note,  in the form of  Exhibit  E to the  Note and  Warrant
Purchase  Agreements  referred to below,  having a principal amount equal to the
Excess Portion, in full payment of the Excess Portion.

            This Note is one of the Company's Amended Senior  Subordinated Notes
due  September  26,  2003 (the  "Notes"),  originally  issued  in the  aggregate
principal  amount of  $16,500,000 on September 26, 1996 pursuant to the Note and
Warrant Purchase Agreements, each dated as of September 26, 1996, and amended by
Amendment  No. 1 thereof,  dated as of November 18, 1999,  and  Amendment  No. 2
thereof,  dated as of August 4, 2000, and as from time to time further  amended,
between the  Company and certain  institutional  investors  named  therein.  The
holder  of this  Note is  entitled  to the  benefits  of such  Note and  Warrant
Purchase  Agreements,  as from  time  to  time  amended,  and  may  enforce  the
agreements of the Company  contained  therein and exercise the remedies provided
for thereby or otherwise available in respect thereof.

            This  Note  is a  registered  Note  and is  transferable  only  upon
surrender  of  this  Note  for  registration  of  transfer,  duly  endorsed,  or
accompanied  by a written  instrument of transfer duly  executed,  by the holder
hereof or such holder's  attorney duly authorized in writing.  Reference in this
Note to a "holder"  shall mean the person in whose name this Note is at the time
registered  on the  register  kept by the  Company as  provided in such Note and
Warrant  Purchase  Agreements and the Company may treat such person as the owner
of this Note for the purpose of  receiving  payment and for all other  purposes,
and the Company shall not be affected by any notice to the contrary.

            The holder of this Note is  entitled  to the  benefits  of a certain
Guaranty Agreement, dated as of September 26, 1996, by Dixon Ticonderoga,  Inc.,
a  corporation  organized  under  the laws of  Ontario,  Canada,  Dixon  Europe,
Limited,  a corporation  organized under the laws of the United  Kingdom,  Grupo
Dixon de Mexico,  S.A. de C.V., f/k/a Dixon Ticonderoga  Company de Mexico, S.A.
de C.V.,  a  corporation  organized  under the laws of  Mexico,  Bryn Mawr Ocean
Resorts, Inc., a Florida corporation,  and Ticonderoga Graphite Inc., a New York
corporation,  subsidiaries  of the Company,  and a certain  Guaranty  Agreement,
dated as of August 4, 2000,  by Grupo Dixon de Mexico,  S.A.  de C.V.,  Vinci de
Mexico, S.A. de C.V., Vinci Manufactura,  S.A. de C.V.,  Comercializadora Dixon,
S.A. de C.V., Servidix,  S.A. de C.V., Dixon Industrial Mexico, S.A. de C.V. and
Dixon  Ticonderoga de Mexico,  S.A. de C.V., each a corporation  organized under
the laws of Mexico.

            The indebtedness evidenced by this instrument is subordinated to the
prior  payment in full of the Superior Debt (as defined in such Note and Warrant
Purchase  Agreements)  pursuant to, and to the extent provided in, such Note and
Warrant Purchase Agreements.

            The Notes are under  certain  circumstances  subject to required and
optional prepayment, in whole or in part, in certain cases with a premium and in
other  cases  without a  premium,  all as  specified  in such  Note and  Warrant
Purchase Agreements.

            In case an Event of  Default,  as defined  in such Note and  Warrant
Purchase  Agreement,  shall occur and be  continuing,  the unpaid balance of the
principal  of this Note may  become  due and  payable in the manner and with the
effect provided in such Note and Warrant Purchase Agreements.

            This Note is made and delivered in New York,  New York, and shall be
governed by the laws of the State of New York.


                             DIXON TICONDEROGA COMPANY


<PAGE>
                                                                       EXHIBIT E

                               [FORM OF PIK NOTE]


                            DIXON TICONDEROGA COMPANY

             AMENDED SENIOR SUBORDINATED NOTE DUE SEPTEMBER 26, 2003

PPN# 255860 A*9
R-                                                    New York, New York
$                                                      ___________, 20__


            DIXON TICONDEROGA  COMPANY, a Delaware  corporation (the "Company"),
for value  received,  hereby  promises to pay to  _____________,  or  registered
assigns,  the principal  amount of  $_____________  on September 26, 2003,  with
interest  (computed on the basis of twelve 30-day  months) on the unpaid balance
of such principal  amount at the Applicable Rate (as  hereinafter  defined) from
the date hereof,  payable  semi-annually on each March 31 and September 30 after
the date hereof,  commencing  [March 31] [September 30], 20__, until such unpaid
balance shall become due and payable (whether at maturity or at a date fixed for
prepayment or by  declaration  or  otherwise),  and with interest on any overdue
principal  (including any overdue prepayment of principal) and premium,  if any,
and (to the extent  permitted by applicable law) on any overdue  interest,  at a
rate equal to the  Applicable  Rate then in effect  plus  2.00% per annum  until
paid, payable semi-annually as aforesaid or, at the option of the holder hereof,
on demand.  Payments  of  principal  and  interest on this Note shall be made in
lawful  money of the United  States of America  at the  principal  office of The
Chase Manhattan Bank,  N.A., in the Borough of Manhattan,  the City and State of
New York, or at such other office or agency in such Borough as the Company shall
have  designated by written notice to the holder of this Note as provided in the
Note and Warrant Purchase Agreements referred to below.

            The term  "Applicable  Rate" as used herein with respect to any date
on which interest is payable,  means an interest rate per annum equal to (a) for
the period  from July 10, 2000 to June 30,  2002,  13.50% and (b) for the period
from and after July 1, 2002, 12.25%.

            On any interest payment date, the Company shall, with respect to any
portion  of  the  interest  payable  on  such  interest  payment  date  for  the
semi-annual period ending on such interest payment date (the "PIK Interest"), in
lieu of the cash payment of the PIK  Interest,  issue to the holder of this Note
an  additional  Note having a principal  amount  equal to the PIK  Interest  and
otherwise of like tenor to this Note, in full payment of the PIK Interest.

            This Note is one of the Company's Amended Senior  Subordinated Notes
due  September  26,  2003 (the  "Notes"),  originally  issued  in the  aggregate
principal  amount of  $16,500,000 on September 26, 1996 pursuant to the Note and
Warrant Purchase Agreements, each dated as of September 26, 1996, and amended by
Amendment  No. 1 thereof,  dated as of November 18, 1999,  and  Amendment  No. 2
thereof,  dated as of August 4, 2000, and as from time to time further  amended,
between the  Company and certain  institutional  investors  named  therein.  The
holder  of this  Note is  entitled  to the  benefits  of such  Note and  Warrant
Purchase  Agreements,  as from  time  to  time  amended,  and  may  enforce  the
agreements of the Company  contained  therein and exercise the remedies provided
for thereby or otherwise available in respect thereof.

            This  Note  is a  registered  Note  and is  transferable  only  upon
surrender  of  this  Note  for  registration  of  transfer,  duly  endorsed,  or
accompanied  by a written  instrument of transfer duly  executed,  by the holder
hereof or such holder's  attorney duly authorized in writing.  Reference in this
Note to a "holder"  shall mean the person in whose name this Note is at the time
registered  on the  register  kept by the  Company as  provided in such Note and
Warrant  Purchase  Agreements and the Company may treat such person as the owner
of this Note for the purpose of  receiving  payment and for all other  purposes,
and the Company shall not be affected by any notice to the contrary.

            The holder of this Note is  entitled  to the  benefits  of a certain
Guaranty Agreement, dated as of September 26, 1996, by Dixon Ticonderoga,  Inc.,
a  corporation  organized  under  the laws of  Ontario,  Canada,  Dixon  Europe,
Limited,  a corporation  organized under the laws of the United  Kingdom,  Grupo
Dixon de Mexico,  S.A. de C.V., f/k/a Dixon Ticonderoga  Company de Mexico, S.A.
de C.V.,  a  corporation  organized  under the laws of  Mexico,  Bryn Mawr Ocean
Resorts, Inc., a Florida corporation,  and Ticonderoga Graphite Inc., a New York
corporation,  subsidiaries  of the Company,  and a certain  Guaranty  Agreement,
dated as of August 4, 2000,  by Grupo Dixon de Mexico,  S.A.  de C.V.,  Vinci de
Mexico, S.A. de C.V., Vinci Manufactura,  S.A. de C.V.,  Comercializadora Dixon,
S.A. de C.V., Servidix,  S.A. de C.V., Dixon Industrial Mexico, S.A. de C.V. and
Dixon  Ticonderoga de Mexico,  S.A. de C.V., each a corporation  organized under
the laws of Mexico.

            The indebtedness evidenced by this instrument is subordinated to the
prior  payment in full of the Superior Debt (as defined in such Note and Warrant
Purchase  Agreements)  pursuant to, and to the extent provided in, such Note and
Warrant Purchase Agreements.

            The Notes are under  certain  circumstances  subject to required and
optional prepayment, in whole or in part, in certain cases with a premium and in
other  cases  without a  premium,  all as  specified  in such  Note and  Warrant
Purchase Agreements.

            In case an Event of  Default,  as defined  in such Note and  Warrant
Purchase  Agreement,  shall occur and be  continuing,  the unpaid balance of the
principal  of this Note may  become  due and  payable in the manner and with the
effect provided in such Note and Warrant Purchase Agreements.

            This Note is made and delivered in New York,  New York, and shall be
governed by the laws of the State of New York.


                                    DIXON TICONDEROGA COMPANY

<PAGE>

                                                                  Exhibit (21)


                         2000 ANNUAL REPORT ON FORM 10-K

                           SUBSIDIARIES OF THE COMPANY

All of the Registrant's subsidiaries as of September 30, 2000, are listed below.
Subsidiaries of a subsidiary are indented.  All subsidiaries are included in the
consolidated financial statements of the Registrant.

                                                                  Percentage of
                                                   State Or           Voting
                                               Jurisdiction of      Securities
                                                Organization          Owned
                                              -----------------  ---------------

Dixon Ticonderoga, Inc.                            Canada             100%

   Grupo Dixon, S.A. de C.V.  (Subsidiary of
   Dixon Ticonderoga, Inc.)                        Mexico              97%

      Dixon Ticonderoga de Mexico, S.A. de
      C.V.  (Subsidiary of Grupo Dixon, S.A.
      de C.V.)                                     Mexico             100%

      Vinci de Mexico, S.A. de C.V.
      (Subsidiary of Grupo Dixon, S.A. de C.V.)    Mexico             100%

      Vinci Manufactura, S.A. de C.V.
      (Subsidiary of Grupo Dixon, S.A. de C.V.)    Mexico             100%

      Comercializadora Dixon, S.A. de C.V.
      (Subsidiary of Grupo Dixon, S.A. de C.V.)    Mexico             100%

      Servidix, S.A. de C.V.  (Subsidiary of
      Grupo Dixon, S.A. de C.V.)                   Mexico             100%

Dixon Industrial Mexico, S.A. de C.V.              Mexico             100%

Beijing Dixon Ticonderoga Stationery Company, Ltd. China              100%

Ticonderoga Graphite, Inc. (a)                    New York            100%

Dixon Europe, Limited                          United Kingdom         100%



(a)  Inactive