<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________________ to ___________________
Commission file number 0-5228
STRATEGIC DISTRIBUTION, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1849240
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
12136 W. Bayaud, Suite 320, Lakewood, CO 80228
(Address of principal
executive offices) (Zip Code)
303-234-1419
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Number of shares of Common Shares outstanding at November 7, 1996: 29,471,656.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
------------------------------
Page No.
Item 1 --------
- ------
Consolidated Financial Statements:
- Consolidated Balance Sheets -
September 30, 1996 (unaudited)
and December 31, 1995 1
- Consolidated Statements of Operations
(unaudited) - Three and Nine Months
Ended September 30, 1996 and 1995 2
- Consolidated Statements of Cash Flows
(unaudited) - Nine Months Ended
September 30, 1996 and 1995 3
- Notes to Consolidated Financial Statements
(unaudited) 4
Item 2
- ------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
---------------------------
Item 6
- ------
Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE>1
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 44,768,918 $ 640,360
Accounts receivable, net 22,994,917 20,104,270
Inventories 21,810,951 15,422,066
Prepaid expenses and
other current assets 759,032 588,188
Deferred tax asset 1,307,000 1,320,000
--------------- --------------
Total current assets 91,640,818 38,074,884
Property and equipment, net 4,131,855 3,352,948
Excess of cost of over fair value
of net assets acquired, net 5,658,369 5,865,691
Other assets 587,773 757,121
--------------- --------------
Total assets $ 102,018,815 $ 48,050,644
=============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued
expenses $22,229,858 $14,317,750
Current portion of long-term debt 122,859 158,553
--------------- --------------
Total current liabilities 22,352,717 14,476,303
Long-term debt 1,349,443 1,458,401
Note payable -- 4,445,000
Deferred tax liability 267,000 280,000
--------------- --------------
Total liabilities 23,969,160 20,659,704
--------------- --------------
Stockholders' equity:
Preferred stock, par value $.10
per share. Authorized:
500,000 shares; issued
and outstanding: none -- --
Common stock, par value $.10
per share. Authorized:
50,000,000 shares; issued and
outstanding: 29,456,221
and 21,716,662 shares 2,945,622 2,171,666
Additional paid-in capital 88,694,123 33,861,694
Accumulated deficit (13,540,090) (8,592,420)
Note receivable from sale of stock (50,000) (50,000)
--------------- --------------
Total stockholders' equity 78,049,655 27,390,940
--------------- --------------
Total liabilities and
stockholders' equity $102,018,815 $48,050,644
=============== ==============
See accompanying notes to consolidated financial statements.
<PAGE>2
<TABLE>
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Three months ended September 30, Nine months ended September 30,
------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 39,626,049 $ 31,926,589 $ 106,934,621 $ 84,557,180
Cost of sales 31,552,204 25,401,817 84,638,252 65,999,148
---------------- -------------- ---------------- ---------------
Gross profit 8,073,845 6,524,772 22,296,369 18,558,032
Selling, general and
administrative expenses 9,989,103 5,932,535 27,034,364 16,332,328
Restructuring charge -- -- 920,000 --
---------------- -------------- ---------------- --------------
Operating income (loss) (1,915,258) 592,237 (5,657,995) 2,225,704
Interest expense (income):
Interest expense 29,046 44,948 209,228 116,232
Interest (income) (624,121) (6,892) (919,553) (78,898)
---------------- -------------- ---------------- ----------------
Interest (income) expense, net (595,075) 38,056 (710,325) 37,334
---------------- -------------- ---------------- ----------------
Income (loss) before income taxes (1,320,183) 554,181 (4,947,670) 2,188,370
Income taxes -- 237,000 -- 950,000
---------------- -------------- ---------------- ----------------
Net income (loss) $ (1,320,183) $ 317,181 $ (4,947,670) $ 1,238,370
================ ============== ================ ================
Net income (loss) per common share $ (0.04) $ 0.01 $ (0.19) $ 0.06
================ ============== ================ ================
Average number of shares of
common stock outstanding 29,452,125 21,696,633 25,431,293 21,682,999
================ ============== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>3
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Nine months ended September 30,
-------------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ (4,947,670) $ 1,238,370
Adjustments to reconcile
net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,133,045 847,843
Restructuring charge 920,000 --
Deferred taxes -- 753,850
Changes in operating assets
and liabilities:
Accounts receivable (2,797,882) (8,676,683)
Inventories (6,388,885) (911,850)
Prepaid expenses and
other current assets (333,186) (586,205)
Accounts payable and
accrued expenses 7,394,716 5,222,074
Other, net 65,845 (9,101)
--------------- --------------
Net cash used
in operating activities (4,954,017) (2,121,702)
--------------- --------------
Cash flows from
investing activities:
Acquisition of business -- 73,576
Additions of property and
equipment (1,898,157) (651,016)
--------------- --------------
Net cash used in
investing activities (1,898,157) (577,440)
--------------- --------------
Cash flows from financing activities:
Proceeds from sale of stock, net 55,570,384 52,016
Repayment of note payable (4,445,000) 825,000
Repayment of long-term
obligations (144,652) (441,305)
--------------- --------------
Net cash provided by
financing activities 50,980,732 435,711
--------------- --------------
Increase (decrease) in cash
and cash equivalents 44,128,558 (2,263,431)
Cash and cash equivalents,
at beginning of the period 640,360 3,022,428
--------------- --------------
Cash and cash equivalents,
at end of the period $ 44,768,918 $ 758,997
=============== ==============
Supplemental cash flow information:
Taxes paid $ 42,247 $ 147,136
Interest paid 214,593 95,358
See accompanying notes to consolidated financial statements.
<PAGE>4
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. The accompanying unaudited consolidated financial statements include
the accounts of Strategic Distribution, Inc. and subsidiaries (the
"Company"). These financial statements have been prepared in accordance
with the instructions to Form 10-Q. In the opinion of management, all
adjustments (consisting of normal, recurring accruals) considered
necessary for a fair presentation of the results of operations for the
three and nine months ended September 30, 1996 and 1995 have been included.
The statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
2. On May 23, 1996, the Company sold 7,630,000 shares of Common Stock in an
underwritten public offering. The net proceeds to the Company were
approximately $55,226,600.
3. Effective April 8, 1996, the Company increased the authorized Common Stock
from 25,000,000 shares to 50,000,000 shares.
<PAGE>5
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company provides proprietary industrial supply procurement solutions to
industrial sites, primarily through its In-Plant Store(R) program. The Company
became a provider of industrial supply services in July 1990. The Company
conducts its operations primarily through three subsidiaries, Strategic
Supply, Inc. (formerly SafetyMaster Corporation), Industrial Systems
Associates, Inc. and American Technical Services Group, Inc. ("ATSG"). On
May 24, 1996 Strategic Supply, Inc. and Lewis Supply (Delaware), Inc. were
merged (the "Merger"). Strategic Supply, Inc. was the surviving
corporation in the Merger. ATSG was acquired by the Company on May 12, 1995.
At September 30, 1996, the Company had 61 operational In-Plant Store(R)
facilities, representing 32 In-Plant Store(R) customers, 24 full-service
branches, and 13 sales and service offices.
The Company has announced its intention to sell Strategic Supply, Inc. and ATSG.
At present, the Company has held preliminary discussions with several interested
parties regarding the sale of these subsidiaries, but there is no guarantee that
any sale will be consummated. For the nine months ended September 30, 1996,
Strategic Supply, Inc. and ATSG generated a combined pretax loss of
approximately $3.2 million.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1996 1995 1996 1995
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $39,626 $31,927 $106,935 $85,557
100.0% 100.0% 100.0% 100.0%
Cost of sales 79.6 79.6 79.1 78.1
Gross profit 20.4 20.4 20.9 21.9
Selling, general and
administrative expenses 25.2 18.6 25.3 19.3
Restructuring charge -- -- .9 --
Operating income (loss) (4.8) 1.8 (5.3) 2.6
Interest (income) expense, net (1.5) .1 ( .7) --
Income (loss) before income taxes (3.3) 1.7 (4.6) 2.6
Income tax expense -- .7 -- 1.1
Net income (loss) (3.3) 1.0 (4.6) 1.5
</TABLE>
<PAGE>6
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995
Revenues for the three months ended September 30, 1996 increased 24.1% to
$39,626,049 from $31,926,589 for the three months ended Septemeber 30, 1995.
During the three months ended September 30, 1996, $25,699,580 of revenues were
from In-Plant Store(R) facilities and $13,926,469 were from branches
(including sales and service locations). During the three months ended
September 30, 1995, $14,858,135 of revenues were from In-Plant Store(R)
facilities and $17,068,454 were from branches (including sales and service
locations).The increase in revenues from In-Plant Store(R) facilities came
primarily from implementation of new facilities. The decrease in branch
revenues resulted primarily from the loss of revenues from key customers and the
effect of the Merger. One In-Plant Store (R) customer (with which the Company
operates under four separate contracts) represented approximately 10.8% of the
revenues for the three months ended September 30, 1995, but less than 10% for
the three months ended September 30, 1996. Another In-Plant Store(R) customer
(with which the Company operates under six separate contracts) represented
approximately 16.0% of revenues for the three months ended September 30, 1996.
Cost of sales as a percentage of revenues remained the same for the three months
ended September 30, 1996 as compared to the three months ended September 30,
1995.
Selling, general and administrative expenses as a percentage of revenues
increased to 25.2% for the three months ended September 30, 1996 from 18.6% for
the three months ended September 30, 1995. The increase resulted primarily from
expenses incurred by the Company in connection with its expansion of the
In-Plant Store(R) program. In addition, the Company incurred approximately
$55,000 of one-time expenses associated with the Merger.
Interest income, net increased by $633,131 to $595,075 for the three months
ended September 30, 1996 from interest expense, net of $38,056 for the three
months ended September 30, 1995. The increase in interest income, net resulted
primarily from the sale of 7,630,000 shares of the Company's Common Stock on May
23,1996 and the interest income earned on the remaining net proceeds.
Income tax expense decreased by $237,000 to $0 for the three months ended
September 30, 1996. An income tax benefit was not recorded for the three months
ended Septemeber 30, 1996 because the Company does not believe that it is more
likely than not that the benefit will be realized during the current year.
The net loss for the three months ended September 30, 1996 was $1,320,183
compared to net income of $317,181 for the three months ended September 30,
1995, primarily as a result of the items previously discussed.
<PAGE>7
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Revenues for the nine months ended September 30, 1996 increased 26.5% to
$106,934,621 from $84,557,180 for the nine months ended September 30, 1995.
During the nine months ended September 30, 1996, $61,725,713 of revenues were
from In-Plant Store(R) facilities and $45,208,908 were from branches (including
sales and service locations). During the nine months ended September 30, 1995,
$37,153,554 of revenues were from In-Plant Store(R) facilities and $47,403,626
were from branches (including sales and service locations). The increase in
revenues from In-Plant Store(R) facilities came primarily from implementation of
new facilities. The decrease in branch revenues resulted primarily from the
loss of revenues from key customers and the effect of the Merger, which was
partially offset by the inclusion of the results of ATSG. One In-Plant Store(R)
customer (with which the Company operates under six separate contracts)
represented approximately 10.6% of revenues for the nine months ended September
30, 1995 but less than 10.0% of revenues for the nine months ended September 30,
1996. Another In-Plant Store(R) customer (with which the Company operates under
six separate contracts) represented approximately 13.8% of revenues for the
nine months ended September 30, 1996.
Cost of sales as a percentage of revenues increased to 79.1% for the nine months
ended September 30, 1996 from 78.1% for the nine months ended September 30,
1995. The increase resulted from the higher percentage of sales from In-Plant
Store(R) facilities which have lower margins than the branches.
Selling, general and administrative expenses as a percentage of revenues
increased to 25.3% for the nine months ended September 30, 1996 from 19.3% for
the nine months ended September 30, 1995. The increase resulted primarily from
expenses incurred by the Company in connection with its expansion of the
In-Plant Store(R) program. In addition, the Company incurred approximately
$285,000 of one-time expenses associated with the Merger and, approximately
$210,000 in charges related to branch closings for employee termination
benefits, asset write-offs and lease payments.
In connection with the Merger and the branch closings, the Company
recorded a restructuring charge aggregating $920,000 for employee
termination benefits, asset write-offs and lease payments. The restructuring
charge was equal to .9% of revenues for the nine months ended September 30,
1996. The termination benefits were paid in July 1996, and the lease payments
will be made in accordance with their original terms. The asset write-offs were
recorded in the third quarter of 1996.
Interest income, net increased by $747,659 to $710,325 for the nine months
ended September 30, 1996 from interest expense, net of $37,334 for the nine
months ended September 30, 1995. The increase in interest income, net resulted
primarily from the sale of 7,630,000 shares of Common Stock on May 23, 1996 and
the interest income earned on the remaining net proceeds.
<PAGE>8
Income tax expense decreased by $950,000 to $0 for the nine months ended
September 30, 1996. An income tax benefit was not recorded for the nine months
ended September 30, 1996 because the Company does not believe that it is more
likely than not that the benefit will be realized during the current year.
The net loss for the nine months ended September 30, 1996 was $4,947,670
compared to net income of $1,238,370 for the nine months ended September 30,
1995, primarily as a result of the items previously discussed.
Liquidity and Capital Resources
Effective as of December 31, 1995, the Company entered into a new revolving
bank credit agreement providing maximum outstanding borrowings of
$20,000,000. The credit agreement was amended on September 9, 1996 to reduce
the permitted maximum outstanding borrowings to $5,000,000. Any borrowings bear
interest at the prime rate (8.25% as of September 30, 1996) and/or a Eurodollar
rate, with a 1/4% commitment fee on the unused portion of the credit available.
The credit facility expires on January 31, 2000. The amount which the Company
may borrow under the credit facility is based upon eligible accounts receivable
which were approximately $22,995,000 at September 30, 1996. The credit facility
contains customary financial and other covenants and is collateralized by
substantially all of the assets, as well as the pledge of the capital stock,
of the Company's subsidiaries. There were no borrowings outstanding under
the credit facility as of September 30, 1996.
On May 23, 1996, the Company sold 7,630,000 shares of Common Stock
in an underwritten public offering. The net proceeds to the Company were
approximately $55,226,600. A portion of the net proceeds were used to repay
the Company's bank indebtedness. The balance of the net proceeds is available
for working capital, including the opening of In-Plant Store(R) facilities,
for general corporate purposes and for the possible acquisition of companies
engaged in the business of providing industrial supply services.
The net cash used in operating activities was $4,954,017 for the nine months
ended September 30, 1996 compared to $2,121,702 for the nine months ended
September 30, 1995. The increase resulted primarily from an increase in
inventories and the change from net income to a net loss which were partially
offset by a smaller increase in accounts receivable and an increase in accounts
payable and accrued expenses.
The Company believes that cash on hand, cash generated from operations and
cash from the Company's bank credit facility will generate sufficient funds to
permit the Company to meet its liquidity needs for the foreseeable future,
including the costs to be incurred by the Company in connection with the
anticipated expansion of the In-Plant Store(R) program.
The Company has stated its intention to seek further acquisition opportunities.
If the Company is able to identify satisfactory acquisitions, the source of
funds for such acquisitions is anticipated to be cash on hand, internally
generated cash and cash from future borrowings or sales of equity securities,
although there is no guarantee that the Company would be successful in raising
funds from such sources.
<PAGE>9
PART II
Item 6. EXHIBITS AND REPORTS ON FROM 8-K
(a). 3.1 Second Restated Certificate of Incorporation of the Company filed
June 21, 1996 with the Secretary of State of Delaware
(incorporated by reference to Exhibit 3.2 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1996).
3.3 Amended and Restated Bylaws of the Company, as amended
(incorporated by reference to Exhibits 3.2 and 3.2(a) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
10.1 Credit Agreement, dated as of December 31, 1995, between Bank of
America Illinois and the Companyd (incorporated by reference to
Exhibit 10.6 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.2 First Amendment to Credit Agreement, dated as of May 28, 1996,
amending the Credit Agreement described in Exhibit 10.1.
10.3 Second Amendment to Credit Agreement and Promissory Note, dated
as of September 9, 1996, amending the Credit Agreement described
in Exhibit 10.1.
(b). None
<PAGE>10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STRATEGIC DISTRIBUTION, INC.
Date: November 11, 1996 By: /s/ Andrew M. Bursky
----------------- --------------------
Andrew M. Bursky,
Chairman of the Board
Date: November 11, 1996 By: /s/ Charles J. Martin
----------------- ---------------------
Charles J. Martin,
Vice President, Controller and
Chief Accounting Officer
<PAGE>11
EXHIBIT INDEX
Page No.
in Manually
Signed Copy
------------
3.1 Second Restated Certificate of Incorporation of the
Company filed June 21, 1996 with the Secretary of
State of Delaware (incoporated by reference to
Exhibit 3.2 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996). --
3.3 Amended and Restated Bylaws of the Company, as amended
(incorporated by reference to Exhibits 3.2 and 3.2(a)
of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995). --
10.1 Credit Agreement, dated as of December 31, 1995,
between Bank of America Illinois and the Company
(incorporated by reference to Exhibit 10.6 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995). --
10.2 First Amendment to Credit Agreement, dated as of
May 28, 1996, amending the Credit Agreement
described in Exhibit 10.1. 14
10.3 Second Agreement to Credit Agreement, dated as of
September 9, 1996, amending the Credit Agreement
described in Exhibit 10.1. 17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000073822
<NAME> STRATEGIC DISTRIBUTION, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 44,768,918
<SECURITIES> 0
<RECEIVABLES> 22,994,917
<ALLOWANCES> 0
<INVENTORY> 21,810,951
<CURRENT-ASSETS> 91,640,818
<PP&E> 4,131,855
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,018,815
<CURRENT-LIABILITIES> 22,352,717
<BONDS> 1,349,443
<COMMON> 2,945,622
0
0
<OTHER-SE> 88,694,123
<TOTAL-LIABILITY-AND-EQUITY> 102,018,815
<SALES> 106,934,621
<TOTAL-REVENUES> 106,934,621
<CGS> 84,638,252
<TOTAL-COSTS> 84,638,252
<OTHER-EXPENSES> 27,954,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (710,325)
<INCOME-PRETAX> (4,947,670)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,947,670)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,947,670)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
<PAGE>1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT, dated as of May 28, 1996, amends and modifies a certain
Credit Agreement, dated as of December 31, 1995 (the "Credit Agreement"),
between STRATEGIC DISTRIBUTION, INC. (the "Company") and BANK OF AMERICA
ILLINOIS (the "Bank"). Capitalized terms not otherwise expressly defined herein
shall have the meanings set forth in the Credit Agreement.
PRELIMINARY STATEMENT
The Company and the Bank desire to amend the Credit Agreement to permit the
Company to guarantee certain indebtedness of its employees to CoreStates Bank
of Delaware, N.A. as hereinafter set forth.
NOW THEREFORE, for value received, the Company and the Bank agree as follows.
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Section 10.18. Section 10.18 ("Guaranties") of the Credit Agreement
is hereby amended as of the date hereof to read in its entirety as follows:
"SECTION 10.18 Guaranties. -Not, and not permit any of its Subsidiaries
to, become or be a guarantor or surety of, or otherwise become or be
responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance
any funds, assets, goods or services, or otherwise) with respect to,
any undertaking of any other Person, except for (a) the Guaranty, (b)
the endorsement in the ordinary course of collection, of instruments
payable to it or its order; (c) the Coors Guaranty, and (d) a guaranty in
favor of CoreStates Bank, N.A. ("CoreStates"), substantially in the form
set forth as Exhibit AA to the First Amendment to this Agreement, which
guarantees obligations to CoreStates in connection with corporate VISA
cards issued to its, or any of its Subsidiaries', employees, in an
aggregate amount not to exceed $400,000."
1.2 Construction. All references in the Credit Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to
the Credit Agreement as amended by this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Loans under the Credit Agreement as amended hereby, the Company hereby
warrants and represents to the Bank that it is duly authorized to execute
and deliver this Amendment, and to perform its obligations under the Credit
Agreement as amended hereby, and that this Amendment constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with
its terms.
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth above,
provided, however, that the effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions precedent:
3.1 Warranties. Before and after giving effect to this Amendment, the
representations and warranties in Section 9 of the Credit Agreement shall
be true and correct as though made on the date hereof, except for changes
that are permitted by the terms of the Credit Agreement. The execution by
the Company of this Amendment shall be deemed a representation that the Company
has complied with the foregoing condition.
<PAGE>2
3.2 Defaults. Before and after giving effect to this Amendment, no Event of
Default and no Unmatured Event of Default shall have occurred and be continuing
under the Credit Agreement. The execution by the Company of this Amendment shall
be deemed a representation that the Company has complied with the foregoing
condition.
3.3 Documents. The Company shall have executed and delivered this Amendment.
ARTICLE IV - GENERAL
4.1 Expenses. The Company agrees to reimburse the Bank upon demand for all
reasonable expenses (including reasonable attorneys' fees and legal expenses)
incurred by this Bank in the preparation, negotiation and execution of this
Amendment and any other document required to be furnished herewith, and in
enforcing the obligations of the Company hereunder, and to pay and save the
Bank harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment or the
issuance of the Note hereunder, which obligations of the Company shall survive
any termination of the Credit Agreement.
4.2 Counterparts. This Amendment may be executed in as many counterparts as
may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
4.3 Severability. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
4.4 Law. This Amendment shall be a contract made under the laws of the State
of Illinois, which laws shall govern all the rights and duties hereunder.
4.5 Successors; Enforceability. This Amendment shall be binding upon the
Company and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Company and the Bank and the successors and
assigns of the Bank. Except as hereby amended, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Chicago, Illinois by their respective officers thereunto duly
authorized as of the date first written above.
BANK OF AMERICA ILLINOIS
By /s/ Randolph T. Kohler
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Title Senior Vice President
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STRATEGIC DISTRIBUTION, INC.
By /s/ Charles J. Martin
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Title Vice President
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SECOND AMENDMENT TO CREDIT AGREEMENT
AND PROMISSORY NOTE
This Amendment is entered into as of September 9, 1996, between BANK OF
AMERICA ILLINOIS ("Bank") and STRATEGIC DISTRIBUTION, INC. ("Company").
Recitals
A. Bank and Company entered into a certain Credit Agreement dated as of
December 31, 1995 (the "Agreement").
B. Company's obligations under the Agreement are evidenced by a certain
promissory note dated December 31, 1995 (the "Note").
C. Bank and Company desire to amend certain terms and provisions of the
Agreement and the Note as more specifically set forth below.
Agreement
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meaning given to them in the Agreement.
2. Amendment to Agreement. Section 2.1 of the Agreement is hereby amended
by substituting "$5,000,000" for "$20,000,000" in clause (ii)(a) thereof.
3. Amendment to Note. The Note is hereby amended by changing the amount at
the top thereof from "$20,000,000" to "$5,000,000" and by substituting "FIVE
MILLION DOLLARS" for "TWENTY MILLION DOLLARS" in the first paragraph thereof.
4. Representations and Warranties. When Company signs this Amendment,
Company represents and warrants to Bank that:
4.1 There is no event which is, or with notice or lapse of time or both
would be, or which has not been waived in writing by Bank, an Event of
Default under the Agreement;
4.2 The representations and warranties in the Agreement are true and
correct as of the date of this Amendment as if made on the date of this
Amendment;
4.3 This Amendment is within Company's powers, has been duly authorized,
and does not conflict with any of Company's organizational papers; and
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4.4 This Amendment does not conflict with any law, agreement, or obligation
by which Company is bound.
5. Effectiveness of Amendment. This Amendment shall be effective upon
Bank's receipt of a duly executed original of this Amendment from Company.
6. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Agreement and the Note shall remain in full force
and effect.
7. Counterparts. This Amendment may be executed in counterparts, each of
which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
In Witness Whereof, the parties hereto have executed this Amendment as of
the day and year first above written.
BANK OF AMERICA ILLINOIS STRATEGIC DISTRIBUTION,INC.
By /s/ Randolph T. Kohler By /s/ Charles J. Martin
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Printed Name Randolph T. Kohler Printed Name Charles J. Martin
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Title Senior Vice President Title Vice President
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