FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
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 0-13283
REX Stores Corporation
(Exact name of registrant as specified in its charter)
Delaware 31-1095548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2875 Needmore Road, Dayton, Ohio 45414
(Address of principal executive offices) (Zip Code)
(937)276-3931
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
At the close of business on December 13, 1999, the registrant had
9,184,882 shares of Common Stock, par value $.01 per share,
outstanding.
<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets......... 3
Consolidated Statements of Income............. 5
Consolidated Statements of Shareholders'
Equity...................................... 7
Consolidated Statements of Cash Flows......... 8
Notes to Consolidated Financial Statements.... 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................ 18
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION> A S S E T S
October 31 January 31 October 31
1999 1999 1998
(In Thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 4,915 $ 11,912 $ 7,362
Accounts receivable, net 1,864 2,297 1,154
Merchandise inventory 172,712 132,002 177,207
Prepaid expenses and other 1,767 2,039 3,357
Equity investment in limited
partnerships 407 1,838 2,959
Future income tax benefits 9,366 9,366 7,899
--------- --------- --------
Total current assets 191,031 159,454 199,938
PROPERTY AND EQUIPMENT, NET 110,386 98,891 95,624
FUTURE INCOME TAX BENEFITS 8,109 8,109 9,541
RESTRICTED INVESTMENTS 1,962 1,828 1,816
--------- --------- --------
Total assets $ 311,488 $ 268,282 $306,919
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 295 $ - $ 36,797
Current portion of long-term debt 2,278 3,114 2,998
Current portion, deferred income
and deferred gain on sale and
leaseback 11,201 11,453 11,463
Accounts payable, trade 54,910 52,674 64,662
Accrued income taxes 748 147 -
Accrued payroll 5,658 5,889 4,407
Other liabilities 10,594 8,817 10,740
--------- -------- --------
Total current liabilities 85,684 82,094 131,067
--------- -------- --------
3
Liabilities and Shareholders' Equity (Continued)
LONG-TERM LIABILITIES:
Long-term debt 42,756 55,478 52,634
Deferred income 15,904 16,723 16,452
Deferred gain on sale and
leaseback 3,159 3,777 4,557
--------- --------- --------
Total long-term liabilities 61,819 75,978 73,643
--------- --------- --------
SHAREHOLDERS' EQUITY:
Common stock 115 98 97
Paid-in capital 102,214 58,596 58,403
Retained earnings 84,019 75,370 67,505
Treasury stock (22,363) (23,854) (23,796)
--------- --------- --------
Total shareholders' equity 163,985 110,210 102,209
--------- --------- --------
Total liabilities and
shareholders' equity $ 311,488 $ 268,282 $306,919
========= ========= ========
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
4
<PAGE>
<TABLE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
1999 1998 1999 1998
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
NET SALES $102,432 $92,634 $309,227 $273,044
COSTS AND EXPENSES:
Cost of merchandise sold 74,651 67,326 224,134 197,710
Selling, general and
administrative expenses 24,088 22,152 71,382 65,186
-------- ------- -------- --------
Total costs and expenses 98,739 89,478 295,516 262,896
-------- ------- -------- --------
INCOME FROM OPERATIONS 3,693 3,156 13,711 10,148
INVESTMENT INCOME 60 64 249 287
INTEREST EXPENSE (1,471) (1,911) (4,226) (4,829)
INCOME(LOSS) FROM LIMITED
PARTNERSHIPS 1,173 (270) 1,969 (270)
GAIN ON SALE OF
REAL ESTATE 787 - 787 -
-------- ------- -------- --------
Income before income taxes 4,242 1,039 12,490 5,336
PROVISION FOR INCOME TAXES 1,061 307 3,124 2,006
-------- ------- -------- --------
Income before extraordinary
item 3,181 732 9,366 3,330
Extraordinary loss from early
extinguishment of debt,
net of income tax effect
of $239 717 - 717 -
-------- ------- -------- --------
NET INCOME $ 2,464 $ 732 $ 8,649 $ 3,330
======== ======= ======== ========
5
Consolidated Statements of Income (Continued)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,110 7,202 7,692 7,512
======== ======= ======== ========
Basic net income per share
before extraordinary item $ 0.39 $ 0.10 $ 1.22 $ 0.44
Extraordinary item (0.09) - (0.09) -
-------- ------- -------- --------
BASIC NET INCOME PER SHARE $ 0.30 $ 0.10 $ 1.13 $ 0.44
======== ======= ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVA-
LENT SHARES OUTSTANDING 9,224 7,509 8,551 7,916
======== ======= ======== ========
Dilutive net income per share
before extraordinary item $ 0.35 $ 0.10 $ 1.10 $ 0.42
Extraordinary item (0.08) - (0.08) -
-------- ------- -------- --------
DILUTED NET INCOME PER SHARE $ 0.27 $ 0.10 $ 1.02 $ 0.42
======== ======= ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
6
<TABLE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Common Shares
-------------------------------
Issued Treasury Paid-in Retained
Shares Amount Shares Amount Capital Earnings
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at
October 31, 1998 9,756 $ 97 2,582 $23,796 $ 58,403 $67,505
Common stock
issued 11 1 - - 193 -
Treasury stock
acquired - - 5 58 - -
Net income - - - - - 7,865
----- ------ ----- ------- -------- -------
Balance at
January 31, 1999 9,767 98 2,587 23,854 58,596 75,370
Common stock
issued 1,700 17 (512) (4,721) 43,618 -
Treasury stock
acquired - - 209 3,230 - -
Net income - - - - - 8,649
----- ------ ----- ------- -------- -------
Balance at
October 31, 1999 11,467 $ 115 2,284 $22,363 $102,214 $84,019
====== ====== ===== ======= ======== =======
</TABLE>
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
7
<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
October 31
1999 1998
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $8,649 $3,330
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization, net 2,556 2,360
Equity in losses of limited partnerships 1,431 -
Deferred income (1,733) (1,373)
Changes in assets and liabilities
Accounts receivable 433 1,621
Merchandise inventory (40,710) (50,709)
Other current assets 267 (1,284)
Accounts payable, trade 2,236 14,830
Other liabilities 2,054 403
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (24,817) (30,822)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,852) (7,926)
Capital disposals 943 2,404
Equity investment in limited
partnerships - (2,959)
Restricted investments (134) (178)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (14,043) (8,659)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 295 36,797
Payments of long-term debt (21,641) (3,277)
Long-term debt borrowings 8,083 3,289
Common stock issued 46,628 507
Treasury stock issued 1,728 -
Treasury stock acquired (3,230) (7,410)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 31,863 29,906
-------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,997) (9,575)
8
Consolidated Statements of Cash Flows (Continued)
CASH AND CASH EQUIVALENTS,
beginning of period 11,912 16,937
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $4,915 $7,362
</TABLE> ======== ========
[FN]
The accompanying notes are an integral part of
these unaudited consolidated statements.
9
<PAGE>
REX STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999
Note 1. Consolidated Financial Statements
The consolidated financial statements included in this report have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and include, in the opinion of
management, all adjustments necessary to state fairly the information set
forth therein. Any such adjustments were of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended January 31, 1999.
Note 2. Accounting Policies
The interim consolidated financial statements have been prepared in
accordance with the accounting policies described in the notes to the
consolidated financial statements included in the Company's 1999 Annual
Report on Form 10-K. While management believes that the procedures followed
in the preparation of interim financial information are reasonable, the
accuracy of some estimated amounts is dependent upon facts that will exist or
calculations that will be accomplished at fiscal year end. Examples of
such estimates include changes in the LIFO reserve (based upon the Company's
best estimate of inflation to date), management bonuses and the provision for
income taxes. Any adjustments pursuant to such estimates during the quarter
were of a normal recurring nature.
Certain reclassifications have been made to prior year amounts to
conform with their fiscal 2000 presentation.
10
<PAGE>
Notes to Consolidated Financial Statements (Continued)
Note 3. Stock Option Plans
The following summarizes options granted, exercised and canceled or
expired during the nine months ended October 31, 1999:
<TABLE>
<CAPTION>
Shares Under Stock
Option Plans
<S> <C>
Outstanding at January 31, 1999
($3.38 to $18.98 per share) 3,194,951
Granted ($11.50 to $22.69 per share) 212,221
Exercised ($3.38 to $16.75 per share) (712,485)
Canceled or expired ($8.13 to $17.25 per share) (17,670)
---------
Outstanding at October 31, 1999
($8.13 to $22.69 per share) 2,677,017
=========
</TABLE>
Note 4. Sale of Common Stock
On September 29, 1999, the Company completed the sale of 1,500,000
shares of common stock under a Form S-3 registration statement and received
net proceeds of approximately $44.7 million. The Company used $19.5 million
of the proceeds to pay a portion of its outstanding long-term mortgage debt
and related prepayment fees. The Company incurred an extraordinary
loss for early extinguishment of debt of $717,000, net of the income tax
effect of $239,000. The remaining proceeds are being used to fund new store
expansion and for other general corporate purposes.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company is a leader in the consumer electronics/appliance retailing
industry with 228 stores in 35 states, operating predominantly in small to
medium-sized markets under the trade name "REX".
Results of Operations
The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items bear to net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold 72.9 72.7 72.5 72.4
----- ----- ----- -----
Gross profit 27.1 27.3 27.5 27.6
Selling, general and
administrative expenses 23.5 23.9 23.1 23.9
----- ----- ----- -----
Income from operations 3.6 3.4 4.4 3.7
Interest expense, net (1.4) (2.0) (1.3) (1.7)
Income (loss) from limited 1.1 (0.3) 0.6 (0.1)
partnerships
Gain on sale of real estate 0.8 - 0.3 -
----- ----- ----- -----
Income before income
taxes 4.1 1.1 4.0 1.9
Provision for income taxes 1.0 0.3 1.0 0.7
----- ----- ----- -----
Income before extraordinary item 3.1 0.8 3.0 1.2
Extraordinary loss from early
extinguishment of debt 0.7 - 0.2 -
----- ----- ----- -----
Net income 2.4% 0.8% 2.8% 1.2%
===== ===== ===== =====
</TABLE>
12
Comparison of Three and Nine Months Ended October 31, 1999 and 1998
Net sales in the third quarter ended October 31, 1999 were $102.4 million
compared to $92.6 million in the prior year's comparable period, representing
an increase of $9.8 million or 10.6%. This increase is primarily the result
of a 7.7% increase in comparable store sales for the quarter. The Company
considers a store to be comparable after it has been open six full fiscal
quarters.
The television category generated the majority of the comparable store
sales increase for the quarter, with the strongest sales coming from big
screen televisions. The next strongest product for the Company was sales of
digital video disc (DVD) players, with lower retail sales from video
cassette recorders (VCR) generally offsetting those sales increases.
Net sales for the first nine months of fiscal 2000 were $309.2 million
compared to $273.0 million for the first nine months of fiscal 1999,
representing an increase of $36.2 million or 13.3%. This increase is
primarily the result of an increase of 11.2% in comparable store sales for
the first nine months of fiscal 2000. All major product categories made
positive contributions to comparable store sales. The appliance category
accounted for 5.0% of the 11.2% increase in comparable store sales, led by
strong air conditioner sales during the second quarter. Televisions
positively impacted comparable store sales by 4.6%, led by big screen
sales. In addition, the audio, video and other categories impacted comparable
store sales by 1.3%, 0.4% and (0.1)%, respectively.
As of October 31, 1999, the Company had 228 stores compared to 223 stores
one year earlier. There were three stores opened and three closed in the first
nine months of fiscal 2000. In the prior year's comparable period there were
six stores opened and five closed. The Company evaluates the performance of
its stores on a continuous basis and, based on an assessment of
profitability, future cash flows and other factors it deems relevant, will
close any store which is not adequately contributing to Company profitability.
Gross profit of $27.8 million in the third quarter of fiscal 2000 (27.1%
of net sales) was 9.8% higher than the $25.3 million gross profit (27.3% of
net sales) recorded in the third quarter of fiscal 1999. In the first nine
months of fiscal 2000 gross profit was $85.1 million (27.5% of net sales),
a 12.9% increase from $75.3 million (27.6% of net sales) for the first nine
months of fiscal 1999. The reduction in gross profit margin for the third
quarter and the first nine months of fiscal 2000 was primarily due to the
recognition of a lower amount of extended service contract revenues relative
to total merchandise sales. Sales of extended service contracts generally
have a higher gross profit margin in comparison to other product categories.
The decline in the percentage of extended service contract revenues to total
sales served to reduce the gross profit margin in the third quarter and
first nine months of fiscal 2000.
Selling, general and administrative expenses for the third quarter of
fiscal 2000 were $24.1 million (23.5% of net sales), an 8.7% increase over
13
<PAGE>
the $22.2 million (23.9% of net sales) for the third quarter of fiscal 1999.
Selling, general and administrative expenses for the first nine months of
fiscal 2000 were $71.4 million (23.1% of net sales), a 9.5% increase from
$65.2 million (23.9% of net sales) for the first nine months of fiscal 1999.
The increase in expense for both the third quarter and first nine months of
fiscal 2000 is primarily the result of increased incentive commissions,
advertising expenditures and other selling costs associated with the
increased sales levels. The reduction in selling, general and administrative
expenses as a percent of net sales is primarily the result of the leveraging
of store operating costs, such as advertising and occupancy expenses, and
corporate costs on an increase in comparable store sales of 7.7% for the
third quarter and 11.2% for the first nine months of fiscal 2000.
Interest expense decreased to $1.5 million (1.4% of net sales) for the
quarter ended October 31, 1999 from $1.9 million (2.1% of net sales) for the
third quarter of fiscal 1999. Interest expense for the first nine
months of fiscal 2000 decreased to $4.2 million (1.4% of net sales) from
$4.8 million (1.8% of net sales) for the first nine months of fiscal 1999.
The decrease in interest expense was primarily the result of lower
borrowings under the line of credit for the first nine months of fiscal 2000.
During the third quarter of fiscal 2000, the Company reported the sale
of a shopping center in which it had previously operated a retail store.
The Company recorded a gain of $787,000 from the sale of this real estate.
Results of the third quarter and first nine months of fiscals 2000 and
1999 also reflect the impact of the Company's equity investment in two
limited partnerships which produce synthetic fuel. Effective February 1,
1999, the Company entered into an agreement to sell a portion of its
investment in one of the limited partnerships, which resulted in the
reduction in the Company's ownership interest from 30% to 17%. The Company
expects to receive cash payments from the sale on a quarterly basis through
2007. These payments are contingent upon and equal to 75% of the federal
income tax credits attributable to the 13% interest sold.
The Company reported income from the limited partnerships of
$1,173,000 for the third quarter of fiscal 2000, which consisted of
$1,547,000 of income generated by the sale of the partnership interest,
partially offset by a charge of $374,000 to reflect the Company's equity
share of the partnerships' losses. For the first nine months of fiscal
2000, the Company reported income from the limited partnerships of
$1,969,000, which consisted of $3,400,000 of income generated by the sale
of the partnership interest, partially offset by a charge of $1,431,000 to
reflect the Company's equity share of the partnerships' losses.
The Company's effective tax rate was reduced to 25.0% for the third
quarter and first nine months of fiscal 2000 from 29.5% for the third
quarter and 37.6% for the first nine months of fiscal 1999 as a result of
the Company's share of federal income tax credits earned by the limited
partnerships under Section 29 of the Internal Revenue Code.
14
The Company recorded an extraordinary loss from the early
extinguishment of debt of $717,000, net of the income tax effect of
$239,000, for the third quarter of fiscal 2000. In October 1999, the
Company paid off approximately $18.9 million of mortgage debt with proceeds
from the Company's secondary offering completed September 29, 1999.
As a result of the foregoing, net income for the third quarter of
fiscal 2000 was $2.5 million, a 236.6% increase from $732,000 for the third
quarter of fiscal 1999. Net income for the first nine months of fiscal
2000 was $8.6 million, a 159.7% increase from $3.3 million for the first
nine months of fiscal 1999.
Liquidity and Capital Resources
Net cash used in operating activities was $24.8 million for the first
nine months of fiscal 2000, compared to $30.8 million for the first nine
months of fiscal 1999. For the first nine months of fiscal 2000, operating
cash flow was provided by net income of $8.6 million adjusted for the net
impact of non-cash items of $2.3 million, which consist of deferred income,
depreciation and amortization and our equity interest in the losses of the
synthetic fuel limited partnerships. The primary use of cash was an
increase in inventory of $40.7 million primarily due to the seasonal timing
of inventory purchases. Cash was also provided by an increase in accounts
payable of $2.2 million, primarily due to an increase in inventory, and an
increase in other liabilities of $2.1 million, primarily due to the timing
of payment of taxes and customer payments.
At October 31, 1999, working capital was $105.3 million compared to
$77.4 million at January 31, 1999. The ratio of current assets to current
liabilities was 2.2 to 1 at October 31, 1999 compared to 1.9 to 1 at
January 31, 1999.
Capital expenditures through October 31, 1999 totaled $14.9 million and
primarily relate to the acquisition of store sites and other construction
expenditures associated with planned fiscal 2000 new store openings and the
purchase of two previously leased stores. The Company expects to open 14
new stores in fiscal 2000.
Cash provided by financing activities totaled approximately $31.9
million for the first nine months of fiscal 2000. On September 29, 1999
the Company completed the sale of 1,500,000 shares of common stock with net
proceeds to the Company of approximately $44.7 million after expenses. The
Company received proceeds of $3.6 million from the exercise of stock
options by employees and directors. The Company paid off $18.9 million of
long-term mortgage debt with proceeds from the stock offering. The Company
also paid off long-term mortgage debt of $3.0 million with scheduled
repayments and $419,000 from the sale of real estate. During the first
half of fiscal 2000, the Company also purchased 209,000 shares of its
common stock for $3.2 million The Company is currently authorized by its
board of directors to purchase an additional 255,700 shares of common
stock. The Company also received proceeds of $8.1 million from long-term
debt borrowings related to mortgage financing for 11 stores.
15
At October 31, 1999, the Company had borrowings totaling $295,000
outstanding on its revolving credit agreement. A total of approximately
$111.6 million was available for borrowings at October 31, 1999.
Year 2000
The statements in this section include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
Certain software and hardware systems are time sensitive. Older time-
sensitive systems often use a two digit dating convention ("00" rather than
"2000") that could result in system failure and disruption of operations as
the Year 2000 approaches. This is referred to as the Year 2000 issue. The
Year 2000 issue will impact us, our suppliers, customers and other third
parties that transact business with us.
We have a staff of internal resources to address Year 2000 issues.
This team believes that it has identified substantially all hardware and
software systems within REX which may be susceptible to Year 2000 issues.
Projects have been established to address all significant Year 2000 issues.
The Year 2000 Team reports regularly to senior management on the progress of
significant Year 2000 projects.
Most Year 2000 activities are to test hardware and software systems,
including infrastructure systems such as telephones and store security
systems. We determined that we needed to modify some of our software. We
believe all hardware systems are Year 2000 compliant. We believe we have
completed reprogramming and testing all of our critical systems impacted by
Year 2000 issues. We are currently working with outside vendors on the
compliance status of the telephones and store security systems.
We have initiated communications with significant suppliers and other
third parties that transact business with us to identify and minimize
disruptions to our operations and to assist in resolving Year 2000 issues.
Information provided by our 15 largest suppliers states that they believe
their products are Year 2000 compliant. Most of the companies operating
our store security systems believe their systems are either Year 2000
compliant or are not date dependent. However, there can be no certainty
that the impacted systems and products of other parties on which we rely
will be Year 2000 compliant.
We generally believe that our suppliers are responsible for the Year
2000 functionality of the products they supply to us for resale. However,
should product failures occur, we may be required to address the
administrative aspects of those failures, such as handling product returns
or repairs.
The estimated costs for resolving Year 2000 issues are approximately
$200,000. Most of these costs are internal labor related to reprogramming
existing software. Estimates of Year 2000 costs are based on numerous
assumptions and actual costs could be greater than estimates. Specific
factors that might cause such differences include, but are not limited to,
16
the continuing availability of personnel trained in this area and the
ability to timely identify and correct all relevant software and hardware
systems.
While we believe we are diligently addressing the Year 2000 issues to
ensure Year 2000 readiness, there can be no absolute assurance that the
objective will be achieved either internally or as it relates to third
parties. At this time, we believe the most reasonably likely worst case
scenario is that:
we could experience significant volumes of product returns due to
widespread product failures;
we could lose communications links with some stores;
some stores could close due to loss of electric power;
store security systems may not operate; and
individual stores may be unable to process transactions or engage in
normal business activity.
Our contingency plans include conducting store operations on a manual
basis, working to assess and correct system errors and possibly changing
suppliers.
Forward-Looking Statements
This Form 10-Q contains or may contain forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995. The words
"believes", "estimates", "plans", "expects", "intends", "anticipates" and
similar expressions as they relate to the Company or its management are
intended to identify such forward-looking statements. Forward-looking
statements are inherently subject to risks and uncertainties. Factors that
could cause actual results to differ materially from those in the forward-
looking statements are set forth in the Risk Factors section in the
Company's prospectus dated September 29, 1999 filed pursuant to Rule 424(b)
under the Securities Act of 1933 (File No. 333-86005).
17
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed
with this report:
4(i) Amendment Agreement dated October 19, 1999
to Amended and Restated Loan Agreement dated
July 31, 1995 among the Borrowers, the
registrant, the lenders named therein and
Fleet Bank, N.A. (as successor to NatWest
Bank N.A.) as agent.........................
27 Financial Data Schedule.....................
(b) Reports on Form 8-K. No reports on Form 8-K
were filed during the quarter ended
October 31, 1999.
18
<PAGE>
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.
REX STORES CORPORATION
Registrant
December 14, 1999 /s/Stuart A. Rose
Stuart A. Rose
Chairman of the Board
(Chief Executive Officer)
December 14, 1999 /s/Douglas L. Bruggeman
Douglas L. Bruggeman
Vice President, Finance and
Treasurer
(Principal Financial and
Chief Accounting Officer)
AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AGREEMENT
AND TO OTHER LOAN DOCUMENTS
AMENDMENT AGREEMENT, dated as of October 19, 1999, to the Amended and
Restated Loan Agreement, dated as of July 31, 1995 (as same has been or may
be further amended, supplemented, modified or restated in accordance with its
terms, the "Loan Agreement") among REX RADIO AND TELEVISION, INC., an Ohio
corporation ("Rex Radio"), KELLY & COHEN APPLIANCES, INC., an Ohio corporation
("Kelly"), STEREO TOWN, INC., a Georgia corporation ("Stereo Town"), REX
KANSAS, INC., a Kansas corporation ("Rex Kansas"), those financial institutions
named as lenders on Schedule 2.01 thereto (the "Lenders") and FLEET BANK, N.A.
(as successor to NatWest Bank N.A.), in its capacity as agent (the "Agent")
for itself and the Lenders. Capitalized terms used herein and not otherwise
defined shall have the meanings attributed to them in the Loan Agreement.
SECTION I. AMENDMENTS TO LOAN AGREEMENT
1. Rex Alabama, Inc., an Ohio corporation ("Rex Alabama") shall be
added as a party to the Loan Agreement as a "Borrower". By its execution and
delivery of this Amendment Agreement, Rex Alabama agrees to be bound by all of
the terms and provisions of the Loan Agreement applicable to "Borrowers".
2. rexstores.com, Inc., an Ohio corporation ("Rex Internet") shall
be added as a party to the Loan Agreement as a "Borrower". By its execution
and delivery of this Amendment Agreement, Rex Internet agrees to be bound by
all of the terms and provisions of the Loan Agreement applicable to
"Borrowers".
3. The preamble to the Loan Agreement is hereby amended and restated
in its entirety to read as follows:
"AMENDED AND RESTATED LOAN AGREEMENT dated as of July 31, 1995,
among REX RADIO AND TELEVISION, INC., an Ohio corporation ('Rex Radio'),
KELLY & COHEN APPLIANCES, INC., an Ohio corporation ('Kelly'), STEREO
TOWN, INC., a Georgia corporation ('Stereo Town'), REX KANSAS, INC., a
Kansas corporation ('Rex Kansas'), REX ALABAMA, INC., an Ohio
corporation ('Rex Alabama'), REXSTORES.COM, INC., an Ohio corporation
('Rex Internet' and together with Rex Radio, Kelly, Stereo Town, Rex
Kansas and Rex Alabama, each a "Borrower" and, jointly and severally,
the "Borrowers"), the lenders named in Schedule 2.01 hereto
(collectively, the "Lenders"), and FLEET BANK, N.A. (as successor to
NatWest Bank N.A.), as agent for the Lenders (in such capacity, the
'Agent')."
4. Section 1.01 of the Loan Agreement is amended by adding the
following defined terms in the correct alphabetical order:
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"'AVA' shall mean AVA Acquisition Corp., a Delaware corporation."
"'Permitted Agreements' shall mean the Agreement between Rex Radio and
Rex Alabama, Inc., dated as of January 1, 1999, as amended, and the
Amended and Restated Loan Agreement dated as of April 15, 1998 among
Colona SynFuel Limited Partnership, L.L.L.P. (f/k/a Colona SynFuel,
L.P.), Somerset SynFuel, L.P. (f/k/a Pageton Synfuel, L.P.) and Rex
Investment, LLC, as amended by Amendment No. 1 to Amended and Restated
Loan Agreement, made as of the 24th day of July, 1998, effective as of
the 30th day of June, 1998, as such agreements are in effect on the
Second Amendment Date."
"'Rex Alabama' shall have the meaning assigned to such term in the
preamble of this Agreement."
"'Rex Internet' shall have the meaning assigned to such term in the
preamble of this Agreement."
"'Rex Investment' shall mean Rex Investment, LLC, an Ohio limited
liability company."
"'Second Amendment Date' shall mean October 19, 1999."
5. Section 2.01(a) of the Loan Agreement is hereby amended by (a)
deleting the word "and" at the end of clause (iii) thereof, (b) renumbering
clause (iv) as clause (vi) and (c) adding new clauses (iv) and (v) which read
as follows:
"(iv) Rex Alabama shall not exceed an amount (the 'Rex Alabama Borrowing
Base') equal to the sum of (1) up to 85% of the Net Amount of Eligible
Accounts of Rex Alabama, plus (2) up to 65% of the Net Amount of Eligible
Inventory of Rex Alabama comprised of Electronic Inventory, plus (3)
without duplication, with respect to the Net Amount of Eligible Inventory
of Rex Alabama comprised of Non-Electronic Inventory, (x) up to 65% of
the value of that portion of such Non-Electronic Inventory of Rex
Alabama comprising 25% or less of the aggregate of all Eligible Inventory
of Rex Alabama and (y) up to 50% of the value of that portion of the
Non-Electronic Inventory of Rex Alabama which, when added together with
the Non-Electronic Inventory referenced in clause (x), comprises more
than 25% of the aggregate of all Eligible Inventory of Rex Alabama, and"
"(v) Rex Internet shall not exceed an amount (the 'Rex Internet Borrowing
Base') equal to the sum of (1) up to 85% of the Net Amount of Eligible
Accounts of Rex Internet, plus (2) up to 65% of the Net Amount of Eligible
Inventory of Rex Internet comprised of Electronic Inventory, plus (3)
without duplication, with respect to the Net Amount of Eligible
Inventory of Rex Internet comprised of Non-Electronic Inventory, (x) up
to 65% of the value of that portion of such Non-Electronic Inventory of
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Rex Internet comprising 25% or less of the aggregate of all Eligible
Inventory of Rex Internet and (y) up to 50% of the value of that portion
of the Non-Electronic Inventory of Rex Internet which, when added
together with the Non-Electronic Inventory referenced in clause (x),
comprises more than 25% of the aggregate of all Eligible Inventory of Rex
Internet, and"
6. Section 2.01(a)(vi) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
(vi) Stereo Town shall not exceed an amount (the "Stereo Town
Borrowing Base" and, together with the Kelly Borrowing Base, Rex Kansas
Borrowing Base, Rex Radio Borrowing Base, Rex Alabama Borrowing Base and
Rex Internet Borrowing Base, the "Borrowing Base") equal to the sum of
(1) up to 85% of the Net Amount of Eligible Accounts of Stereo Town,
plus (2) up to 65% of the Net Amount of Eligible Inventory of Stereo
Town comprised of Electronic Inventory, plus (3) without duplication,
with respect to the Net Amount of Eligible Inventory of Stereo Town
comprised of Non-Electronic Inventory, (x) up to 65% of the value of that
portion of such Non-Electronic Inventory comprising 25% or less of the
aggregate of all Eligible Inventory of Stereo Town and (y) up to 50% of
the value of that portion of the Non-Electronic Inventory of Stereo
Town which, when added together with the Non-Electronic Inventory
referenced in clause (x), comprises more than 25% of the aggregate of
all Eligible Inventory of Stereo Town; provided, however, that
commencing with the date, if any, upon which the Agent becomes aware
(whether through receipt of financial statements in accordance with
Section 8.01 hereof or otherwise) that the Parent and its Subsidiaries
on a Consolidated basis have suffered a pre-tax loss of $5,000,000 or
more for the fiscal year just ended (the amount of any such loss to be
calculated in accordance with GAAP as in effect on the date hereof),
the advance rates set forth in clauses (i)(2), (i)(3)(x), (ii)(2),
(ii)(3)(x), (iii)(2), (iii)(3)(x), (iv)(2), (iv)(3)(x), (v)(2),
(v)(3)(x), (vi)(2) and (vi)(3)(x) above shall be reduced to not more
than 55%; and, provided further, that in any event, amounts available
under the Total Commitment shall not exceed (i) $100,000,000 from January
1 through June 30 of each year and (ii) $150,000,000 from July 1 through
December 31 of each year.
7. The introductory paragraph of Article IX of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"Each Borrower, jointly and severally, covenants and agrees with the Agent
and each Lender that, so long as this Agreement shall remain in effect, or
any Obligations shall remain outstanding or unpaid or any Letter of
Credit shall remain outstanding, it will not, and will not cause or
permit any of its Subsidiaries to:"
8. Section 9.02 of the Loan Agreement is hereby amended by (a)
deleting the word "and" at the end of clause (iii) thereof, (b) deleting the
period at the end of clause (iv) and substituting "; and" therefor and (c)
adding a new clause (v) which reads as follows:
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"(v) Indebtedness owing by any Borrower to any other Borrower."
9. Section 9.03 of the Loan Agreement is hereby amended by (a)
deleting the word "and" at the end of clause (x) thereof, (b) deleting the
period at the end of clause (xi) and substituting "; and" therefor and (c)
adding a new clause (xii) which reads as follows:
"(xii) Liens by Rex Alabama in favor of Rex Radio granted pursuant to
the Alabama Agreement and collaterally assigned to the Agent on behalf of
the Lenders."
10. Section 9.06 of the Loan Agreement is hereby amended by (a)
deleting the word "and" at the end of clause (vi) thereof, (b) deleting the
period at the end of clause (vii) and substituting a semicolon therefor and
(c) adding new clauses (viii) through (x) which read as follows:
"(viii) investments in the capital stock, limited partnership
interests or other equity interests of Rex Alabama, Rex Investment, Rex
Internet, Colona SynFuel Limited Partnership, L.L.L.P. and Somerset
SynFuel, L.P., provided that none of the Borrowers or any of their
Subsidiaries may make loans to or investments in such entities after
the Second Amendment Date, other than in accordance with the Permitted
Agreements or as otherwise permitted by this Section 9.06;
(ix) the repurchase of stock and exchange of securities made pursuant
to the Contribution and Redemption Agreement made and entered into as of
the 1st day of January, 1999, among AVA, the Parent and Kelly; and
(x) Indebtedness permitted by Section 9.02(v)."
SECTION II. AMENDMENT TO NOTES
1. Rex Alabama shall be added as a party to each Note and shall be
jointly and severally liable with each other Borrower for such Note and the
Obligations. By its execution and delivery of this Amendment Agreement, Rex
Alabama agrees to bound by all of the terms and provisions of the Notes.
2. Rex Internet shall be added as a party to each Note and shall be
jointly and severally liable with each other Borrower for such Note and the
Obligations. By its execution and delivery of this Amendment Agreement, Rex
Internet agrees to bound by all of the terms and provisions of the Notes.
SECTION III. AMENDMENT TO BORROWERS GUARANTY
1. Rex Alabama shall be added as a party to the Borrowers Guaranty
and shall be a "Guarantor" as such term is defined in the Borrowers Guaranty.
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By its execution and delivery of this Amendment Agreement, Rex Alabama agrees
to bound by all of the terms and provisions of the Borrowers Guaranty.
2. Rex Internet shall be added as a party to the Borrowers Guaranty
and shall be a "Guarantor" as such term is defined in the Borrowers Guaranty.
By its execution and delivery of this Amendment Agreement, Rex Internet agrees
to bound by all of the terms and provisions of the Borrowers Guaranty.
3. The preamble to the Borrowers Guaranty is hereby amended and
restated in its entirety to read as follows:
"BORROWERS GUARANTY by REX RADIO AND TELEVISION, INC., an Ohio
corporation ('Rex Radio'), STEREO TOWN, INC., a Georgia corporation
('Stereo Town'), KELLY & COHEN APPLIANCES, INC., an Ohio corporation
('Kelly'), REX KANSAS, INC., a Kansas corporation ('Rex Kansas'), REX
ALABAMA, INC., an Ohio corporation ('Rex Alabama') and REXSTORES.COM, INC.,
an Ohio corporation ('Rex Internet', and together with Rex Radio, Stereo
Town, Kelly, Rex Kansas and Rex Alabama, each a 'Guarantor' and
collectively, the 'Guarantors'), dated July 31, 1995, in favor of FLEET
BANK, N.A. (as successor to NatWest Bank, N.A.), in its capacity as
agent (the 'Agent') for itself and for the Lenders hereinafter referred
to."
SECTION IV. AMENDMENTS TO BORROWERS SECURITY AGREEMENT
1. Rex Alabama shall be added as a party to the Borrowers Security
Agreement and shall be a "Debtor" as such term is defined in the Borrowers
Security Agreement. By its execution and delivery of this Amendment Agreement,
Rex Alabama (i) agrees to be bound by all of the terms and provisions of the
Borrowers Security Agreement, (ii) hereby, and thereby, grants a security
interest in all assets owned by it which meet the description of Collateral
set forth on Schedule A of the Borrowers Security Agreement to secure all
Obligations and (iii) agrees and confirms that it and such assets shall be
subject to the terms and provisions of the Borrowers Security Agreement.
2. Rex Internet shall be added as a party to the Borrowers Security
Agreement and shall be a "Debtor" as such term is defined in the Borrowers
Security Agreement. By its execution and delivery of this Amendment Agreement,
Rex Internet (i) agrees to be bound by all of the terms and provisions of the
Borrowers Security Agreement, (ii) hereby, and thereby, grants a security
interest in all assets owned by it which meet the description of Collateral
set forth on Schedule A of the Borrowers Security Agreement to secure all
Obligations and (iii) agrees and confirms that it and such assets shall be
subject to the terms and provisions of the Borrowers Security Agreement.
5
3. The preamble to the Borrowers Security Agreement is hereby amended
and restated in its entirety to read as follows:
"BORROWERS SECURITY AGREEMENT, dated as of January 31, 1989, as
amended and restated through July 31, 1995, made by REX RADIO AND
TELEVISION, INC., an Ohio corporation (' Radio'), KELLY & COHEN
APPLIANCES, INC., an Ohio Corporation ('Kelly'), STEREO TOWN, INC., a
Georgia corporation ('Stereo Town'), REX KANSAS, INC., a Kansas corporation
('Rex Kansas'), REX ALABAMA, INC., an Ohio corporation ('Rex Alabama')
and REXSTORES.COM, INC., an Ohio corporation ('Rex Internet', and
together with Rex Radio, Kelly, Stereo Town, Rex Kansas and Rex
Alabama, each a Debtor' and, jointly and severally, the 'Debtors'), and
FLEET BANK, N.A. (as successor to NatWest Bank, N.A.), as agent (in such
capacity, referred to herein as 'Secured Party') for the several banks
and other financial institutions (the 'Lenders') from time to time
parties to the Amended and Restated Loan Agreement dated as of July 31,
1995 (as it may be further amended, modified or supplemented from time
to time, the 'Loan Agreement'; terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the Loan
Agreement)."
4. Exhibit 1 to Schedule I to the Borrowers Security Agreement is
hereby amended by deleting such exhibit in its entirety and substituting, in
lieu thereof, Exhibit 1 to Schedule I attached hereto as Annex A.
SECTION V. AMENDMENTS TO BORROWERS PLEDGE AGREEMENT
1. Wherever it may occur in the Borrowers Pledge Agreement, the
term "Pledged Securities" shall be deemed to include the stock of each of
Rex Alabama and AVA. Each of Rex Radio and Kelly, by its execution and
delivery of this Amendment Agreement, (i) hereby, and pursuant to the
Borrowers Pledge Agreement, grants a security interest in such stock to
secure all Obligations and (ii) confirms that such stock shall be subject to
the terms and provisions of the Borrowers Pledge Agreement.
2. Schedule A to the Borrowers Pledge Agreement is hereby amended
by deleting such schedule in its entirety and substituting, in lieu thereof,
Schedule A attached hereto as Annex B.
SECTION VI. AMENDMENTS TO SECURITY AGREEMENT - PATENTS
AND TRADEMARKS
1. Rex Alabama shall be added as a party to the Security Agreement -
Patents and Trademarks and shall be a "Debtor" as such term is defined in the
Security Agreement - Patents and Trademarks. By its execution and delivery
of this Amendment Agreement, Rex Alabama (i) agrees to be bound by all of the
6
terms and provisions of the Security Agreement - Patents and Trademarks, (ii)
hereby, and thereby, grants a security interest in all assets owned by it
which meet the description of Collateral set forth in the Security Agreement-
Patents and Trademarks to secure the Obligations and (iii) agrees and confirms
that it and such assets shall be subject to the terms and provisions of the
Security Agreement-Patents and Trademarks.
2. Rex Internet shall be added as a party to the Security Agreement -
Patents and Trademarks and shall be a "Debtor" as such term is defined in the
Security Agreement - Patents and Trademarks. By its execution and delivery
of this Amendment Agreement, Rex Internet (i) agrees to be bound by all of the
terms and provisions of the Security Agreement - Patents and Trademarks, (ii)
hereby, and thereby, grants a security interest in all assets owned by it
which meet the description of Collateral set forth in the Security Agreement-
Patents and Trademarks to secure the Obligations and (iii) agrees and
confirms that it and such assets shall be subject to the terms and provisions
of the Security Agreement-Patents and Trademarks.
3. The preamble to the Security Agreement - Patents and Trademarks is
hereby amended and restated in its entirety to read as follows:
"AGREEMENT, dated as of January 31, 1989, as amended and restated through
July 31, 1995, made by REX RADIO AND TELEVISION, INC., an Ohio corporation
('Rex Radio'), KELLY & COHEN APPLIANCES, INC., an Ohio Corporation
('Kelly'), STEREO TOWN, INC., a Georgia corporation ('Stereo Town', REX
KANSAS, INC., a Kansas corporation ('Rex Kansas'), REX ALABAMA, INC., an
Ohio corporation ('Rex Alabama') and REXSTORES.COM, INC., an Ohio
corporation ('Rex Internet') and together with Rex Radio, Kelly, Stereo
Town, Rex Kansas and Rex Alabama, each a 'Debtor' and, jointly and
severally, the 'Debtors'), and FLEET BANK, N.A. (as successor to
NatWest Bank, N.A.), as agent (in such capacity, referred to herein as
'Secured Party') for the several banks and other financial institutions
(the 'Lenders') from time to time parties to the Amended and Restated
Loan Agreement dated as of July 31, 1995 (as it may be further amended,
modified or supplemented from time to time, the 'Loan Agreement'; terms
used herein and not otherwise defined herein shall have the meanings
assigned thereto in the Loan Agreement)."
4. Schedule C to the Security Agreement - Patents and Trademarks is
hereby amended by deleting such schedule in its entirety and substituting, in
lieu, thereof, Schedule C attached hereto as Annex C.
SECTION VII. AMENDMENTS TO PARENT PLEDGE AGREEMENT
1. The Agent hereby releases its Lien in the stock of AVA pledged to
it under the Parent Pledge Agreement. The stock of AVA shall be removed from
the terms "Pledged Securities" and "Initial Pledged Securities", wherever such
terms may appear in the Parent Pledge Agreement.
7
2. Wherever it may occur in the Parent Pledge Agreement, the term
"Pledged Securities" shall be deemed to include the stock of Rex Internet.
The Parent, by its execution and delivery of this Amendment Agreement, (i)
hereby, and pursuant to the Parent Pledge Agreement, grants a security
interest in such stock to secure all Obligations and (ii) confirms that such
stock shall be subject to the terms and provisions of the Parent Pledge
Agreement.
3. Schedule A to the Parent Pledge Agreement is hereby amended by
deleting such schedule in its entirety and substituting, in lieu thereof,
Schedule A attached hereto as Annex D.
SECTION VIII. CONDITIONS PRECEDENT
This Amendment Agreement shall become effective upon the execution and
delivery of counterparts hereof by the Borrowers (including Rex Alabama and Rex
Internet), the Parent, the Agent and the Required Lenders and the fulfillment
of the following conditions:
1. No unwaived event has occurred and is continuing which constitutes
a Default or an Event of Default.
2. All representations and warranties made by the Borrowers
(including Rex Alabama and Rex Internet) and the Parent in this Amendment
Agreement shall be true and correct.
3. The Agent shall have received (i) a copy of the articles of
incorporation, in each case as amended to date, of each of Rex Alabama and Rex
Internet, certified as of a recent date by the Secretary of State or other
appropriate official of the state of its organization, and a certificate as
to the good standing of each from such Secretary of State or other official,
and a certificate of good standing from the appropriate official of each state
in which it is qualified to do business, in each case dated as of a recent
date; (ii) a certificate of the Secretary of Rex Alabama and Rex Internet,
dated the Second Amendment Date and certifying (A) that attached thereto is
a true and complete copy of such Person's Code of Regulations as in effect
on the date of such certificate and at all times since a date prior to the
date of the resolution described in item (B) below, (B) that attached thereto
is a true and complete copy of a resolution adopted by such Person's Board of
Directors authorizing the execution, delivery and perfor-mance of this
Amendment Agreement, the Agreement, the Security Documents, the Notes, the
other Loan Documents and the Credit Events hereunder and thereunder, and
that such resolution has not been modified, rescinded or amended and is
in full force and effect, (C) that such Person's articles of incorporation has
not been amended snce the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to (i) above, and (D) as to
the incumbency and specimen signature of each of such Person's officers
executing this Amendment Agreement or any other Loan Document delivered in
connection herewith; (iii) a certificate of another of such Person's officers
as to incumbency and signature of its Secretary; and (iv) such other documents
as the Agent or any Lender may reasonably request.
8
4. The Agent shall have received a (i) certificate of the Secretary
of each of the Parent and the Borrowers, other than Rex Alabama and Rex
Internet, dated the Second Amendment Date and certifying (A) that attached
thereto is a true and complete copy of a resolution adopted by such Person's
Board of Directors authorizing the execution, delivery and perfor-mance of
this Amendment Agreement, the other Loan Documents and the Credit Events
hereunder, as applicable, and that such resolution has not been modified,
rescinded or amended and is in full force and effect, (B) that such Person's
certificate or articles of incorporation or constitutive documents and such
Person's By-laws or Code of Regulations have not been amended since the date
of the Amendment Date, and (C) as to the incumbency and specimen signature
of each of such Person's officers executing this Amendment Agreement or any
other Loan Document delivered in connection herewith; (ii) a certificate of
another of such Person's officers as to incumbency and signature of its
Secretary; and (iii) such other documents as the Agent or any Lender may
reasonably request.
5. The Borrower shall have ordered requests for copies or information
on Form UCC-11 or certificates satisfactory to the Agent of a UCC Reporter
Service, of all effective UCC financing statements, tax liens and payment
liens which name as debtor Rex Alabama, Rex Internet, Rex Investment or AVA
and which are filed in the appropriate offices in the States in which are
located the chief executive office and other operating offices of Rex
Alabama, Rex Internet Rex Investment or AVA, as the case may be, together with
copies of such financing statements.
6. The Agent shall have received each document (including, without
limitation, each UCC financing statement, assignment and amendment) required
by law or requested by the Agent to be filed, registered or recorded in order
to create in favor of the Agent for the benefit of the Lenders a first
priority perfected security interest in the Collateral owned by Rex Alabama
and Rex Internet.
7. The Agent shall have received the certificates evidencing the
shares of stock of AVA and Rex Alabama being pledged pursuant to the Borrowers
Pledge Agreement, together with undated stock powers executed in blank, each
duly executed by the appropriate Person.
8. The Agent shall have received the certificates evidencing the
shares of stock of Rex Internet being pledged pursuant to the Parent Pledge
Agreement, together with undated stock powers executed in blank, each duly
executed by the appropriate Person.
9. The Agent shall have received an opinion of Borrowers' counsel as
to such matters as the Agent may require, such opinion to be in form and
substance satisfactory to the Agent.
9
10. The Agent shall have received an amendment to the Agreement
between Rex Radio and Rex Alabama, Inc., dated as of January 1, 1999,
permitting Rex Alabama to grant and permit to exist a valid, perfected and
enforceable first priority Lien on and security interest in the Collateral
in favor of the Agent on behalf of the Lenders.
11. The Agent shall have received assignments of any UCC-1
Financing Statements that have been filed by Rex Radio, as secured party,
against Rex Alabama.
12. The Agent shall have received copies of (i) the Inventory
Purchase Agreement, dated as of May 5, 1999, between Rex Radio and Rex
Internet (ii) the Management Services Agreement, dated as of May 5, 1999,
between Rex Radio and Rex Internet, and (iii) the License Agreement, dated
as of May 5, 1999 between Rex Kansas and Rex Internet.
13. The Agent shall have received such other documents as the
Lenders or the Agent or the Agent's counsel shall reasonably deem necessary.
SECTION IX. CONDITIONS SUBSEQUENT
The Borrowers (including Rex Alabama and Rex Internet) hereby agree
and covenant to satisfy the following additional conditions within 30 days of
the date hereof:
1. The Agent shall have received a Guaranty and a Security Agreement,
each duly executed by Rex Investment and AVA, each in form and substance
satisfactory to the Agent.
2. The Agent shall have received clipped copies of requests for
copies or information on Form UCC-11 or certificates satisfactory to the Agent
of a UCC Reporter Service, listing all effective UCC financing statements,
tax liens and payment liens which name as debtor Rex Alabama, Rex Internet,
Rex Investment or AVA and which are filed in the appropriate offices in the
States in which are located the chief executive office and other operating
offices of Rex Alabama, Rex Internet, Rex Investment or AVA, as the case may
be, together with copies of such financing statements. With respect to any
liens not permitted pursuant to Section 9.03 of the Loan Agreement, the
Agent shall have received termination statements in form and substance
satisfactory to it.
3. The Agent shall have received each document (including, without
limitation, each UCC financing statement, assignment and amendment) required by
law or requested by the Agent to be filed, registered or recorded in order to
create in favor of the Agent for the benefit of the Lenders a first priority
perfected security interest in the Collateral owned by Rex Investment and
AVA, other than Rex Investment's limited partnership interests in Colona
SynFuel Limited Partnership, L.L.L.P. and Somerset SynFuel, L.P.
4. The Agent shall have received a Pledge Agreement executed by Kelly
and AVA pledging their respective membership interests in Rex Investment.
10
5. The Agent shall have received an Assignment of Contracts as
Collateral with respect to each Permitted Agreement, together with assignments
of any UCC-1 Financing Statements that have been filed by Rex Investment, as
secured party against Colona SynFuel Limited Partnership, L.L.L.P. (f/k/a
Colona SunFuel, L.P.).
SECTION X. MISCELLANEOUS
1. By its signature below, each of the Borrowers (including Rex
Alabama and Rex Internet) reaffirms and restates the representations and
warranties set forth in Article VII of the Loan Agreement, and all such
representations and warranties are true and correct on the date hereof with
the same force and effect as if made on such date (except to the extent that
they relate expressly to an earlier date). The Parent reaffirms and restates
the representations and warranties set forth in Section 14 of the Parent
Guaranty, and all such representations and warranties are true and correct
on the date hereof with the same force and effect as if made on such date
(except to the extent that they relate expressly to an earlier date). In
addition, each of the Borrowers (including Rex Alabama and Rex Internet) and
the Parent represents and warrants (which representations and warranties
shall survive the execution and delivery hereof) to the Agent and the
Lenders that:
(a) it has the power and authority to execute, deliver and carry
out the terms and provisions of this Amendment Agreement and the transactions
contemplated hereby, and has taken or caused to be taken all necessary
actions to authorize the execution, delivery and performance of this
Amendment Agreement and the transactions contemplated hereby;
(b) no consent of any other Person (including, without limitation,
shareholders or creditors of the Borrowers (including Rex Alabama and Rex
Internet) or the Parent) and no action of, or filing with any governmental or
public body or authority is required to authorize, or is otherwise required
in connection with the execution, delivery and performance of this Amendment
Agreement, or consummation of the transactions contemplated hereby;
(c) this Amendment Agreement has been duly executed and delivered by
or on behalf of the Borrowers (including Rex Alabama and Rex Internet) and the
Parent and constitutes a legal, valid and binding obligation of each of the
Borrowers (including Rex Alabama and Rex Internet) and the Parent enforceable
in accordance with its terms, subject as to enforceability to bankruptcy,
reorganization, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and the exercise of judicial
discretion in accordance with general principles of equity;
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(d) the execution, delivery and performance of this Amendment
Agreement will not violate any law, statute or regulation, or any order or
decree of any court or governmental instrumentality, or conflict with, or
result in the breach of, or constitute a default under any contractual
obligation of any Borrower (including Rex Alabama and Rex Internet) or the
Parent; and
(e) as of the date hereof (after giving effect to the consummation
of the transactions contemplated under this Amendment Agreement) there exists
no Default or Event of Default.
By its signature below, each of the Borrowers (including Rex Alabama and
Rex Internet) and the Parent agree that it shall constitute an Event of Default
if any representation or warranty made above should be false or misleading in
any material respect.
2. Each of the Loan Agreement, the Borrowers Guaranty, the Borrowers
Security Agreement, the Borrowers Pledge Agreement, the Security Agreement-
Patents and Trademarks and the Parent Pledge Agreement is hereby ratified and
confirmed in all respects and, except as expressly amended or waived hereby,
all of the representations, warranties, terms, covenants and conditions of
the Loan Agreement, the Borrowers Guaranty, the Borrowers Security Agreement,
the Borrowers Pledge Agreement, the Security Agreement-Patents and Trademarks
and the Parent Pledge Agreement shall remain unamended, unwaived and in
effect in accordance with their respective terms. The amendments and waivers
set forth herein shall be limited precisely as provided for herein and
shall not be deemed to be amendments or consents to, or waivers of
modifications of, any term or provision of the Loan Documents or any other
document or instrument referred to herein or therein or of any transaction
or further or future action on the part of any Borrower (including Rex
Alabama and Rex Internet) or the Parent requiring the consent of the Agent or
any Lender, except to the extent specifically provided for herein.
3. Each Borrower (including Rex Alabama and Rex Internet) and the
Parent confirms in favor of the Agent and each Lender that it agrees that it
has no defense, offset, claim, counterclaim or recoupment with respect to any
of its obligations or liabilities under the Loan Agreement, the Borrowers
Guaranty, the Parent Guaranty, the Borrowers Security Agreement, the Parent
Security Agreement, the Borrowers Pledge Agreement, the Parent Pledge
Agreement, the Security Agreement-Patents and Trademarks or any other Loan
Document and that, except as herein provided, all terms of the Loan Agreement,
the Borrowers Guaranty, the Parent Guaranty, the Borrowers Security Agreement,
the Parent Security Agreement, the Borrowers Pledge Agreement, the Parent
Pledge Agreement, the Security Agreement-Patents and Trademarks and the other
Loan Documents shall continue in full force and effect.
4. This Amendment Agreement may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all of which shall constitute one and the same
agreement.
5. Delivery of an executed counterpart of a signature page by
telecopier shall be effective as delivery of a manually executed counterpart.
12
6. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF).
"Borrowers"
REX RADIO AND TELEVISION, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
KELLY & COHEN APPLIANCES, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
STEREO TOWN, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
REX KANSAS, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
REX ALABAMA, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
13
REXSTORES.COM, INC.
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
"Parent"
REX STORES CORPORATION
By:/s/ Edward M. Kress
Name: Edward M. Kress
Title: Secretary
"Lenders"
FLEET BANK, N.A.,
Individually
By:/s/ Thomas Maiale
Name: Thomas Maiale
Title: Vice President
BANK ONE, DAYTON, N.A.
By:/s/ Michael R. Zaksheske
Name: Michael R. Zaksheske
Title: Vice President
HELLER FINANCIAL, INC.
By:/s/ T. W. Bukowski
Name: Thomas W. Bukowski
Title: Senior Vice President
14
<PAGE>
NATIONAL CITY BANK, DAYTON
By:/s/ Sheila J. Petteruti
Name: Sheila J. Petteruti
Title: Vice President
THE PROVIDENT BANK
By:/s/ Jerome J. Brunswick
Name: Jerome J. Brunswick
Title: Senior Vice President
THE FIFTH THIRD BANK
By:/s/ K. Douglas Compton
Name: K. Douglas Compton
Title: Vice President
FIRSTSTAR BANK, N.A.
(as successor to Star Bank, N.A.)
By:/s/ Thomas D. Gibbons
Name: Thomas D. Gibbons
Title: Vice President
"Agent"
FLEET BANK, N.A.,
As Agent
By:/s/ Thomas Maiale
Name: Thomas Maiale
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000744187
<NAME> REX STORES CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-1-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1
<CASH> 4,915
<SECURITIES> 0
<RECEIVABLES> 2,317
<ALLOWANCES> 453
<INVENTORY> 172,712
<CURRENT-ASSETS> 191,031
<PP&E> 131,385
<DEPRECIATION> 20,999
<TOTAL-ASSETS> 311,488
<CURRENT-LIABILITIES> 85,684
<BONDS> 42,756
<COMMON> 115
0
0
<OTHER-SE> 163,870
<TOTAL-LIABILITY-AND-EQUITY> 311,488
<SALES> 309,227
<TOTAL-REVENUES> 309,227
<CGS> 224,134
<TOTAL-COSTS> 224,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,226
<INCOME-PRETAX> 12,490
<INCOME-TAX> 3,124
<INCOME-CONTINUING> 9,366
<DISCONTINUED> 0
<EXTRAORDINARY> 717
<CHANGES> 0
<NET-INCOME> 8,649
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.02
</TABLE>
