<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
1999
FORM 10 - Q
For the Fiscal
SECOND QUARTER
Ended July 3, 1999
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
MOORE MEDICAL CORP.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 1-8903
(State of incorporation) (Commission File Number)
P.O. Box 1500, New Britain, CT 06050 22-1897821
(Address of principal executive offices) (I.R.S. Employer
Identification Number)
860-826-3600
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock ($.01 Par Value) American Stock Exchange
Rights to Purchase Series I Junior Preferred Stock American Stock Exchange
(Title of Each Class) (Name of each exchange on which registered)
- --------------------------------------------------------------------------------
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
-----
2,939,176
Number of shares of Common Stock outstanding as of July 29, 1999
Total number of pages in the numbered original (including exhibits) is 21
This is page 1 of 21 pages.
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<PAGE>
MOORE MEDICAL CORP.
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at the end of the second quarter of
1999 and at the end of the year 1998.................................. 3
Statements of Operations for the second quarters
of 1999 and 1998...................................................... 4
Statements of Operations for the first two quarters
of 1999 and 1998...................................................... 5
Statements of Cash Flows for the first two quarters
of 1999 and 1998...................................................... 6
Notes to Financial Statements.............................................. 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition................................. 8-12
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders ....................... 12
Item 6. Exhibits and Reports on Form 8-K........................................... 12-21
Signatures........................................................................... 13
</TABLE>
2
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Balance Sheets at end of
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands Second Quarter 1999 Year 1998
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 148 $ 3,520
Accounts receivable, less allowances
of $373 and $372............................................ 11,330 9,385
Inventories..................................................... 14,259 13,684
Prepaid expenses and other current assets....................... 2,420 1,992
Deferred income taxes........................................... 2,500 2,500
---------- ---------
Total Current Assets................................... 30,657 31,081
---------- ---------
Noncurrent Assets
Equipment and leasehold improvements, net....................... 9,672 7,038
Other assets.................................................... 263 362
---------- ---------
Total Noncurrent Assets................................ 9,935 7,400
---------- ---------
$ 40,592 $ 38,481
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................ $ 7,599 $ 5,421
Accrued expenses................................................ 6,150 7,139
---------- ---------
Total Current Liabilities.............................. 13,749 12,560
---------- ---------
Deferred Income Taxes.................................................. 368 368
Shareholders' Equity
Preferred stock - no shares outstanding......................... -- --
Common stock - $.01 par value;
5,000 shares authorized;
3,246 shares issued......................................... 33 33
Capital in excess of par value.................................. 21,672 21,667
Retained earnings............................................... 7,502 6,597
---------- ---------
29,207 28,297
Less treasury shares, at cost, 307 and 308
shares...................................................... (2,732) (2,744)
---------- ----------
Total Shareholders' Equity............................. 26,475 25,553
---------- ----------
$ 40,592 $ 38,481
========== ==========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Operations for the
- --------------------------------------------------------------------------------------------------------------------
Amounts in thousands, except per share data Second Quarter
-----------------------------------------
1999 1998
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales........................................................ $ 29,367 $ 30,042
Cost of products sold............................................ 20,152 20,685
-------- --------
Gross profit..................................................... 9,215 9,357
Selling, general & administrative expenses....................... 8,551 8,250
-------- --------
Operating income................................................. 664 1,107
Interest income, net............................................. 7 18
-------- --------
Income before income taxes....................................... 671 1,125
Income tax provision............................................. 243 416
-------- --------
Net income....................................................... $ 428 $ 709
======== ========
Basic and diluted net income per share........................... $ .15 $ .24
======== ========
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Operations for the
- --------------------------------------------------------------------------------------------------------------------------
Amounts in thousands, except per share data First Two Quarters
--------------------------------------
1999 1998
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales........................................................ $ 58,422 $ 60,981
Cost of products sold............................................ 39,698 42,286
-------- --------
Gross profit..................................................... 18,724 18,695
Selling, general & administrative expenses....................... 17,354 16,951
-------- --------
Operating income................................................. 1,370 1,744
Interest income, net............................................. 52 24
-------- --------
Income before income taxes....................................... 1,422 1,768
Income tax provision............................................. 517 654
-------- --------
Net income....................................................... $ 905 $ 1,114
======== ========
Basic and diluted net income per share........................... $ .31 $ .38
======== ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Cash Flows for the
- -----------------------------------------------------------------------------------------------------------------------
Amounts in thousands First Two Quarters
--------------------------------------
1999 1998
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income............................................................ $ 905 $ 1,114
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation and amortization..................................... 754 613
Changes in operating assets and liabilities
Accounts receivable ......................................... (1,945) 4,187
Inventories.................................................. (575) (1,772)
Other current assets......................................... (428) 372
Accounts payable............................................. 2,178 (2,702)
Other current liabilities.................................... (886) 1,559
------- ---------
Net cash flows provided by
operating activities........................................ 3 3,371
------- ---------
Cash Flows From Investing Activities
Equipment and leasehold improvements.................................. (3,388) (1,539)
------- ---------
Net cash flows used in investing activities....................... (3,388) (1,539)
------- ---------
Cash Flows From Financing Activities
Revolving credit financing decrease, net.............................. - (1,512)
Other, net............................................................ 13 64
------- ---------
Net cash flows provided by (used in)
financing activities............................................. 13 (1,448)
------- ---------
(Decrease) increase in cash.................................................. (3,372) 384
Cash at beginning of period.................................................. 3,520 54
------- ---------
Cash At End Of Period........................................................ $ 148 $ 438
======= =========
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MOORE MEDICAL CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation of Financial Statements
The accompanying financial statements should be read in conjunction
with the Notes to Financial Statements and Management's Discussion and
Analysis of Results of Operations and Financial Condition included in
the Company's 1998 Annual Report filed on Form 10-K and in this Form
10-Q Report.
In the opinion of management, all adjustments necessary for a fair
presentation of the results for the interim periods have been made.
The results of operations for the second quarter and first two
quarters are not necessarily indicative of the results to be expected
for the full year. The fiscal quarters ended July 3, 1999 and July 4,
1998.
Note 2 - Contingencies
Beginning in 1991, the Company entered into various supply contracts
with the U.S. Department of Veterans Affairs and the Defense
Department. In April 1997, the Company completed a review of its
compliance with various pricing provisions of these contracts and,
with the assistance of special legal counsel, concluded that
adjustments may be due to the federal agencies for potential
unasserted claims against the Company relating to pricing deficiencies
under product supply contracts subject to General Services
Administration and Department of Defense regulations. In the fourth
quarter of 1996 the Company established a $3.8 million reserve for
estimated pricing deficiency liabilities and associated legal costs.
As of the end of 1998 and second quarter end of 1999, the reserve
balance was $3.2 million. The final amount of the pricing deficiency
adjustment is subject to the outcome of contract settlement
discussions between the Company and the governmental agencies or to an
adjudicated disposition. In management's opinion, the ultimate
resolution of this matter will not have a material adverse effect on
the Company's financial position. Although management believes that
the reserve is sufficient, it is possible the final resolution could
exceed such reserve and could have a material impact on the statement
of operations and cash flow in such period.
In 1997, the Company established a $4.5 million restructuring reserve
relating to its exit from the wholesale drug distribution business. At
the end of 1998, and the second quarter end of 1999, approximately
$1.0 million and $0.8 million, respectively, remained.
7
<PAGE>
MOORE MEDICAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
OVERVIEW
- --------
The following table sets forth items included in the Statements of Operations as
a percentage of sales for the second quarters and first two quarters of 1999 and
1998, respectively. The table also shows, for each line item, the percentage
change in the 1999 periods from the comparable 1998 periods.
<TABLE>
<CAPTION>
Second Quarter First Two Quarters
--------------------------------------- ---------------------------------------
% of Sales % % of Sales %
------------------------- ---------- ------------------------ ----------
1999 1998 Change 1999 1998 Change
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% (2)% 100.0% 100.0% (4)%
Cost of products sold................ 68.6 68.9 (3) 68.0 69.3 (6)
------ ----- ------ ------
Gross profit......................... 31.4 31.1 (2) 32.0 30.7 -
Selling, general & admin. exp........ 29.1 27.4 4 29.7 27.8 2
------ ----- ------ ------
Operating income..................... 2.3 3.7 (40) 2.3 2.9 (21)
Interest income, net............... - - (61) (0.1) - 117
------ ----- ------ ------
Income before income taxes........... 2.3 3.7 (40) 2.4 2.9 (20)
Income tax provision................. .8 1.3 (42) .9 1.1 (21)
------ ----- ------ ------
Net income........................... 1.5% 2.4% (40)% 1.5% 1.8% (19)%
====== ===== ===== ====== ====== =====
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
Second Quarter
1999 Compared with 1998
- -----------------------
Net sales of $29.4 million for the second quarter of 1999 decreased 2% from the
same quarter of 1998 due primarily to the significant allocation of the
Company's human and financial capital required to implement a new state-of-the-
art Enterprise Resource Planning (ERP) system. The system was implemented to
provide timely, consistent company wide management and customer information.
For the 1999 second quarter, gross profit dollars decreased 2% to $ 9.2 million.
The gross profit margin rate in the 1999 quarter increased to 31.4% of sales
from 31.1% in the same quarter a year earlier. The improvement in margin rate is
attributable to a favorable product mix in sales.
8
<PAGE>
Selling, general and administrative expenses in the second quarter of 1999
increased 4% from the quarter a year ago. The increase is primarily attributable
to expenses related to the implementation of the Company's ERP system for
training and outside consulting services.
Net income for the 1999 second quarter decreased 40%. The decrease was due
primarily to lower sales volume and expenses related to the implementation of
the Company's ERP system.
First Two Quarters
1999 Compared with 1998
- -----------------------
Net sales for the first half of 1999 decreased 4% to $58.4 million from $61.0
million in the comparable 1998 period due to three major events: 1) the
Company's transition out of the wholesale drug distribution business, 2) the
liquidation of inventory related to this business in 1998 and 3) the investment
in human and financial capital related to the Company's implementation of a new
Enterprise Resource Planning (ERP) system.
For the 1999 first half, gross profit dollars remained flat with 1998 at $18.7
million. The gross profit margin rate in the 1999 half increased to 32.0% of
sales from 30.7% in the same period a year earlier. The improvement in rates is
primarily due to a favorable product sales mix.
Selling, general and administrative expenses during the first half of 1999
increased 2% compared with the first half of 1998. The increase is primarily due
to expenses related to the implementation of the Company's ERP system for
training and outside consulting services.
Net income for the first half of 1999 decreased 19% as compared to the same 1998
period. The decrease was attributable to the expenses associated with the
implementation of the Company's new ERP system.
FINANCIAL CONDITION
- -------------------
During the first half of 1999, the Company's operating activities were cash
neutral and investing activities used $3.4 million in funds. Operating
activities used $3.8 million in cash from a $1.9 million increase in accounts
receivable, a $0.6 million increase in inventories and $1.3 million net change
in other assets and liabilities. Operating activities generated $3.8 million in
cash from a $2.2 million increase in accounts payable, $0.7 million in
amortization and depreciation and $0.9 million in net income. Investing
activities used $3.4 million for capital expenditures.
The Company's bank financing agreement provides a $10 million revolving line of
credit through December, 1999. Interest on loans is charged at the prime rate
or, at the option of the Company, at the Eurodollar rate plus a rate in a range
of 1% to 2%
9
<PAGE>
depending on the financial leverage of the Company. In addition, the Company
pays a 1/4% commitment fee on the unused line of credit.
Management believes that the funding needs of the Company for operating working
capital and capital expenditures will continue to be met through income from
operations and financing available under its line of credit.
YEAR 2000 ISSUES
- ----------------
Year 2000 issues are the result of computer programs that were written using two
digits rather than four to define the applicable year. If the Company's computer
programs with date sensitive functions are not year 2000 compliant, they may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, an inability to process transactions, send invoices or
engage in other normal business activities.
The Company has identified its Year 2000 risks in three categories: internal
business software, internal non-information technology software, and external
vendor compliance.
Internal Information Technology
- -------------------------------
During 1998, as part of a modernization program intended to improve productivity
and increase profitability by upgrading data processing, integrating systems and
enhancing internal reporting, the Company purchased an integrated enterprise
system which includes software which the vendor has represented to be Year 2000
compliant. The total estimated hardware, software, installation and training
cost of the integrated enterprise system, of which Year 2000 compliance is a
by-product, is $6.7 million, of which $6.2 million has been incurred through the
second quarter, funded through operating cash flow. The Company substantially
completed the implementation of the system during the second quarter of 1999.
With this implementation, the Company believes its internal information
technology systems to be in substantial compliance. However, if experience
should demonstrate that the implementation is not substantially complete, Year
2000 issues could have a material adverse impact on the Company's operations.
Contingency plans are being developed for areas where management considers there
may be some risk to modify certain of the major existing internal information
technology systems to be Year 2000 compliant.
Internal Non-Information Technology
- -----------------------------------
The Company has assessed the Year 2000 compliance of its internal
non-information software and of the technology embedded in such systems as
security, telecommunications and building systems by contacting the providers of
such systems. Written assurance of Year 2000 compliance has been received from
substantially all providers.
10
<PAGE>
External Vendor Compliance
- --------------------------
The Company has identified and contacted its major suppliers, service providers
and contractors ("vendors") to determine the extent of their Year 2000
compliance. The process is substantially complete. To the extent that responses
were unsatisfactory, the Company intends to consider changing the vendors to
those who have represented Year 2000 readiness, but cannot be assured that it
will be successful in finding alternative vendors. In the event that a major
vendor's written assurance of Year 2000 compliant becomes questionable and the
Company does not replace it with a new vendor, its business could be materially
adversely affected. The Company is formulating a contingency plan for major
vendors' Year 2000 non-compliance.
FORWARD-LOOKING INFORMATION
- ---------------------------
From time to time, the Company or its representatives may have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but, not limited to, press releases, oral
statements made by or with the approval of an authorized executive officer, or
in this report or other filings made by the Company with the Securities and
Exchange Commission. The words or phrases "trend," "expect," "grow," "will,"
"could," "likely result," "planned," "intends," "continued," "anticipated,"
"estimated," "projected" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to ensure that such statements
are accompanied by meaningful cautionary statements, so as to maximize to the
fullest extent possible the protections of the safe harbor established in the
said Act. Accordingly, such statements are qualified in their entirety by
reference to and are accompanied by the following discussion of certain
important factors that could cause actual results to differ materially from such
forward-looking statements.
Investors should also be aware of factors that could have an impact on the
Company's business or financial position or performance. These include possible:
pressures on revenues resulting, for example, from customer consolidations or
changes in customer buying patterns; intensified competition resulting, for
example, from distributor consolidations or pricing pressures from distributors
able to benefit from economies of scale or other operating efficiencies;
disruptions in services on which the Company is dependent, such as by truckers
in deliveries from its suppliers, by UPS or other common carriers in deliveries
to its customers, by its catalog printers or in telecommunication services, or
relating to its computer systems; unfavorable outcomes of litigation to which
the Company may become a party; and other factors detailed from time to time in
the Company's Securities and Exchange Commission filings or other readily
available or generally disseminated writings. The risks identified here are not
all inclusive. Reference is also made to other parts of this report that include
additional information concerning factors that could adversely impact the
Company's business or financial position or performance. Moreover, the Company
operates in a changing and very competitive business environment. New risks may
emerge from time to time, and
11
<PAGE>
it is not possible for management to predict all risk factors, nor can it
necessarily identify or assess the impact of all such factors on the Company or
the extent to which any factor or combination of factors may cause actual
results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.
PART II. OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The 1999 Annual Meeting of Shareholders of the Company was held
May 12, 1999.
(b) At the Annual Meeting, the following persons were elected
directors, with the following number of shares voted for and
withheld:
For Withheld
--------------- -------------
Steven Kotler 2,259,359 11,606
Robert H. Steele 2,259,359 11,606
Peter C. Sutro 2,259,359 11,606
Wilmer J. Thomas, Jr. 2,259,359 11,606
Dan K. Wassong 2,259,359 11,606
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Fifth Amendment to Revolving Credit Exhibit 10.18
Agreement by the Company and BankBoston,
N.A., dated April 30, 1999
Financial Data Schedule Exhibit 27
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the quarter.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MOORE MEDICAL CORP.
(REGISTRANT)
By: /s/ David V. Harper By: /s/ Susan G. D'Amato
------------------------- -------------------------------
David V. Harper, Executive Susan G. D'Amato, Vice
Vice President - Finance and President and Controller
Chief Financial Officer August 10, 1999
August 10, 1999
13
<PAGE>
EXHIBIT 10.18
FIFTH AMENDMENT AGREEMENT
-------------------------
FIFTH AMENDMENT AGREEMENT (this "Amendment Agreement") dated as of April
30, 1999- by and among Moore Medical Corp. (the "Borrower"), BankBoston, N.A.
(as successor by merger to Bank of Boston Connecticut) and certain other lending
institutions (collectively, the "Banks"), and BankBoston, N.A. (as successor by
merger to Bank of Boston Connecticut), as agent for the Banks (in such capacity,
the "Agent"), amending a certain Revolving Credit Agreement dated as of January
9, 1996, as amended by the First Amendment Agreement dated as of March 1, 1996,
the Second Amendment Agreement dated as of December 27, 1996, the Third
Amendment and Waiver Agreement dated as of April 14, 1997 and the Fourth
Amendment and Waiver Agreement dated as of March 30, 1998 (as amended, the
"Credit Agreement").
WITNESSETH
-----------
WHEREAS, the Borrower has requested that the Banks amend certain terms and
conditions of the Credit Agreement; and
WHEREAS, the Banks and the Agent are willing to amend such terms and
conditions on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
(S)1. Definitions. Capitalized terms used herein without definition that
-----------
are defined in the Credit Agreement shall have the same meanings herein as
therein.
(S)2. Ratification of Existing Agreements. All of the Borrower's
-----------------------------------
obligations and liabilities to the Agent and the Banks, and all the Agent's and
Banks' obligations and liabilities to the Borrower, as evidenced by or otherwise
arising under the Credit Agreement, the Notes and the other Loan Documents,
except as otherwise expressly modified in this Amendment Agreement upon the
terms set forth herein, are, by the Borrower's, the Agent's and Banks',
execution of this Amendment Agreement ratified and confirmed in all respects. In
addition, by the Borrower's execution of this Amendment Agreement, the Borrower
represents and warrants that, subject to the provided and provided, however,
clauses of Section 5.4 of the Credit Agreement, no counterclaim, right of
set-off or defense of any kind exists or is outstanding with respect to such
obligations and liabilities.
(S)3. Representations and Warranties. All of the representations and
------------------------------
warranties made by the Borrower in the Credit Agreement, the Notes and the other
Loan Documents are true and correct on the date hereof as if made on and as of
the date hereof, except to the extent that any of such representations and
warranties relate by their terms to a prior date and except to the extent of
changes resulting from transactions contemplated or permitted by the Credit
Agreement and
14
<PAGE>
changes occurring in the ordinary course of business that singly or in the
aggregate do not have a Material Adverse Effect.
(S)4. Conditions Precedent. The effectiveness of the amendments
--------------------
contemplated hereby shall be subject to the satisfaction on or before the date
hereof of each of the following conditions precedent:
(a) Representations and Warranties. All of the representations and
------------------------------
warranties made by the Borrower herein, whether directly or incorporated by
reference, shall be true and correct on the date hereof, except as provided
in (S)3 hereof.
(b) Performance: No Event of Default. The Borrower shall have
--------------------------------
performed and complied in all material respects with all terms and
conditions herein required to be performed or complied with by it prior to
or at the time hereof, and there shall exist no Default or Event of
Default.
(c) Corporate Action. All requisite corporate action necessary for
----------------
the valid execution, delivery and performance by the Borrower of this
Amendment Agreement and all other instruments and documents delivered by
the Borrower in connection therewith shall have been duly and effectively
taken.
(d) Delivery. The parties hereto shall have executed and delivered
--------
this Amendment Agreement. In addition, the Borrower shall have executed and
delivered such further instruments, and take such further action as the
Agent and the Banks may have reasonably requested, in each case further to
effect the purposes of this Amendment Agreement, the Credit Agreement and
the other Loan Documents.
(e) Fees and Expenses. The Borrower shall have paid to the Agent
-----------------
and the Banks all fees and expenses incurred by the Agent in connection
with this Amendment Agreement, the Credit Agreement or the other Loan
Documents on or prior to the date hereof.
(S)5. Amendments to Credit Agreement.
------------------------------
(S)5.1. Amendment to (S) 2.1. Section 2.1 of the Credit Agreement
--------------------
is hereby amended by deleting the entire thirteenth line of such section
and substituting the phrase "time exceed the Total Commitment." therefor.
(S)5.2. Amendment to (S) 2.10. Section 2.10 of the Credit
---------------------
Agreement is hereby deleted in its entirety.
(S)5.3. Amendment to (S) 3.2. Section 3.2 of the Credit Agreement
--------------------
is hereby amended by deleting the phrase "lesser of (a) the Total
Commitment and (b) the Borrowing Base." in the fourth line thereof and
substituting the phrase "the Total Commitment," therefor.
15
<PAGE>
(S)5.4. Amendment to (S) 4.1. Section 4.1(a) of the Credit
--------------------
Agreement is hereby amended by deleting the phrase "lessor of (1) the Total
Commitment and (2) the Borrowing Base." in the second to last and last line
thereof and substituting the phrase "Total Commitment." therefor.
(S)5.5. Amendment to (S) 6. Section 6 of the Credit Agreement is
------------------
hereby amended in its entirety to read as follows:
"(S)6. Intentionally Omitted."
(S)5.6. Amendment to (S) 7.14. Section 7.14 of the Credit
---------------------
Agreement is hereby amended in its entirety to read as follows:
"(S)7.14. Intentionally Omitted."
(S)5.7. Amendment to (S) 8.4. Section 8.4(e) of the Credit
-------------------
Agreement is hereby amended in its entirety to read as follows:
"(e) intentionally omitted;"
(S)5.8. Amendment to (S)8.5. Clause "(ii)" of Section 8.5(b) of
-------------------
the Credit Agreement is hereby amended in its entirety to read as follows:
"(ii) upon becoming aware thereof, of any inquiry, proceeding,
investigation, or other action, including a notice from any agency of
potential environmental liability, or any federal, state or local
environmental agency or board, that has the potential to materially affect
the assets, liabilities, financial conditions or operations of the Borrower
or any of its Subsidiaries."
(S)5.9. Amendment to (S)8.5. Section 8.5(c) of the Credit
-------------------
Agreement is hereby amended in its entirety to read as follows:
"(c) Notification of Claim Against Assets. The Borrower will,
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the assets of the Borrower, or the Agent's rights with respect thereto,
are subject."
(S)5.10. Amendment to (S)8.7. Section 8.7 of the Credit Agreement
-------------------
is hereby amended in its entirety to read as follows:
"(S)8.7. Insurance The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such
periods as may be reasonable and prudent."
16
<PAGE>
(S)5.11. Amendment to (S) 8.13. Section 8.13 of the Credit Agreement
---------------------
is hereby deleted.
(S)5.12. Amendment to (S) 9.1. Section 9.1 of the Credit Agreement
--------------------
is hereby amended by deleting "." from the end of subsection "(h)" and
substituting "; and" therefore and by adding a new subsection "(i)" to such
section to read as follows:
"(i) Indebtedness in the aggregate principal amount not in excess of
$10,000,000 at any time as long as such Indebtedness is either (x)
unsecured or (y) incurred in connection with the acquisition of Acquired
Assets or Capitalized Leases and is secured only by such Acquired Assets or
such Capitalized Leases with no other recourse of any kind whatsoever to
the Borrower,"
(S)5.13. Amendment to (S) 9.2. Section 9.2(e)(viii) of the Credit
--------------------
Agreement is hereby amended by adding the phrase "Acquired Assets or" after
the phrase "mortgages on" in the second line of such section and adding the
phrase "or (S)9.1(i)(y)" after "(S)9.1(f)" in the fifth line of such
section.
(S)5.14. Amendment to (S) 9.3. Section 9.3 of the Credit Agreement
---------------------
is hereby amended by deleting "." from the end of subsection "(i)" and
substituting "; and" therefore and by adding a new subsection "(j)" to such
section to read as follows:
"(j) the Permitted Acquisitions."
(S)5.15. Amendment to (S) 9.5. Section 9.5(a) of the Credit Agreement
--------------------
is hereby amended by inserting the phrase "the Permitted Acquisitions or"
after the phrase "other than" in the fourth line of such section.
(S)5.16. Amendment to (S) 10.5. Section 10.5 of the Credit Agreement
---------------------
is amended by adding the phrase "(other than for Capital Assets acquired in
connection with Permitted Acquisitions)" after the phrase "Capital
Expenditures" in the second line of such section.
(S)5.17. Amendment to (S) 11. Section 11.5 of the Credit Agreement
-------------------
is hereby amended in its entirety to read as follows:
"(S)11.5 Intentionally Omitted."
(S)5.18. Amendment to (S) 12.3. Section 12.3 of the Credit Agreement
--------------------
is hereby amended in its entirety to read as follows:
"(S)12.3. Intentionally omitted."
(S)5.19. Amendment to (S) 13.1. Section 13.1(m) of the Credit
---------------------
Agreement is hereby amended in its entirety to read as follows:
17
<PAGE>
"(m) there shall occur any material damage to, or loss, theft or
destruction of, any assets of the Borrower, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other
casualty, which in any such case causes, for more than fifteen (15)
consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a Materially Adverse Effect."
(S)5.20. Amendment to (S) 13.1. Section 13.1(o) of the Credit
--------------------
Agreement is hereby amended in its entirety to read as follows:
"(o) the Borrower or any of its Subsidiaries shall be indicted
for a federal crime, a punishment for which could include the forfeiture of
any assets of the Borrower or such Subsidiary having a fair market value in
excess of $1,000,000;"
(S)5.21. Amendment to (S) 13.4. The first paragraph of Section 13.4
---------------------
of the Credit Agreement is hereby amended in its entirety to read as
follows:
"(S)13.4 Distribution of Proceeds. In the event that following the
------------------------
occurrence or during the continuance of any Default or Event of Default,
the Agent or any Bank, as the case may be, receives any monies in
connection with the enforcement of any the Loan Documents, or otherwise
with respect to the realization upon any of the assets of the Borrower,
such monies shall be distributed for application as follows:"
(S)5.22. Amendment to (S) 13.4. Section 13.4(a) of the Credit
---------------------
Agreement is hereby amended by deleting the word "Collateral" in the
seventh line thereof and substituting the phrase "assets of the Borrower"
therefor.
(S)5.23. Amendment to (S) 14. Section 14 of the Credit Agreement is
-------------------
hereby amended by deleting the word "Collateral," in the first line thereof
and substituting the phrase "collateral security, if any," therefor.
(S)5.24. Amendment to (S)15.11. Section 15.11 of the Credit
---------------------
Agreement is hereby amended in its entirety to read as follows:
"(S)15.11. Duties in the Case of Enforcement. In case one of more
---------------------------------
Events of Default have occurred and shall be continuing, and whether
or not acceleration of the Obligations shall have occurred, the Agent
shall, if (a) so requested by the Majority Banks and (b) the Banks
have provided to the Agent such additional indemnities and assurances
against expenses and liabilities as the Agent may reasonably request,
proceed to enforce the provisions of the Loan Documents authorizing
the sale or other disposition of all or any part of the assets of the
Borrower and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such assets. The
Majority Banks may direct the Agent in writing as to the method and
the extent of any such sale or other disposition, the Banks hereby
agreeing to indemnify and hold the Agent, harmless
18
<PAGE>
from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent
--------
need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction."
(S)5.25. Amendment to (S) 16. Section 16 of the Credit Agreement is
-------------------
hereby amended by deleting the word "Collateral;" in the fourth to last
line thereof and substituting the phrase "collateral security;" therefor.
(S)5.26. Amendment to (S) 17. Section 17 of the Credit Agreement is
hereby amended by deleting the word "Collateral," in the fourteenth line
thereof and substituting the phrase "assets of the Borrower," therefor.
(S)5.27. Amendments to Schedule 2. Schedule 2 is hereby amended by
------------------------
deleting the definitions of "Borrowing Base," "Borrowing Base Report,"
"Collateral," "Perfection Certificates" and "Security Agreement" set forth
therein.
(S)5.28. Amendments to Schedule 2.
------------------------
(a) The definition of "Loan Documents" appearing in
Schedule 2 to the Credit Agreement is hereby amended by deleting the phrase
"Security Agreement" from the second line thereof.
(b) The following definitions of "Permitted Acquisitions"
and "Acquired Assets" are hereby added to Schedule 2 to the Credit
Agreement in the proper alphabetical order to read as follows:
"Permitted Acquisitions. Shall mean any acquisition of all
-----------------------
or substantially all the assets of, or shares or other equity interest in,
a Person or division or line of business ("Acquired Assets") of a Person if
immediately after giving effect thereto: (a) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (b) all
transactions related thereto shall be consummated in accordance in all
material respects with applicable laws, (c) the Bank shall have received
evidence that the board of directors (or Persons performing similar
functions) of such Person shall have approved such acquisition, such
evidence of approval to be in form and substance reasonably satisfactory to
the Bank in all respects, (d) such acquisition is in the same or similar
line of business of the Borrower, (e) the payment of the total
consideration for such acquisition, separately and when considered with all
acquisitions of Acquired Assets since the Closing Date, shall not be in
excess of $10,000,000, (f) one hundred percent (100%) of the capital stock
or other equity interest of any acquired or newly formed corporation,
partnership, limited liability, association or other business entity is
owned directly by the Borrower or a Subsidiary of the Borrower and (g)(x)
the Borrower and its Subsidiaries shall be in compliance, on a pro forma
basis after giving effect to such acquisition or formation, with the
covenants contained in (S)10 recomputed as at the last day of each relevant
period for testing such compliance, and the Borrower shall have
19
<PAGE>
delivered to the Bank an officer's certificate to such effect, together
with all relevant financial information for such subsidiary or assets, and
(y) any acquired or newly formed subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by (S)9.1 hereof).
(S)6. Release of Collateral. Subject to the satisfaction of the
---------------------
conditions set forth herein and in accordance with the terms hereof, the
Banks and the Agent hereby release the security interest in and lien on the
Collateral and agree to execute and file termination statements in all
filing offices of each jurisdiction in which a financing statement with
respect to any of the Collateral was filed, all at the cost and expense of
the Borrower.
(S)7. Expenses. The Borrower agrees to pay to the Agent upon demand
--------
an amount equal to any and all out-of-pocket costs or expenses (including
reasonable legal fees and disbursements and appraisal expenses) incurred or
sustained by the Agent in connection with the preparation of this Amendment
Agreement and any related matters.
(S)8. Miscellaneous.
-------------
(c) This Amendment Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
(d) Except as otherwise expressly provided by this Amendment
Agreement, all of the respective terms, conditions and provisions of the
Credit Agreement shall remain the same and in full force and effect. It is
declared and agreed by each of the parties hereto that this Amendment
Agreement and the Credit Agreement be read and construed as one instrument,
and all referenced in the Loan Documents to the Credit Agreement shall
hereafter refer to the Credit Agreement, as amended by this Amendment
Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this Amendment
Agreement to be executed in its name and behalf by its duly authorized officer
as of the date first written above.
MOORE MEDICAL CORP.
By: /s/ David V. Harper
-------------------
Executive Vice President - Finance and
Chief Financial Officer
BANKBOSTON, N.A. (as successor by merger to
Bank of Boston Connecticut) Individually and
as Agent
By: /s/ Donald W. Peters
--------------------
Vice President
20
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 148
<SECURITIES> 0
<RECEIVABLES> 11,703
<ALLOWANCES> 373
<INVENTORY> 14,259
<CURRENT-ASSETS> 30,657
<PP&E> 21,273
<DEPRECIATION> (11,601)
<TOTAL-ASSETS> 40,592
<CURRENT-LIABILITIES> 13,749
<BONDS> 0
0
0
<COMMON> 33
<OTHER-SE> 26,442
<TOTAL-LIABILITY-AND-EQUITY> 40,592
<SALES> 58,422
<TOTAL-REVENUES> 58,422
<CGS> 39,698
<TOTAL-COSTS> 39,698
<OTHER-EXPENSES> 17,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (52)
<INCOME-PRETAX> 1,422
<INCOME-TAX> 517
<INCOME-CONTINUING> 905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 905
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
