<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 1997 Commission file number 1-8897
CONSOLIDATED STORES CORPORATION
A Delaware Corporation
IRS No. 06-1119097
1105 North Market Street, Suite 1300
P. O. Box 8985
Wilmington, Delaware 19899
(302) 478-4896
Indicate 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock $.01 par value per share, outstanding as of
June 5, 1997, was 67,402,482 and there were no shares of Nonvoting Common Stock,
$.01 par value per share outstanding at that date.
<PAGE> 2
CONSOLIDATED STORES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
-----
Page
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information
Signature 13
FORM 10-Q Page 2
<PAGE> 3
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
May 3, February 1,
1997 1997*
- ---------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $23,441 $ 30,044
Accounts receivable 13,343 9,342
Inventories 927,793 792,665
Prepaid expenses and deferred income taxes 101,254 94,467
- ---------------------------------------------------------------------------------------------------
Total current assets 1,065,831 926,518
- ---------------------------------------------------------------------------------------------------
Property and equipment - net 394,842 380,095
Other assets 28,837 23,890
- ---------------------------------------------------------------------------------------------------
$1,489,510 $1,330,503
- ---------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: ----------
Accounts payable $ 305,137 $ 295,701
----------
Accrued liabilities and income taxes 53,359 133,635
Current maturities of long-term obligations and notes payable 51,499 27,892
- ---------------------------------------------------------------------------------------------------
Total current liabilities 409,995 457,228
- ---------------------------------------------------------------------------------------------------
Long-term obligations 353,214 151,292
Deferred income taxes and other noncurrent liabilities 41,096 39,898
Stockholders' equity:
Preferred stock - authorized 2,000,000 shares, $.01 par value;
none issued -- --
Common stock - authorized 90,000,000 shares, $.01 par value;
issued 67,377,445 and 66,958,488 shares respectively 674 670
Common stock - authorized 8,000,000 shares, $.01 par value;
none issued -- --
Additional paid-in-capital 323,070 312,879
Retained earnings 361,708 369,022
Other adjustments (247) (486)
- ---------------------------------------------------------------------------------------------------
Total stockholders' equity 685,205 682,085
- ---------------------------------------------------------------------------------------------------
$1,489,510 $1,330,503
- ---------------------------------------------------------------------------------------------------
<FN>
* Condensed from audited financial statements
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
FORM 10-Q Page 3
<PAGE> 4
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------
MAY 3, MAY 4,
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 594,874 $ 321,969
Cost and expenses:
Cost of sales 356,063 186,861
Selling and administrative expenses 246,070 124,702
Interest expense 4,677 1,303
Other - net 54 (242)
- ---------------------------------------------------------------------------------
606,864 312,624
- ---------------------------------------------------------------------------------
Income (loss) from continuing operations before
income taxes (11,990) 9,345
Income taxes (4,676) 3,458
- ---------------------------------------------------------------------------------
Income (loss) from continuing operations (7,314) 5,887
Discontinued operations -- (2,281)
- ---------------------------------------------------------------------------------
Net income (loss) $ (7,314) $ 3,606
- ---------------------------------------------------------------------------------
Income (loss) per common and common
equivalent share:
Continuing operations $ (0.10) $ 0.10
Discontinued operations -- (0.04)
- ---------------------------------------------------------------------------------
$ (0.10) $ 0.06
- ---------------------------------------------------------------------------------
Weighted average common and common
equivalent shares outstanding 70,127 62,282
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
FORM 10-Q Page 4
<PAGE> 5
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Thirteen weeks ended
------------------------
May 3, May 4,
1997 1996
<S> <C> <C>
Cash provided by (used for) operations:
Net income (loss) $ (7,314) $ 3,606
Items not effecting cash:
Depreciation and amortization 15,148 8,164
Deferred income taxes 4,843 (740)
Other 6,849 1,825
Change in assets and liabilities (225,919) (71,454)
- ----------------------------------------------------------------------------------
Net cash used for operations (206,393) (58,599)
- ----------------------------------------------------------------------------------
Cash provided by (used for) investment activities:
Capital expenditures (29,688) (11,375)
Other 322 508
- ----------------------------------------------------------------------------------
Net cash used for investment activities (29,366) (10,867)
- ----------------------------------------------------------------------------------
Cash provided by (used for) financing activities:
Proceeds from credit agreements 225,595 320,000
Payment of debt issue expenses -- (11,388)
Proceeds from exercise of stock options 3,004 1,234
Payment of long-term obligations (77) --
Other 634 640
- ----------------------------------------------------------------------------------
Net cash provided by financing activities 229,156 310,486
- ----------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents and
restricted cash $ (6,603) $ 241,020
- ----------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 52,484 $ 10,644
Interest paid $ 6,228 $ 810
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
FORM 10-Q Page 5
<PAGE> 6
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The condensed consolidated balance sheet at May 3, 1997, and the condensed
consolidated statements of income and statements of cash flows for the thirteen
week period ended May 3, 1997, have been prepared by the Company without audit.
In the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations, and cash flows at May 3, 1997, and
for the thirteen week periods presented have been made. Such adjustments
consisted only of normal recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been omitted or condensed. It is suggested that the condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report for the fiscal year ended
February 1, 1997. The results of operations for the period ended May 3, 1997,
may not necessarily be indicative of the operating results for the full year.
NOTE 2 - ACQUISITION
- --------------------
Effective May 5, 1996, the Company acquired Kay-Bee Center, Inc. (KAY-BEE) from
Melville Corporation for a initial purchase price of approximately $315 million
(subject to post-closing adjustments), consisting of $215 million in cash and
$100 million of subordinated notes, issued to Melville Corporation. Post-closing
adjustments recorded in the third quarter 1996, reduced the cash component of
the purchase price by $29.7 million to $185.3 million. This acquisition was
accounted for as a purchase with the results of KAY-BEE included from the
acquisition date. At May 5, 1996, KAY-BEE operated 1,042 toy stores located in
all 50 states and Puerto Rico primarily under the names Kay-Bee Toys and Toy
Works.
The following summary, prepared on a pro forma basis, combines the results of
operations as if KAY-BEE had been acquired at the beginning of the fiscal year
presented. Included in the pro forma presentation is the impact of certain
purchase adjustments directly attributable to the acquisition which are expected
to have a continuing impact.
<TABLE>
<CAPTION>
Thirteen weeks
ended
(In thousands, except per share data) May 4, 1996
- ---------------------------------------------------------------
Unaudited
<S> <C>
Net sales $498,359
- ---------------------------------------------------------------
Loss from continuing operations (11,799)
- ---------------------------------------------------------------
Net loss (14,080)
- ---------------------------------------------------------------
Loss per common and common equiva-
lent share of stock:
Continuing operations $ (0.17)
- ---------------------------------------------------------------
Net loss $ (0.20)
- ---------------------------------------------------------------
</TABLE>
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of the operating results that would have
occurred had the KAY-BEE acquisition been consummated as of the beginning of the
fiscal years presented. Additionally, the pro forma financial information is not
intended to be a prediction of future results and it does not reflect any
synergies that may be achieved from the combined operations.
FORM 10-Q Page 6
<PAGE> 7
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - DISCONTINUED OPERATIONS
- --------------------------------
In the fourth quarter of 1996 the Company adopted a plan to close its single
price point and small specialty stores operating under the names of All For One
and iTZADEAL!. Accordingly, the operating results for this business are reported
as a discontinued operation and prior years operating results have been
restated.
NOTE 4 - EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
- ---------------------------------------------------------------
Income (loss) per common and common equivalent share are based on the weighted
average number of shares outstanding during each period which includes the
additional number of shares which would have been issued upon exercise of stock
options assuming that the Company used the proceeds received to purchase
additional shares at market value.
On November 19, 1996, the Board of Directors authorized a 5 for 4 stock split
payable to stockholders of record on December 10, 1996. The stock split,
distributed December 24, 1996, resulted in the issuance of 13,388,264 new shares
of common stock. All references in the financial statements to average number of
shares outstanding and related prices, per share amounts, and stock option data
have been restated to reflect the split.
NOTE 5 - NEW ACCOUNTING STANDARD
- --------------------------------
The Company calculates earnings (loss) per share using methods prescribed by
Accounting Principles Board Opinion (APB) No. 15, "Earnings per Share". In
February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which
replaces APB No. 15 and requires adoption for periods ending after December 15,
1997. The Statement will require dual presentation of basic and fully diluted
income (loss) per share on the face of the statement of income. For the periods
ended May 3, 1997, and May 4, 1996, the basic and diluted income (loss) per
share calculated pursuant to SFAS No. 128 are not materially different from
primary income (loss) per share calculated under APB No. 15.
NOTE 6 - SUBSEQUENT EVENT
- -------------------------
On May 20, 1997, the Board of Directors authorized a 5 for 4 stock split payable
to stockholders of record on June 10, 1997, to be distributed June 24,1997.
FORM 10-Q Page 7
<PAGE> 8
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS OF THE SECURITIES
LITIGATION REFORM ACT OF 1995
When used in this discussion and the financial statements, the words,
"expect(s)", "feel(s)", "believe(s)", "will", "may", "anticipate(s)" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various disclosures
made by the Company which attempt to advise interested parties of the factors
which affect the Company's business, including the following Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in this report, as well as, the Company's periodic reports on Forms
10-K and 8-K filed with the Securities and Exchange Commission.
OVERVIEW
The Company is the nation's largest closeout retailer and the nation's largest
mall-based toy retailer with 1,840 stores located in all 50 states and Puerto
Rico. The Company operates 637 retail closeout stores under the names ODD LOTS
and BIG LOTS (Closeout Stores) in the midwestern, southern and mid-Atlantic
regions of the United States, and 1,203 retail toy and closeout toy stores
throughout the United States and Puerto Rico, primarily under the names KB TOYS,
KB TOY WORKS, and KB TOY OUTLET (Toy Stores). The Company believes that KB TOYS
is the largest enclosed shopping mall-based toy retailer in the United States.
1,042 of the Toy Stores were acquired as of May 5, 1996 in the acquisition of
Kay-Bee Center, Inc. As a value retailer specializing in toys and closeout
merchandise, the Company seeks to provide the budget-conscious consumer with a
broad range of quality, name-brand products at exceptional values. Wholesale
operations are conducted under the names CONSOLIDATED INTERNATIONAL and
WISCONSIN TOY.
The Closeout Stores typically offer merchandise at prices 15% to 35% below those
offered by other discount retailers and up to 70% below those offered by
traditional retailers. The Closeout Stores offer a wide variety of name-brand
consumer products, including food items, health and beauty aids, electronics,
housewares, tools, paint, lawn and garden, hardware, sporting goods, toys and
softlines. In addition, these stores supplement their broad offering of items in
core product categories with a changing mix of new merchandise and seasonal
goods such as back-to-school and holiday merchandise.
The Toy Stores offer a broad variety of closeout toys, as well as currently
promoted retail toys (known as "in-line toys") and traditional toy merchandise.
The Company has been in the toy retailing business since its inception and has
operated stand-alone toy stores since 1994.
THIRTEEN WEEKS ENDED MAY 3, 1997 COMPARED TO THIRTEEN WEEKS ENDED MAY 4, 1996
TRENDS The Company has historically experienced seasonal fluctuations with a
significant percentage of its net sales and income being realized in the fourth
fiscal quarter. The Company's quarterly results can also be affected by the
timing of store openings and closings, the amount of net sales contributed by
new and existing stores and the timing of certain holidays. Historically, the
Company has generally recorded operating profits during each fiscal quarter. Due
to the increase in the Company's retail toy operations as a result of the
KAY-BEE acquisition on May 5, 1996, it is anticipated that a substantial amount
of net sales, operating profit and net income will be realized in the fourth
fiscal quarter. Quarterly fluctuations in inventory balances are normal
reflecting the opportunistic purchases available at any given time and the
expansion of the Company's store base. Historically, on a per store basis,
inventory levels are lower at the end of the Company's fiscal year and build
through the remaining three quarters of the year to a peak level in the third
quarter. Accounts payable generally follow a trend similar to inventories.
FORM 10-Q Page 8
<PAGE> 9
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The following table compares components of the statement of income as a percent
of net sales and reflects the number of stores in operation at the end of each
period.
<TABLE>
<CAPTION>
Thirteen weeks ended
May 3, May 4,
1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Net sales:
Closeout 55.9% 92.8%
Toy 42.1 4.2
- -----------------------------------------------------------------------------
Total Retail 98.0 97.0
- -----------------------------------------------------------------------------
Other 2.0 3.0
- -----------------------------------------------------------------------------
Total net sales 100.0 100.0
- -----------------------------------------------------------------------------
Cost of sales:
Closeout 59.0 57.8
Toy 60.2 50.6
- -----------------------------------------------------------------------------
Total Retail 59.5 57.5
- -----------------------------------------------------------------------------
Other 75.3 76.8
- -----------------------------------------------------------------------------
Total cost of sales 59.9 58.0
- -----------------------------------------------------------------------------
Gross profit 40.1 42.0
Selling and administrative expenses 41.4 38.7
- -----------------------------------------------------------------------------
Operating profit (loss) (1.3) 3.3
Interest expense 0.8 0.4
Other (income) expense -- (0.1)
- -----------------------------------------------------------------------------
Income (loss) from continuing operations before
income tax (2.1) 3.0
Income taxes (0.8) 1.1
- -----------------------------------------------------------------------------
Income (loss) from continuing operations (1.3) 1.9
Discontinued operations -- (0.7)
- -----------------------------------------------------------------------------
Net income (loss) (1.3)% 1.2%
- -----------------------------------------------------------------------------
Retail stores in operation at end of period:
Closeout 637 559
Toy 1,203 118
- -----------------------------------------------------------------------------
1,840 677
- -----------------------------------------------------------------------------
</TABLE>
FORM 10-Q Page 9
<PAGE> 10
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In the fourth quarter of 1996 the Company adopted a plan to close its single
price point and small specialty stores operating under the names of All For One
and iTZADEAL!. The 1996 operations of these stores are reported as discontinued
operations.
NET SALES Net sales increased to $594.9 million for the thirteen week period
ended May 3, 1997, from $322.0 million in the same period of 1996, an increase
of $272.9 million, or 84.8%. This increase was attributable to net sales of
Kay-Bee Toy (acquired in May of 1996) and a comparable store sales increase of
9.5%.
Closeout Stores net sales increased $33.9 million, or 11.4%, to $332.6 million
for the quarter from $298.7 million in the same period of 1996. Toy Stores net
sales rose $237.0 million to $250.6 million, principally as a result of the
acquisition of the toy stores discussed above.
GROSS PROFIT Gross profit increased to $238.8 million in the quarter from $135.1
million in the prior year quarter, an increase of $103.7 million, or 76.8%. As a
percentage of net sales, gross profit decreased to 40.1% in the 1997 quarter
from 42.0% in the previous year quarter. Closeout Stores gross profit was 41.0%
compared to 42.2% in the prior year period. This decline is primarily the result
of the sales merchandise mix in the first quarter. Toy Stores gross profit was
39.8% in the 1997 quarter compared to 49.4% in 1996. The decline in Toy Stores
gross profit is principally attributable to the higher percentage of lower
margin in-line toys associated with the Kay-Bee acquisition compared to the
primarily closeout selection offered by the Toy Stores in the prior year
quarter.
SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses
increased to $246.1 million in the first quarter of 1997 from $124.7 million in
the previous year quarter, an increase of $121.4 million, or 97.3%. This
increase is attributable to the acquisition of the Kay-Bee Toy Stores. As a
percentage of net sales, selling and administrative expenses increased to 41.4%
in 1997 from 38.7% in the prior year period. Historically the Kay-Bee Toy stores
cost structure has resulted in a higher percentage ratio of selling and
administrative expenses to net sales in the first three quarters of the year.
INTEREST EXPENSE Interest expense increased to $4.7 million in the first quarter
from $1.3 million in fiscal 1996. The increase was attributable to higher
weighted average debt levels principally to support requirements associated with
the operations of the increased number of Toy Stores and increased effective
interest rates on seasonal borrowings during the quarter.
INCOME TAXES The effective tax rate of the Company has increased from 37.0% in
the 1996 quarter to 39.0% in the first quarter of 1997. The increase in rate
results primarily from the surrender of the Company's corporate-owned life
insurance program in 1996.
CAPITAL RESOURCES AND LIQUIDITY
The primary sources of liquidity for the Company has been cash flow from
operations and borrowings under available credit facilities. Net cash used by
operations in each of the thirteen week periods ended May 3, 1997, and May 4,
1996, as detailed in the condensed consolidated statements of cash flows, was
$206.4 million and $58.6 million, respectively. This increase is principally
attributable to increased inventory levels primarily associated with the
operations of the Toy Stores. Additionally, the Company had capital expenditures
of $29.7 million and $11.4 million in each respective first fiscal quarter.
Capital expenditures in 1997 are expected to be approximately $110 million to
$120 million principally for the
FORM 10-Q Page 10
<PAGE> 11
CONSOLIDATED STORES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
anticipated opening of 85 to 95 net Closeout Stores and estimated 100 net Toy
Stores plus capital requirements for warehouse expansion and systems needs.
As necessary, the Company supplemented its capital and operating cash
requirements in the first quarter with borrowings under available credit
facilities. At May 3, 1997, approximately $247.3 million was available for
direct borrowings under the Company's $600 million Revolving Credit Facility
(Revolver) and an additional $55.0 million of uncommitted credit facilities were
available, subject to the terms of the Revolver.
The Company continues to believe that it will have adequate resources to fund
ongoing operating requirements and future capital expenditures related to the
expansion of existing businesses and development of new projects. Additionally,
management is not aware of any current trends, events, demands, commitments, or
uncertainties which reasonably can be expected to have a material impact on the
liquidity, capital resources, financial position or results of operations of the
Company.
FORM 10-Q Page 11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to Vote of Security Holders.
No matter was submitted during the
first quarter of the fiscal year
covered by this report to a vote of
security holders.
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Topic
--------- -----------------------
10 Amendment Number One to
Amended and Restated
Credit Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
FORM 10-Q Page 12
<PAGE> 13
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.
CONSOLIDATED STORES CORPORATION
-------------------------------
(Registrant)
Dated: June 10, 1997 By: /s/ Michael J. Potter
------------- ---------------------------------------
Michael J. Potter, Sr. Vice President,
Chief Financial Officer, and Principal
Accounting Officer
FORM 10-Q Page 13
<PAGE> 1
FORM 10Q EXHIBIT 10
$600,000,000 REVOLVING CREDIT FACILITY
AMENDMENT NUMBER ONE
TO
AMENDED AND RESTATED CREDIT AGREEMENT
by and among
CONSOLIDATED STORES CORPORATION, an Ohio corporation, as Borrower
and
THE BANKS PARTY HERETO
and
THE BANK OF NEW YORK, As Syndication Agent and Managing Agent
and
NATIONAL CITY BANK OF COLUMBUS, As Administrative Agent and Managing Agent
and
PNC BANK, OHIO, NATIONAL ASSOCIATION, As Arranger, Documentation Agent and
Managing Agent
and
BANK ONE, COLUMBUS, N.A., as Managing Agent
and
NATIONAL CITY BANK, as Managing Agent
Dated as of March 21,1997
<PAGE> 2
FORM 10Q EXHIBIT 10
AMENDMENT NUMBER ONE
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER ONE TO AMENDED AND RESTATED CREDIT AGREEMENT is dated as
of March 21, 1997 (the "Amendment") and is made by and among CONSOLIDATED STORES
CORPORATION, an Ohio corporation (the "Borrower"), the Revolving Credit Banks
(as hereinafter defined), and THE BANK OF NEW YORK, in its capacity as
Syndication Agent and as Managing Agent, NATIONAL CITY BANK OF COLUMBUS, in its
capacity as Administrative Agent ("Administrative Agent") and as Managing Agent,
PNC BANK, OHIO, NATIONAL ASSOCIATION, in its capacity as Arranger, as
Documentation Agent (the "Documentation Agent") and as Managing Agent, BANK ONE,
COLUMBUS, N.A., in its capacity as Managing Agent, and NATIONAL CITY BANK in its
capacity as Managing Agent.
WITNESSETH:
WHEREAS, the Agents, the Existing Banks (as hereinafter defined) and the
Borrower are parties to an Amended and Restated Credit Agreement dated as of May
3, 1996 (the "Credit Agreement") pursuant to which the Existing Banks have
provided a revolving credit facility not to exceed $600,000,000; and
WHEREAS, the Revolving Credit Banks and the Borrower have agreed to certain
amendments to the Credit Agreement which are set forth in this Amendment;
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
covenant and agree as follows:
1. CERTAIN DEFINITIONS. The following terms shall have the following meanings:
Term Meaning
---- -------
Banks to be Terminated The Nippon Credit Bank, Ltd., The Fuji
Bank, Limited and The Sumitomo Bank,
Limited
Existing Banks Any bank which was a "Bank" under
the Credit Agreement immediately prior to
the date of this Amendment.
New Banks The Hongkong and Shanghai Banking
Corporation Limited and NationsBank, N.A.
Post-Amendment Revolving Credit Banks The Existing Banks except for the Banks
to be Terminated and the New Banks. The
Post-Amendment Revolving Credit Banks are
listed on Schedule 1.1(B) as amended by
this Amendment. The Post-Amendment
Revolving Credit Banks are the "Revolving
Credit Banks" (as such term is defined in
the Credit Agreement, as amended by this
Amendment) under the Credit Agreement
immediately after the effective date of
this Amendment.
Revolving Credit Banks The Existing Banks and the New Banks
<PAGE> 3
FORM 10Q EXHIBIT 10
All terms used in this Amendment and not otherwise defined in this Amendment
shall have the meanings ascribed thereto in the Credit Agreement.
2. AMENDMENTS TO PART 1, DEFINITIONS. Part 1, Definitions, of the Credit
Agreement is amended as follows:
(A) The following definitions are added to Section 1.1:
"APPLICABLE FACILITY PERCENTAGE shall have the meaning assigned to that
term in Section 2.3."
"BID shall have the meaning assigned to such term in Section 2.11.2."
"BID LOAN FIXED RATE OPTION shall mean the option of the Borrower to
request that the Revolving Credit Banks submit Bids to make Bid Loans
bearing interest at a fixed rate per annum quoted by such Revolving
Credit Banks as a numerical percentage (and not as a spread over
another rate such as the Euro-Rate)."
"BID LOAN INTEREST PERIOD shall have the meaning assigned to such term
in Section 2.11.1."
"BID LOAN REQUEST shall have the meaning assigned to such term in
Section 2.11.1."
"BID LOANS shall mean collectively and Bid Loan shall mean separately
all of the loans or any loan made by any of the Revolving Credit Banks
to the Borrower pursuant to Section 2.11."
"BID NOTES shall mean collectively and Bid Note shall mean separately
all of the promissory notes or any promissory note of the Borrower in
the form of Exhibit 1.1(B) evidencing the Bid Loans together with all
amendments, extensions, renewals, replacements, refinancings or refunds
thereof in whole or in part."
"CO-AGENTS shall mean ABN AMRO Bank N.V., The First National Bank of
Boston, Bank of Tokyo - Mitsubishi Trust Company and Fleet National
Bank."
"DESIGNATED LENDER shall mean any Person who has been designated by a
Revolving Credit Bank to fund Bid Loans and has executed a Designation
Agreement and thereby become a party to this Agreement pursuant to
Section 10.11.3.1."
"DESIGNATING BANK shall have the meaning assigned to such term in
Section 10.11.3.1." "Designation Agreement means a designation
agreement entered into by a Revolving Credit Bank and a Designated
Lender and accepted by the Administrative Agent, in substantially the
form of Exhibit 1.01(D)."
"FACILITY FEE shall have the meaning assigned to that term in Section
2.3."
2
<PAGE> 4
FORM 10Q EXHIBIT 10
"FIXED RATE shall mean a fixed interest rate quoted by a Revolving
Credit Bank in its Bid to apply to such Revolving Credit Bank's Bid
Loan over the term of such Bid Loan if such Revolving Credit Bank's Bid
is accepted."
"INDENTURE shall mean that certain Indenture dated May 5, 1996 between
the Borrower and The Bank of New York, as trustee, as amended by the
Indenture Amendment and as hereafter amended, replaced, or restated."
"INDENTURE AMENDMENT shall mean that certain First Supplemental
Indenture dated as of January 22, 1997 between the Borrower and The
Bank of New York, as trustee, in the form attached as Exhibit 2(A) to
the first amendment hereto."
"LOANS shall mean collectively and Loan shall mean separately all
Revolving Credit Loans, Swing Loans and Bid Loans or any Revolving
Credit Loan, Swing Loan or Bid Loan."
"MOODY'S RATING shall mean the highest rating of senior unsecured
indebtedness of the Borrower having an original maturity of more than
one year which has received a rating from Moody's Investors Service,
Inc., or any successor thereto."
"NOTES shall mean the Revolving Credit Notes and the Bid Notes and Note
shall mean any Revolving Credit Note or Bid Note."
"OFFERED AMOUNT shall have the meaning assigned to such term in Section
2.11.2."
"QUALIFIED LETTER of Credit Bank shall mean any Revolving Credit Bank
designated as such in a written notice by the Borrower to the
Administrative Agent to which the Administrative Agent has not
reasonably objected to a Revolving Credit Bank's designation as such
within five (5) Business Days of receipt of the Borrower's written
notice of such designation and which designation has not been revoked
in a written notice by the Borrower to the Administrative Agent,
provided, however, that the Borrower may not have more than four (4)
Revolving Credit Banks so designated at any one time."
"REQUESTED AMOUNT shall have the meaning assigned to such term in
Section 2.11.1."
"REVOLVING CREDIT BANKS shall mean the financial institutions named on
Schedule 1.1(B) and their respective successors and assigns as
permitted hereunder, each of which is referred to herein as a
"Revolving Credit Bank."
"REVOLVING CREDIT INTEREST PERIOD shall have the meaning assigned to
such term in Section 3.2."
"REVOLVING CREDIT LOAN REQUEST shall have the meaning assigned to such
term in Section 2.5.
"STANDARD & POOR'S RATING shall mean the higher of (i) the corporate
credit rating of the Company from Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, or any successor thereto
("Standard & Poor's") or (ii) the highest rating of senior
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FORM 10Q EXHIBIT 10
unsecured indebtedness of the Borrower having an original maturity of
more than one year received by the Borrower from Standard & Poor's."
(B) AMENDMENTS TO DEFINITIONS IN CONNECTION WITH THE BID LOAN FACILITY.
Each of the following definitions in Section 1.1 is amended and
restated as set forth below:
"BANKS shall mean each of the Revolving Credit Banks and each of the
Designated Lenders."
"BORROWING DATE shall mean, with respect to any Loan, the date for the
making thereof or the renewal or conversion thereof at or to the same
or a different Interest Rate Option, which shall be a Business Day."
"BORROWING TRANCHE shall mean specified portions of Revolving Credit
Loans or Bid Loans outstanding as follows: (i) any Loans to which a
Revolving Credit Euro-Rate Option or Bid Loan Fixed Rate Option applies
under the applicable Loan Request by the Borrower and which have the
same Interest Period shall constitute one Borrowing Tranche, and (ii)
all Revolving Credit Loans to which a Revolving Credit Base Rate Option
applies shall constitute one Borrowing Tranche."
"EXPIRATION DATE shall mean May 3, 2000."
"FIXED CHARGE COVERAGE RATIO shall mean on any date of determination,
the ratio of (i) the sum of (a) Consolidated EBIT for the most recent
four (4) full consecutive fiscal quarters immediately preceding the
date of determination plus (b) Consolidated Rentals plus (c)
Consolidated Maturing Rentals, to (ii) Fixed Charges. For the purpose
of determining the Fixed Charge Coverage Ratio for any quarter which
includes the fourth fiscal quarter of the fiscal year ended February 1,
1997:
(A) any charges recorded in accordance with GAAP associated with the
loss on disposal of the discontinued operations of the All For One and
iTZADEAL! businesses (collectively, the "Discontinued Businesses")
shall be excluded from the definition of Consolidated EBIT in such
computation, and
(B) any payments made under leases comprising the Discontinued
Businesses shall be excluded from the definitions of Consolidated
Rentals and Consolidated Maturing Rentals (including the definitions of
such terms which are contained in the definition of "Fixed Charges") to
the extent that such payments are recorded as an offset to the reserve
established in connection with the loss on the disposal of the
Discontinued Businesses."
"INTEREST PERIOD shall mean either a Bid Loan Interest Period or a
Revolving Credit Interest Period."
"INTEREST RATE OPTION shall mean any of the Revolving Credit Euro-Rate
Option, the Bid Loan Fixed Rate Option or the Revolving Credit Base
Rate Option."
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FORM 10Q EXHIBIT 10
"LOAN DOCUMENTS shall mean this Agreement, the Master Guaranty
Agreement, the Master Intercompany Subordination Agreement, the
Revolving Credit Notes, the Bid Notes and any other instruments,
certificates or documents delivered or contemplated to be delivered
hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time in accordance
herewith or therewith, and Loan Document shall mean any of the Loan
Documents."
"LOAN REQUEST shall mean either a Revolving Credit Loan Request or a
Bid Loan Request."
"MATERIAL SUBSIDIARY shall mean any of C S Ross Company, an Ohio
corporation, KB Toy of California, Inc., a Delaware corporation, K.B.
Consolidated, Inc., an Ohio corporation, KayBee Center, Inc., a
California corporation, and any Subsidiary of the Borrower having at
least 10% of the total consolidated assets of the Company and its
Subsidiaries or at least 10% of the total consolidated revenues of the
Company and its Subsidiaries for the 12-month period ending on the last
day of the most recent fiscal quarter of the Company. Notwithstanding
the foregoing, each of KB Toy of Wisconsin, Inc., TRO, Inc. and Kay-Bee
Toy & Hobby Shops, Inc. (each a "Deemed NM Subsidiary") shall not be
considered to be a Material Subsidiary so long as the operating assets
(as opposed to assets consisting of capital stock) of such Deemed NM
Subsidiary shall not exceed 10% of the total consolidated operating
assets of the Company and its Subsidiaries and the revenues of such
Deemed NM Subsidiary (excluding revenues of Subsidiaries of such Deemed
NM Subsidiary which may be consolidated with the revenues of such
Deemed NM Subsidiary under GAAP) shall not exceed 10% of the total
consolidated revenues of the Company and its Subsidiaries for the
12-month period ending on the last day of the most recent fiscal
quarter of the Company."
"REQUIRED BANKS shall be defined as follows: (i) prior to the
termination of the Revolving Credit Commitments, "Required Banks" shall
mean Revolving Credit Banks whose Revolving Credit Commitments
aggregate at least 66 2/3% of the Revolving Credit Commitments of all
of the Revolving Credit Banks, and (ii) after the earlier of the date
on which the Revolving Credit Commitments are terminated or the date on
which Revolving Credit Loans or any other Indebtedness of the Borrower
to the Revolving Credit Banks shall have become due and payable
pursuant to Section 8.2, "Required Banks" shall mean Banks whose
outstanding Loans and Ratable Share (as determined pursuant to Section
2.9.2) in the face amount of outstanding Letters of Credit and
Reimbursement Obligations aggregate at least 66 2/3% of the total
principal amount of the Loans and the face amount of Letters of Credit
and Reimbursement Obligations outstanding hereunder."
"REVOLVING CREDIT LOANS shall mean collectively and Revolving Credit
Loan shall mean separately all loans or any loan made by the Revolving
Credit Banks or one of the Revolving Credit Banks to the Borrower
pursuant to Section 2.1 or 2.9. A Bid Loan is not a Revolving Credit
Loan, except that it will be treated as a Revolving Credit Loan
following a termination of the Revolving Credit Commitments or an
acceleration of the Revolving Credit Loans hereunder pursuant to
Section 8.2.1 or 8.2.2 as provided in Section 8.2.3.
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FORM 10Q EXHIBIT 10
"REVOLVING FACILITY USAGE shall mean at any time the sum of the
Revolving Credit Loans outstanding, the Bid Loans outstanding, the
Swing Loans outstanding and the Letter of Credit Outstandings."
(C) The definition of the term "Applicable Documentary LC Percentage" is
amended and restated in its entirety to read as follows:
"APPLICABLE DOCUMENTARY LC PERCENTAGE shall mean that percentage which
equals (A) the product obtained by multiplying one-half (0.5) times the
sum of (i) the Applicable Facility Percentage plus (ii) the Revolving
Credit Euro-Rate Spread, and (B) subtracting therefrom the Applicable
Facility Percentage."
(D) The definition of the term "Commitment Fee" is deleted and each
reference in the Credit Agreement or any Loan Document to the term
"Commitment Fee" is replaced by the term "Facility Fee".
(E) The definition of the term "Issuing Letter of Credit Bank" is amended
in its entirety to read as follows: "ISSUING LETTER OF CREDIT BANK
shall mean with respect to a Letter of Credit a Qualified Letter of
Credit Bank which has issued that Letter of Credit pursuant to Section
2.9."
(F) The definition of the term "Permitted Liens" is amended by deleting
from clause (vii) thereof the phrase "not otherwise prohibited by
Section 7.2.15".
3. USE OF CERTAIN DEFINED TERMS.
(A) "BANK" OR "BANKS". Each reference to the term "Bank", "Banks", "Bank's"
or "Banks'" shall be amended to read "Revolving Credit Bank", "
Revolving Credit Banks", " Revolving Credit Bank's" or " Revolving
Credit Banks'", as the case may be, in each of the following Sections
of the Credit Agreement:
Section Description
------- -----------
1.1 Definitions of "Purchasing Bank", "Ratable Share", "
Revolving Credit Commitment" and "Transferor Bank"
2 Revolving Credit Facility (all provisions in Section
2, except for those in Section 2.10.1 or in Section
2.11 (which is being added pursuant to this
Amendment))
3.1 Interest Rate Options
3.4 Euro-Rate Unascertainable
4.2 Pro-Rata Treatment of Banks
4.4.1 Right to Prepay
7.1.6 Visitation Rights
7.3 (intro Reporting Requirements parag. only)
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FORM 10Q EXHIBIT 10
7.3.3 Certificate of Borrower
7.3.7 Budgets, Forecasts (etc.)
7.3.8 Notices Regarding Plans and Benefit Arrangements
8.2.4 Suits, Actions, Proceedings
9.9 Notice of Default
9.10 Notices
9.11 (first Banks in their Individual Capacities sent. only)
9.14 Successor Administrative and Documentation Agents
(B) "REVOLVING CREDIT LOAN" OR "REVOLVING CREDIT LOANS". Each reference
to the term "Revolving Credit Loan" or "Revolving Credit Loans" shall
be amended to read "Loan" or "Loans", as the case may be, in each of
the following Sections of the Credit Agreement:
Section Description
------- -----------
2.8 - Use of Proceeds
3.2 - Interest Periods
3.3 - Interest After Default
4.1 - Payments
4.6.1 - Increased Costs (etc.)
5.1.10 - Margin Stock
7.1.10 - Use of Proceeds
9 (except for - The Managing Agents--the change applies to all
9.13) subsections of Section 9 except for Section
9.13, Equalization of Banks
10 (except for - Miscellaneous--the change applies to all
10.11) subsections of Section 10, except for
Section 10.11, Successors and Assigns.
Section 10.11 is being amended hereby.
(C) "REVOLVING CREDIT NOTE" OR "REVOLVING CREDIT NOTES". Each reference
to the term "Revolving Credit Note" or "Revolving Credit Notes" shall
be amended to read "Note" or "Notes", as the case may be, in each of
the following Sections of the Credit Agreement:
Section Description
------- -----------
1.1 - Definition of "Obligations"
2.4.1 - Voluntary Reduction of Revolving Credit Commitments
4.6.1 - Increased Costs (etc.)
5.1.23 - Senior Debt Status
9.12 - Holders of Revolving Credit Notes
10.10 - Duration; Survival
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<PAGE> 9
FORM 10Q EXHIBIT 10
4. AMENDMENTS TO PART 2, REVOLVING CREDIT FACILITY. The following sections in
Part 2, REVOLVING CREDIT FACILITY, are amended:
(A) Section 2.1, REVOLVING CREDIT COMMITMENTS, is amended by the deletion
of the entirety of clause (i) which appears in the proviso at the end
thereof and by deleting the number "(ii)" which appears at the
beginning of the second clause in such proviso and amending and
restating the second clause to read in its entirety as follows: "the
Revolving Facility Usage exceed, at any one time, an amount equal to
the Revolving Credit Commitments less the face amount of commercial
paper issued by the Borrower and its Subsidiaries."
(B) Section 2.3, COMMITMENT FEES, is amended in its entirety to read as
follows:
"2.3 FACILITY FEES.
The Borrower agrees to pay to the Administrative Agent for the
account of each Revolving Credit Bank, as consideration for such
Revolving Credit Bank's Revolving Credit Commitment hereunder, a
nonrefundable facility fee (the "Facility Fee") at the times and in
the amounts as follows:
(A) on the effective date of the first amendment to this Agreement in
an amount equal to the product of the following: (i) a fraction equal
to the number of days remaining in the quarter ending on May 31, 1997
as of such effective date divided by 365, (ii) the Applicable
Facility Percentage (as defined below) as of such effective date, and
(iii) the amount of such Bank's Revolving Credit Commitment
(regardless of usage) as of such effective date, and
(B) on the first Business Day of each June, September, December and
March after the effective date of the first amendment to this
Agreement until the Expiration Date in an amount equal to the product
of the following: (i) 25%, (ii) the Applicable Facility Percentage
(as defined below) in effect on the due date of such payment , and
(iii) the amount of such Revolving Credit Bank's Revolving Credit
Commitment (regardless of usage) as of the due date of such payment;
except that the Facility Fee on the last payment date prior to the
Expiration Date shall equal the product of the following: (i) a
fraction equal to the number of days remaining in the quarter in
which the Expiration Date falls through the Expiration Date divided
by 365 or 366, as applicable, (ii) the Applicable Facility Percentage
(as defined below) in effect on the due date of such payment and
(iii) the amount of such Bank's Revolving Credit Commitment
(regardless of usage) as of the due date of such payment.
The "Applicable Facility Percentage" shall be determined from the
following table (i) if the Borrower does not have a Moody's Rating or
a Standard & Poor's Rating, the Applicable Facility Percentage
shall be the indicated percentage for the Fixed Charge Coverage Ratio
set forth in Table 1 below then in effect for the Borrower or (ii) if
the Borrower does have a Moody's Rating or a Standard & Poor's
Rating, the Applicable Facility Percentage
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<PAGE> 10
FORM 10Q EXHIBIT 10
shall be the indicated percentage set forth in Table 2 below for the
higher of the Moody's Rating or the Standard & Poor's Rating then in
effect for the Borrower:
Table 1 - Applicable Facility Percentages if No Rated Senior
Unsecured INDEBTEDNESS
Applicable Facility
-------------------
Percentage
----------
Fixed Charge Coverage Ratio (rate per annum)
--------------------------- ----------------
greater than or equal to 2.05 to 1.00 0.100%
greater than or equal to 1.90 to 1.00 but 0.125%
less than 2.05 to 1.00
greater than or equal to 1.75 to 1.00 but 0.150%
less than 1.90 to 1.00
greater than or equal to 1.65 to 1.00 but 0.175%
less than 1.75 to 1.00
less than 1.65 to 1.00 0.225%
Table 2 - Applicable Facility Percentages if Senior Unsecured
Indebtedness Rated
Applicable Facility
-------------------
Standard & Poor's Percentage (rate
----------------- ----------------
Rating Moody's Rating per annum)
------ -------------- ----------
A- or better A3 or better 0.100%
BBB+ Baa1 0.125%
BBB Baa2 0.150%
BBB- Baa3 0.175%
BB+ or lower Ba1 or lower 0.250%
Until the Borrower shall have delivered to the Administrative Agent a
Compliance Certificate covering the four fiscal periods ending on
November 1, 1997, the Fixed Charge Coverage Ratio shall be deemed to
be 1.75 to 1.00. Beginning on the date on which Borrower delivers (or
is required to deliver as more fully provided below) Borrower's
Compliance Certificate for its fiscal quarter ending November 1, 1997
and thereafter, the Fixed Charge Coverage Ratio shall be computed
based on the most recent Compliance Certificate delivered (or due to
be delivered as more fully provided below) by the Borrower. Any
change in the Fixed Charge Coverage Ratio (and any change in the
Applicable Facility Percentage if it is determined based upon the
Fixed Charge Coverage Ratio) shall be effective on the date on which
the Compliance Certificate evidencing the computation of such Fixed
Charge Coverage Ratio is delivered to the Administrative Agent;
provided, however, that if the Compliance Certificate evidencing the
computation of the Fixed Charge Coverage Ratio is not delivered on
the date on which such Compliance Certificate is due to be delivered
under Section 7.3.3, the Fixed Charge Coverage Ratio on and
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<PAGE> 11
FORM 10Q EXHIBIT 10
after the date on which such Compliance Certificate is due to be
delivered under Section 7.3.3 and until the date on which such
Compliance Certificate is delivered to the Administrative Agent shall
be deemed to be less than 1.65 to 1.00 and the Applicable Facility
Percentage for such period computed accordingly.
The obtaining of a Moody's Rating or a Standard & Poor's Rating and
any change in a Moody's Rating or a Standard & Poor's Rating (and the
change in the Applicable Facility Percentage which occurs as a result
of obtaining such a rating or a change being made in any rating)
shall be effective on the earlier of the date on which such rating or
change in rating is publicly announced by the applicable rating
agency or the date on which the Borrower shall have delivered
satisfactory evidence of such rating to the Administrative Agent."
(C) The last clause of the third to last sentence of Section 2.4.1,
VOLUNTARY REDUCTION OF REVOLVING CREDIT COMMITMENTS which now reads
"to the extent that the Revolving Facility Usage then exceeds the
Revolving Credit Commitments as so reduced or terminated" is hereby
amended and restated to read as follows: "to the extent that the
Revolving Facility Usage then exceeds the difference between the
Revolving Credit Commitments as so reduced or terminated and the face
amount of the commercial paper issued by the Borrower and its
Subsidiaries."
(D) Section 2.4.2, MANDATORY REDUCTION OF REVOLVING CREDIT COMMITMENTS,
is deleted in its entirety.
(E) Section 2.5, REVOLVING CREDIT LOAN REQUESTS, is amended by (1)
replacing the words "(each, a "Loan Request")" with the words,
"(each, a "Revolving Credit Loan Request")" and (2) by replacing the
words, "Loan Request", in each instance where such words appear with
the words, "Revolving Credit Loan Request".
(F) Section 2.6, MAKING REVOLVING CREDIT LOANS, is hereby amended by
replacing the words, "Loan Request", in each instance where such
words appear with the words, "Revolving Credit Loan Request"
(G) Section 2.9.1, ISSUANCE OF LETTERS OF CREDIT, is amended by subclause
(i) of clause (B) being restated to read in its entirety as follows:
"(i) the sum of the Standby Letter of Credit Outstandings exceed
$50,000,000".
(H) Section 2.9.3.1, DOCUMENTARY LETTER OF CREDIT FEES, is amended and
restated in its entirety to read as follows:
"2.9.3.1 DOCUMENTARY LETTER OF CREDIT FEES.
Documentary Letters of Credit Fees on Documentary Letter of Credit
shall be determined by multiplying the then Applicable Documentary LC
Percentage times the average daily Documentary Letter of Credit
Outstandings.
The Company shall also pay Documentary Letters of Credit Fees in
respect of Documentary Letter of Credit (Time Draft) Outstandings
determined by multiplying two (2) times the
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<PAGE> 12
FORM 10Q EXHIBIT 10
Applicable Documentary LC Percentage times the average daily
Documentary Letter of Credit (Time Draft) Outstandings.
The Borrower shall also pay to the applicable Issuing Letter of
Credit Bank for its sole account (i) a fronting fee as determined by
such Issuing Letter of Credit Bank and the Borrower and (ii) such
Issuing Letter of Credit Bank's then in effect customary issuance
fees and administrative expense payable with respect to its
Documentary Letters of Credit as such Issuing Letter of Credit Bank
may generally charge or incur from time to time in connection with
the issuance, maintenance, modification (if any), assignment or
transfer (if any), negotiation, and administration of commercial
letters of credit, payable at such times as such Issuing Letter of
Credit Bank may specify."
(I) Section 2.9.3.2, STANDBY LETTER OF CREDIT FEES, is amended and
restated in its entirety to read as follows:
"2.9.3.2 Standby Letter of Credit Fees.
Standby Letters of Credit Fees shall be determined by multiplying the
then applicable Revolving Credit Euro-Rate Spread determined pursuant
to Section 3.1.1(ii) (which shall constitute the "Applicable Standby
LC Percentage") times the average daily Standby Letter of Credit
Outstandings.
The Borrower shall also pay to the applicable Issuing Letter of
Credit Bank for its sole account (i) a fronting fee as determined by
such Issuing Letter of Credit Bank and the Borrower and (ii) such
Issuing Letter of Credit Bank's then in effect customary issuance
fees and administrative expense payable with respect to its Standby
Letters of Credit as such Issuing Letter of Credit Bank may generally
charge or incur from time to time in connection with the issuance,
maintenance, modification (if any), assignment or transfer (if any),
negotiation, and administration of standby letters of credit payable
at such times as such Issuing Letter of Credit Bank may specify."
(J) SWING LOAN COMMITMENT. The second sentence of Section 2.10.1, Swing
Loan Commitment (beginning "The Swing Lender may in . . ."), is
hereby amended and restated to read as follows:
"The Swing Lender may in its discretion make Swing Loans provided
that the Revolving Facility Usage shall not at any time exceed an
amount equal to the Revolving Credit Commitments less the face amount
of commercial paper issued by the Borrower and its Subsidiaries."
(K) BID LOAN FACILITY. A new Section 2.11 is hereby added to the Credit
Agreement to follow immediately after Section 2.10 and to read as
follows:
2.11 Bid Loan Facility.
2.11.1 BID LOAN REQUESTS.
Except as otherwise provided herein, the Borrower may from time to
time prior to the Expiration Date request that the Revolving Credit
Banks make Bid Loans by delivery to the
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FORM 10Q EXHIBIT 10
Administrative Agent not later than 2:00 P.M. Columbus time of a duly
completed request therefor substantially in the form of EXHIBIT
2.11.1 or a request by telephone immediately confirmed in writing by
letter, facsimile or telex (each, a "Bid Loan Request") at least
three (3) Business Days prior to the proposed Borrowing Date. The
Administrative Agent may rely on the authority of any individual
making a telephonic request referred to in the preceding sentence
without the necessity of receipt of written confirmation. Each Bid
Loan Request shall be irrevocable and shall specify (i) the proposed
Borrowing Date, (ii) the term of the proposed Bid Loan (the "Bid Loan
Interest Period") which may be no less than seven (7) days and no
longer than thirty (30) days, and (iii) the maximum principal amount
(the "Requested Amount") of such Bid Loan, which shall be not less
than $5,000,000 and shall be an integral multiple of $1,000,000.
After giving effect to such Bid Loan and any other Loan made on or
before the Borrowing Date, (i) the Revolving Facility Usage shall not
exceed an amount equal to the Revolving Credit Commitments less the
face amount of commercial paper issued by the Borrower and its
Subsidiaries and (ii) there may not exist more than one (1) Borrowing
Tranche of Bid Loans outstanding.
2.11.2 BIDDING.
The Administrative Agent shall promptly after receipt by it of a Bid
Loan Request pursuant to Section 2.11.1 notify the Revolving Credit
Banks of its receipt of such Bid Loan Request specifying (i) the
proposed Borrowing Date, (ii) the Bid Loan Interest Period and (iii)
the principal amount of the proposed Bid Loan. Each Revolving Credit
Bank may submit a bid (a "Bid") in the form of EXHIBIT 2.11.2 to the
Administrative Agent not later than 10:00 A.M. Columbus time one (1)
Business Day before the proposed Borrowing Date in writing by
facsimile. Each Bid shall specify: (A) the principal amount of
proposed Bid Loans offered by such Revolving Credit Bank (such Bid
Loans may be funded by such Revolving Credit Bank's Designated Lender
as provided in Section 2.11.4, however, such Revolving Credit Bank
shall not be required to specify in its Bid whether such Bid Loans
will be funded by such Designated Lender) (the "Offered Amount")
which (i) may be less than, but shall not exceed, the Requested
Amount, (ii) shall be at least $5,000,000 and shall be an integral
multiple of $1,000,000 and (iii) may exceed such Revolving Credit
Bank's Revolving Credit Commitment, and (B) the Fixed Rate which
shall apply to such proposed Bid Loan. If any Bid omits information
required hereunder, the Administrative Agent may in its sole
discretion attempt to notify the Revolving Credit Bank submitting
such Bid. If the Administrative Agent so notifies a Revolving Credit
Bank, such Revolving Credit Bank may resubmit its Bid provided that
it does so prior to the time set forth above in this Section 2.11 by
which such Revolving Credit Bank is required to submit its Bid to the
Administrative Agent. The Administrative Agent shall promptly notify
the Borrower of the Bids which it timely received from the Revolving
Credit Banks. If the Administrative Agent in its capacity as a
Revolving Credit Bank shall, in its sole discretion, make a Bid, it
shall notify the Borrower of such Bid before 9:00 A.M. Columbus time
one (1) Business Day before the proposed Borrowing Date.
2.11.3 ACCEPTING BIDS.
The Borrower shall irrevocably accept or reject Bids by notifying the
Administrative Agent of such acceptance or rejection by telephone
(immediately confirmed in writing by letter,
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<PAGE> 14
FORM 10Q EXHIBIT 10
facsimile or telex) not later than 11:00 A.M. Columbus time one (1)
Business Day before the proposed Borrowing Date. If the Borrower
elects to accept any Bids, its acceptance must meet the following
conditions: (1) the total amount which the Borrower accepts from all
Revolving Credit Banks must exceed $5,000,000 and be in integral
multiples of $1,000,000 and may not exceed the Requested Amount; (2)
the Borrower must (subject to clause (4) below) accept Bids based
solely on the Fixed Rates which the Revolving Credit Banks quoted in
their Bids in ascending order of such Fixed Rates; (3) the Borrower
may not borrow Bid Loans from any Revolving Credit Bank (or such
Revolving Credit Bank's Designated Lender) on the Borrowing Date in
an amount exceeding such Revolving Credit Bank's Offered Amount; (4)
if two or more Revolving Credit Banks make Bids at the same Fixed
Rate and the Borrower desires to accept a portion but not all of the
Bids at such Fixed Rate, the Borrower shall accept a portion of each
Bid equal to the product of the Offered Amount of such Bid times the
fraction obtained by dividing the total amount of Bids which Borrower
is accepting at such Fixed Rate by the sum of the Offered Amounts of
the Bids at such Fixed Rate; provided that the Borrower shall round
the Bid Loans allocated to each such Revolving Credit Bank upward or
downward as the Borrower may select to integral multiples of
$100,000. The Administrative Agent shall (i) promptly notify a
Revolving Credit Bank that has made a Bid of the amount of its Bid
that was accepted or rejected by the Borrower by delivering a notice
in the form of EXHIBIT 2.11.3(A) and (ii) as promptly as practical
notify all of the Revolving Credit Banks (other than those described
in clause (i) immediately above) of the amount of all Bids which the
Borrower has accepted by delivering a notice in the form of EXHIBIT
2.11.3(B).
2.11.4 FUNDING BID LOANS.
Each Revolving Credit Bank whose Bid or portion thereof is accepted
shall, or at its option shall cause its Designated Lender to, remit
the principal amount of its Bid Loan to the Administrative Agent by
12:00 Noon on the Borrowing Date. The Administrative Agent shall make
such funds available to the Borrower on or before 1:00 P.M. on the
Borrowing Date provided that the conditions precedent to the making
of such Bid Loan set forth in Section 6.2 have been satisfied not
later than 10:00 A.M. Columbus time on the proposed Borrowing Date.
If such conditions precedent have not been satisfied prior to such
time, then (i) the Administrative Agent shall not make such funds
available to the Borrower, (ii) the Bid Loan Request shall be deemed
to be canceled and (iii) the Administrative Agent shall return the
amount previously funded to the Administrative Agent by each
applicable Bank no later than the following Business Day. The
Borrower shall immediately notify the Administrative Agent of any
failure to satisfy the conditions precedent to the making of Bid
Loans under Section 6.2. The Administrative Agent may assume that the
Borrower has satisfied such conditions precedent if the Borrower (i)
has delivered to the Administrative Agent the documents required to
be delivered under Section 6.2, (ii) the Borrower has not notified
the Administrative Agent that the Loan Parties have not satisfied any
other conditions precedent, and (iii) the Administrative Agent has no
actual notice of such a failure. Any Designated Lender which funds a
Bid Loan shall on and after the time of such funding become the
obligee under such Bid Loan and be entitled to receive payment
thereof when due. A Revolving Credit Bank shall be relieved of its
obliga-
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<PAGE> 15
FORM 10Q EXHIBIT 10
tion to fund a Bid Loan upon the funding of such Bid Loan by its
Designated Lender and not prior to such time.
2.11.5 SEVERAL OBLIGATIONS.
The obligations of the Revolving Credit Banks to make Bid Loans after
their Bids have been accepted are several. No Revolving Credit Bank
shall be responsible for the failure of any other Bank to make any
Bid Loan which another Revolving Credit Bank has agreed to make.
2.11.6 BID NOTES.
The obligation of the Borrower to repay the aggregate unpaid
principal amount of the Bid Loans made to it by each Revolving Credit
Bank or its Designated Lender, as the case may be, together with
interest thereon, shall be evidenced by a Bid Note dated as of the
date of the first amendment to this Agreement payable to the order of
such Revolving Credit Bank and a Bid Note dated as of the date of the
applicable Designation Agreement in favor of the Designated Lender
named in such Designation Agreement in a face amount equal to the
aggregate Revolving Credit Commitments of all of the Banks."
2.11.7 PAYMENTS AND PREPAYMENTS.
The Borrower shall repay each Bid Loan on the last day of the
Interest Period with respect to such Bid Loan. The Borrower may not
prepay the Bid Loans.
5. AMENDMENTS TO PART 3, INTEREST RATES. The following sections in Part 3,
INTEREST RATES, are amended:
(A) Section 3.1.1(ii), REVOLVING CREDIT EURO-RATE OPTION, is amended in
its entirety to read as follows:
(ii) Revolving Credit Euro-Rate Option: A rate per annum (computed on
the basis of a year of 360 days and actual days elapsed) equal to the
Euro-Rate plus a percentage rate per annum (the "Revolving Credit
Euro-Rate Spread") determined as follows: (i) if the Borrower does
not have a Moody's Rating or a Standard & Poor's Rating, the
applicable Revolving Credit Euro-Rate Spread shall be the indicated
percentage for the Fixed Charge Coverage Ratio set forth in Table 1
below then in effect for the Borrower; or (ii) if the Borrower does
have a Moody's Rating or a Standard & Poor's Rating, the applicable
Revolving Credit Euro-Rate Spread shall be the indicated percentage
set forth in Table 2 below for the higher of the Moody's Rating or
the Standard & Poor's Rating then in effect for the Borrower:
Table 1 - Euro-Rate Spreads if No Rated Senior Unsecured Indebtedness
<TABLE>
<CAPTION>
Applicable Revolving
--------------------
Credit Euro-Rate
----------------
Fixed Charge Coverage Ratio Spread
--------------------------- ------
<S> <C>
greater than or equal to 2.05 to 1.00 0.225%
greater than or equal to 1.90 to 1.00 but 0.250%
</TABLE>
14
<PAGE> 16
FORM 10Q EXHIBIT 10
<TABLE>
<S> <C>
less than 2.05 to 1.00
greater than or equal to 1.75 to 1.00 but 0.350%
less than 1.90 to 1.00
greater than or equal to 1.65 to 1.00 but 0.450%
less than 1.75 to 1.00
less than 1.65 to 1.00 0.525%
</TABLE>
Table 2 - Euro-Rate Spreads if Senior Unsecured Indebtedness Rated
<TABLE>
<CAPTION>
Applicable Revolving
--------------------
Standard & Poor's Credit Euro-Rate
----------------- ----------------
Rating Moody's Rating Spread
------ -------------- ------
<S> <C> <C>
A- or better A3 or better 0.200%
BBB+ Baa1 0.225%
BBB Baa2 0.250%
BBB- Baa3 0.275%
BB+ or lower Ba1 or lower 0.400%
</TABLE>
Until the Borrower shall have delivered to the Administrative Agent a
Compliance Certificate covering the four fiscal periods ending on
November 1, 1997, the Fixed Charge Coverage Ratio shall be deemed to
be 1.75 to 1.00. Beginning on the date on which Borrower delivers (or
is required to deliver as more fully provided below) Borrower's
Compliance Certificate for its fiscal quarter ending November 1, 1997
and thereafter, the Fixed Charge Coverage Ratio shall be computed
based on the most recent Compliance Certificate delivered (or due to
be delivered as more fully provided below). Any change in the Fixed
Charge Coverage Ratio (and any change in the applicable Revolving
Credit Euro-Rate Spread if it is determined based upon the Fixed
Charge Coverage Ratio) shall be effective on the date on which the
Compliance Certificate evidencing the computation of such Fixed
Charge Coverage Ratio is delivered to the Administrative Agent;
provided, however, that if the Compliance Certificate evidencing the
computation of the Fixed Charge Coverage Ratio is not delivered on
the date on which such Compliance Certificate is due to be delivered
under Section 7.3.3, the Fixed Charge Coverage Ratio on and after the
date on which such Compliance Certificate is due to be delivered
under Section 7.3.3 and until the date on which such Compliance
Certificate is delivered to the Administrative Agent shall be deemed
to be less than 1.65 to 1.00 and the applicable Revolving Credit
Euro-Rate Spread for such period computed accordingly.
The obtaining of a Moody's Rating or a Standard & Poor's Rating and
any change in a Moody's Rating or a Standard & Poor's Rating (and the
change in the applicable Revolving Credit Euro-Rate Spread which
occurs as a result of obtaining such a rating or a change being made
in any rating) shall be effective on the earlier of the date on which
such rating or change in rating is publicly announced by the
applicable rating agency or
15
<PAGE> 17
FORM 10Q EXHIBIT 10
the date on which the Borrower shall have delivered satisfactory
evidence of such rating to the Administrative Agent.
Swing Loans shall bear interest in accordance with Section 3.1.1(i)
[Revolving Credit Base Rate Option] except to the extent that the
Swing Lender agrees in writing to a different rate of interest;
provided, however, that any Swing Loans with respect to which the
Swing Lender demands payment pursuant to Section 2.10.5 shall bear
interest on and after such demand for payment in accordance with
Section 3.1.1(i) [Revolving Credit Base Rate Option] notwithstanding
any other interest rate agreed to by the Administrative Agent. "
(B) Section 3.2, INTEREST PERIODS, is amended by replacing the words
"(the "Interest Period")" with the words, "(the "Revolving Credit
Interest Period")".
6. AMENDMENTS TO PART 4, PAYMENTS. The following sections in Part 4, PAYMENTS,
are amended:
(A) Section 4.3, INTEREST PAYMENT DATES, is hereby amended and restated
to read as set forth below:
4.3 INTEREST PAYMENT DATES.
Interest on Revolving Credit Loans to which the Revolving Credit Base
Rate Option applies and on Swing Loans shall be due and payable in
arrears on the first Business Day of each March, June, September and
December after the date hereof and on the Expiration Date or upon
acceleration of the Revolving Credit Notes. Interest on Revolving
Credit Loans to which the Revolving Credit Euro-Rate Option applies
and on any Bid Loans shall be due and payable on the last day of each
Interest Period for those Loans and, if any Interest Period
applicable to a Revolving Credit Loan is longer than three Months,
also on the last day of every third Month during such Interest
Period. Without limitation on Section 4.4.1 interest on mandatory
prepayments of principal under Section 4.5 shall be due on the date
such mandatory prepayment is due. Interest on the principal amount of
each Loan or other monetary Obligation shall be due and payable on
demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon
acceleration or otherwise)."
(B) The text of each of Sections 4.5.1, SALE OF ASSETS, 4.5.2, Payment to
REDUCE REVOLVING CREDIT LOANS MADE PURSUANT TO SECTION 2.9.4, and
4.5.3, PAYMENT TO REDUCE REVOLVING CREDIT LOANS IF REVOLVING CREDIT
COMMITMENTS ARE REDUCED PURSUANT TO SECTION 2.4.2, is hereby deleted
in its entirety and the words "Intentionally omitted" are inserted in
lieu of such text.
(C) Section 4.6.2, INDEMNITY, is hereby amend and restated to read as
follows:
"4.6.2 INDEMNITY.
In addition to the compensation required by Section 4.6.1, the
Borrower shall indemnify each Bank against all liabilities, losses or
expenses (including loss of margin, any loss or expense incurred in
liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund
or maintain
16
<PAGE> 18
FORM 10Q EXHIBIT 10
Revolving Credit Loans subject to a Revolving Credit Euro-Rate Option
or Bid Loans ) which such Bank sustains or incurs as a consequence of
any
(i) payment, prepayment, conversion or renewal of any Revolving
Credit Loan to which a Revolving Credit Euro-Rate Option applies or
any Bid Loan on a day other than the last day of the corresponding
Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or
prepayment is then due),
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 or 2.11 or any notice relating to prepayments under
Section 4.4, or
(iii) default by the Borrower in the performance or observance of any
covenant or condition contained in this Agreement or any other Loan
Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Facility Fee or
any other amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall
from time to time notify the Borrower of the amount determined in
good faith by such Bank (which determination may include such
assumptions, allocations of costs and expenses and averaging or
attribution methods as such Bank shall deem reasonable and shall be
binding on the parties absent manifest error) to be necessary to
indemnify such Bank for such loss or expense. Such notice shall set
forth in reasonable detail the basis for such determination. Such
amount shall be due and payable by the Borrower to such Bank ten (10)
Business Days after such notice is given."
7. AMENDMENTS TO PART 6.2, EACH ADDITIONAL REVOLVING CREDIT LOAN. Section 6.2
is hereby amended by (1) deleting the term "Revolving Credit" from the
caption of such Section, (2) inserting the words, ", Bid Loan", immediately
after the words "Revolving Credit Loan", everywhere the latter words appear
and (3) inserting the words, ", Bid Loans", immediately after the words
"Revolving Credit Loans", everywhere the latter words appear.
8. AMENDMENTS TO PART 7.2, NEGATIVE COVENANTS. The following sections in
Part 7, NEGATIVE COVENANTS, are amended:
(A) Section 7.2.1, INDEBTEDNESS, is amended as follows:
17
<PAGE> 19
FORM 10Q EXHIBIT 10
(1) Subsection (iii) is amended by the deletion of the phrase "as and
to the extent not prohibited by Section 7.2.15";
Subsection (viii) is amended by the deletion of the word "and";
Subsection (ix) is amended and restated in its entirety to read as
follows:
"(ix) commercial paper maturing in not more than 180 days; and"
A new subsection (x) is added which reads as follows:
"(x) any other Indebtedness (excluding Indebtedness relating to
documentary letters of credit) not referenced above which does not
exceed in the aggregate at any one time outstanding in any calendar
year $100,000,000."
(B) Section 7.2.4(v) is amended by deleting the phrase "permitted by
Section 7.2.15". (C) Section 7.2.4(vi) is amended in its entirety to
read as follows:
"(vi) Investments other than those set forth hereinabove not to
exceed $25,000,000 at any time outstanding."
(D) The last sentence of Section 7.2.5, DIVIDENDS AND RELATED
DISTRIBUTIONS, is amended by replacing the number "$10,000,000" with
the number "$20,000,000".
(E) Section 7.2.6, LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS,
is amended and restated in its entirety to read as follows:
"7.2.6 LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS.
Except as permitted by Section 7.2.7, each of the Loan Parties shall
not, and shall not permit any of the Company, the Borrower and the
Material Subsidiaries to, dissolve, liquidate or wind-up its affairs,
or become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all of the assets
or capital stock of any other Person; PROVIDED that any Loan Party
other than the Borrower and the Company may consolidate, liquidate,
dissolve or merge into, or acquire, another Loan Party which is
wholly-owned, directly or indirectly, by the Company; and PROVIDED
FURTHER that any Loan Party may acquire by merger, purchase or
otherwise all or substantially all of the assets of any other Person
or any division or subsidiary of such other Person if (a) the
Borrower is in compliance with all of the provisions of this
Agreement immediately prior to such acquisition and after giving
effect to such acquisition the Borrower will be in compliance with
all of the provisions of this Agreement and (b) with respect to any
acquisition of capital stock of another Person, Borrower shall
acquire at least fifty percent (50% ) of such capital stock so that
such other Person shall become a Subsidiary of the Borrower, and such
Person shall join in the Master Guaranty Agreement in accordance with
Section 10.18, provided that any Subsidiary which is organized, owns
assets and conducts its business in a jurisdiction other than the
United States (each a "Foreign Subsidiary") shall not be required to
join the Master Guaranty Agreement if both of the following are true:
18
<PAGE> 20
FORM 10Q EXHIBIT 10
(i) the total assets of all of the Foreign Subsidiaries which are not
Guarantors is less than 10% of the total consolidated assets of the
Company and its Subsidiaries and (ii) the total consolidated revenues
of all of the Foreign Subsidiaries which are not Guarantors for the
immediately preceding fiscal year is less than 10% of the total
consolidated revenues of the Company and its Subsidiaries for such
year."
(F) Section 7.2.7, DISPOSITION OF ASSETS OR SUBSIDIARIES, is amended by
amending clause (iv) to read as follows:
(iv) any sale, transfer or lease of assets, other than those
specifically excepted pursuant to clauses (i) through (iii) above or
clauses (v) and (vi) below, provided that there shall not exist any
Event of Default or Potential Default after such sale and the Loan
Parties shall be in compliance with all of the covenants herein
applicable to any Loan Party or its Subsidiaries including those in
Section 7.2.10 (Continuation of or Change in Business), 7.2.16
(Minimum Fixed Charge Coverage Ratio), 7.2.17 (Total Indebtedness to
Total Capitalization Ratio) and 7.2.18 (Minimum Tangible Net Worth)
and the Borrower shall deliver a certificate to the Administrative
Agent for the benefit of the Banks at least five (5) Business Days
before such sale confirming the same;
(G) Section 7.2.9, SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURE, is
amended and restated in its entirety to read as follows:
"7.2.9 Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any
Subsidiaries other than (i) any Subsidiary which has joined this
Agreement as Guarantor on the Closing Date; (ii) any Subsidiary
acquired or formed after the Closing Date which joins this Agreement
as a Guarantor pursuant to Section 10.18; and (iii) any Foreign
Subsidiary, provided that such Foreign Subsidiary shall join this
Agreement as a Guarantor if the conditions described in both clauses
(i) and (ii) of the last sentence of Section 7.2.6 are not met. Each
of the Loan Parties shall not become or agree to become a general or
limited partner in any general or limited partnership or a joint
venturer in any joint venture other than (i) solely with other Loan
Parties; (ii) as permitted by Section 7.2.4; (iii) for the
acquisition of inventory; and (iv) for transactions which when
aggregated do not exceed $20,000,000, except that the Loan Parties
may be general or limited partners in other Loan Parties."
(H) Section 7.2.10, CONTINUATION OF OR CHANGE IN BUSINESS, is amended to
read in its entirety as follows:
7.2.10 CONTINUATION OF OR CHANGE IN BUSINESS.
Each of the Company and the Borrower shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than the
wholesale and retail sale of general merchandise, substantially as
conducted and operated by the Company, the Borrower and their
Subsidiaries and as conducted and operated by Kay-Bee Center, Inc.
and its Subsidiaries, during the 1996 fiscal year. This Section
7.2.10 shall not prohibit the Company, the Borrower or any Subsidiary
thereof from engaging in a business which provides
19
<PAGE> 21
FORM 10Q EXHIBIT 10
services common to the retail or wholesale trade in general
merchandise to the Company, the Borrower or any Subsidiary thereof or
to any Person engaged in the sale of general retail merchandise."
(I) Section 7.2.15, CAPITAL EXPENDITURES AND LEASES, is amended by
deleting and replacing the text thereof with the statement "The
covenant previously contained in Section 7.2.15 has been deleted;
this section is intentionally not used".
(J) The grid in Section 7.2.17, TOTAL INDEBTEDNESS TO TOTAL
CAPITALIZATION RATIO, is hereby amended and restated to read as
follows:
Maximum Permitted
Fiscal Quarter Ending Nearest: Percentage
------------------------------ ----------
July 31, 1996 67.5%
October 31, 1996 72.5%
January 31, 1997 62.5%
April 30, 1997 67.5%
July 31, 1997 70.0%
October 31, 1997 72.5%
January 31, 1998 60.0%
April 30, 1998 65.0%
July 31, 1998 67.5%
October 31, 1998 70.0%
January 31, 1999 57.5%
April 30, 1999 62.5%
July 31, 1999 65.0%
October 31, 1999 67.5%
All Quarters subsequent to October 31, 1999 55.0%
(K) Section 7.2.19, Minimum Working Capital Ratio, is amended by deleting
and replacing the text thereof with the statement "The covenant
previously contained in Section 7.2.19 has been deleted; this section
is intentionally not used".
(L) Section 7.2.21, Outstanding Revolving Credit Loans, is amended and
restated as follows:
7.2.21 OUTSTANDING LOANS.
The Loan Parties shall not permit the sum of the Revolving Credit
Loans, Swing Loans and Bid Loans outstanding to exceed $100,000,000
for not less than thirty (30)
20
<PAGE> 22
FORM 10Q EXHIBIT 10
consecutive calendar days during the period commencing with December
1 of each calendar year and ending on February 1 of the succeeding
calendar year.
(M) Section 7.2.22, No Prepayment of Subordinated Debt, is amended and
restated to read as follows:
7.2.22 NO PREPAYMENT OF SUBORDINATED DEBT.
The Loan Parties shall not permit the payment or prepayment, directly
or indirectly (including without limitation of the foregoing any
purchase of one or more of the notes issued thereunder or any
interest or participation in any such notes or any redemption of any
of the Seller Notes), of any principal of the Seller Note (provided
that this provision shall not prohibit transfers by any holder or
holders of the Seller Note to Persons other than the Company and
direct or indirect Subsidiaries of the Company), except that the
Borrower may pay on the due date for payment of principal under the
Seller Note, May 4, 2000 (or thereafter if the due date is hereafter
extended, but in no circumstances may the Borrower make any payment
of principal before May 4, 2000), the principal then due provided
that none of the circumstances described in Section 10.02 or 10.03 of
the indenture dated as of May 5, 1996 (the "Indenture") pursuant to
which the Seller Notes were issued exist. It is acknowledged that
such circumstances include among other things the existence of an
Event of Default under this Agreement as more fully provided in
Section 10.03 of the Indenture. All payments of principal, interest
or other amounts by the Borrower under the Seller Note are subject to
the terms of subordination governing such Seller Note contained in
Article 10 of the Indenture or in any other provisions of the Seller
Note or the Indenture and the Agents and the Banks do not hereby
waive or limit in any manner such terms of subordination."
9. AMENDMENTS TO PART 8.1, EVENTS OF DEFAULT. The following section in Part
8.1, EVENTS OF DEFAULT, is amended:
(A) Section 8.1.1, PAYMENTS UNDER LOAN DOCUMENTS, is amended by
replacing the words, "Revolving Credit Loan" everywhere such words
appear with the word, "Loan".
10. AMENDMENTS TO PART 8.2, CONSEQUENCES OF EVENT OF DEFAULT. The following
sections in Part 8.2, CONSEQUENCES OF EVENT OF DEFAULT, are amended:
(A) Section 8.2.1, EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS, is amended and restated to read as
follows:
8.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Sections 8.1.1 through 8.1.12
shall occur and be continuing, the Banks and the Administrative Agent
shall be under no further obligation to make Loans or issue Letters
of Credit, as the case may be, no Swing Loans shall be made, and the
Administrative Agent may, and upon the request of the Required Banks,
shall by written notice to the Borrower, take one or more of the
following actions: (i) terminate the Revolving Credit Commitments and
thereupon the Revolving Credit
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<PAGE> 23
FORM 10Q EXHIBIT 10
Commitments shall be terminated and of no further force and effect,
(ii) declare the unpaid principal amount of the Revolving Credit
Notes, the Swing Note and all Reimbursement Obligations then
outstanding and all interest accrued thereon, any unpaid fees and all
other Indebtedness of the Borrower to the Revolving Credit Banks
hereunder and thereunder to be forthwith due and payable, and the
same shall thereupon become and be immediately due and payable to the
Administrative Agent for the benefit of each Revolving Credit Bank
without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, and (iii) require the
Borrower to, and the Borrower shall thereupon, deposit in a
non-interest bearing account with the Administrative Agent, as cash
collateral for its Obligations under the Loan Documents, an amount
equal to the maximum amount currently or at any time thereafter
available to be drawn on all outstanding Letters of Credit, and the
Borrower hereby pledges to the Administrative Agent and the Banks,
and grants to the Administrative Agent and the Banks a security
interest in, all such cash as security for such Obligations. Upon the
curing of all existing Events of Default to the satisfaction of the
Required Banks, the Administrative Agent shall return such cash
collateral to the Borrower;"
(B) Section 8.2.2, BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS,
is amended and restated to read as follows:
8.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Section 8.1.13 or 8.1.14 shall
occur, the Revolving Credit Commitments shall automatically terminate
and be of no further force and effect, the Banks shall make no Loans
hereunder and the Swing Lender shall make no Swing Loans hereunder
and the unpaid principal amount of the Revolving Credit Notes, the
Swing Note and all Reimbursement Obligations then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness
of the Borrower to the Revolving Credit Banks hereunder and
thereunder shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived;"
(C) RIGHT OF COMPETITIVE BID LOAN BANKS. A new Section 8.2.7 is hereby
added to follow immediately after Section 8.2.6 and to read as
follows:
8.2.7 RIGHT OF COMPETITIVE BID LOAN BANKS.
If any Event of Default shall occur and be continuing, the Banks
which have any Bid Loans then outstanding to the Borrower (the "Bid
Loan Banks") shall not be entitled to accelerate payment of the Bid
Loans or to exercise any right or remedy related to the collection of
the Bid Loans until the earlier of the date on which the Revolving
Credit Commitments shall be terminated hereunder pursuant to Section
8.2 or the Revolving Credit Loans or any other Indebtedness of the
Borrower to the Revolving Credit Banks shall have become due and
payable pursuant to Section 8.2. Upon such a termination of the
Revolving Credit Commitments: (i) reference to Revolving Credit Loans
and Revolving Credit Notes in Section 8.2 shall be deemed to apply
also to the Bid Loans and the Bid Notes, respectively, and the Bid
Loan Banks shall be entitled to all enforcement rights
22
<PAGE> 24
FORM 10Q EXHIBIT 10
given to a holder of Revolving Credit Loans in Section 8.2 and (ii)
the definition of Required Banks shall be changed as provided in
Section 1.1 so that each Bank shall have voting rights hereunder in
proportion to its share of the total Loans outstanding; provided that
each Designating Bank shall serve as the agent of its Designated
Lender and as such shall exercise all voting, approval and related
rights on behalf of its Designated Lender as more fully described in
Section 10.11.3 and in the Designation Agreement."
11. Amendments to Part 9, THE MANAGING AGENTS. The following sections in
Part 9, THE MANAGING AGENTS, are amended:
(A) Section 9.12, HOLDERS OF REVOLVING CREDIT NOTES, is hereby amended
by replacing the words, "Revolving Credit Note" or "Revolving Credit
Notes", everywhere such words appear with the words, "Note" or
"Notes", as applicable.
(B) Section 9.15, OTHER FEES. Section 9.15, OTHER FEES, is hereby amended
and restated to read as follows:
9.15 OTHER FEES.
The Borrower shall pay to the Administrative Agent the bid loan
processing fee and administrative fees due pursuant to that certain
commitment letter dated March 25, 1996, among the Borrower and the
various Agents and that certain letter agreement between Borrower and
the Administrative Agent dated on or about the date of the first
amendment to this Agreement, as later amended, at the times set forth
in such letter."
12. NOTICES. A new sentence is hereby added to Section 10.6, NOTICES, at the
end of the text in such Section (such text currently ends with the words,
"receipt by it of any such notice.") to read as follows:
Each Designated Lender appoints its Designating Bank as its agent for
the purpose of delivering and receiving all notices hereunder as more
fully set forth in Section 10.11.3 and in its Designation Agreement
with such Designating Bank."
13. AMENDMENTS TO SECTION 10.11, SUCCESSORS AND ASSIGNS. Section 10.11,
SUCCESSORS AND ASSIGNS, is hereby amended and restated to read as set forth
below:
10.11 SUCCESSORS AND ASSIGNS.
10.11.1 BINDING EFFECT; ASSIGNMENTS BY LOAN PARTIES.
This Agreement shall be binding upon and shall inure to the benefit
of the Banks, the Documentation Agent, the Administrative Agent, the
Syndication Agent, the Managing Agents, the Issuing Letter of Credit
Banks, the Loan Parties and their respective successors and assigns,
except that none of the Loan Parties may assign or transfer any of
its rights and Obligations hereunder or any interest herein without
consent of all of the Re-
23
<PAGE> 25
FORM 10Q EXHIBIT 10
volving Credit Banks (each on its own behalf and on behalf of any
Designated Lenders of such Revolving Credit Bank).
10.11.2 ASSIGNMENTS AND PARTICIPATIONS BY BANKS OTHER THAN
ASSIGNMENTS OF BID LOANS AMONG DESIGNATING BANKS AND DESIGNATED
LENDERS.
This Section shall apply to any assignment or participation by a Bank
of its Loans, Letters of Credit Outstandings or Revolving Credit
Commitment except for assignments or designations of Bid Loans among
Designating Banks or Designated Lenders described in Section 10.11.3.
Each Revolving Credit Bank may, at its own cost, make assignments of
all or any part of its Revolving Credit Commitment and Revolving
Credit Loans and Bid Loans and its Ratable Share of Letter of Credit
Outstandings to one or more banks or other entities, subject to the
consent of the Borrower (which consent shall not be required during
any period in which an Event of Default exists), the Issuing Letter
of Credit Banks and the Administrative Agent with respect to any
assignee, such consents not to be unreasonably withheld, and provided
that assignments may not be made in amounts less than $10,000,000 and
a Bank may assign a Bid Loan to another Person only if either such
Bank is a Revolving Credit Bank and is simultaneously assigning all
or a portion of its Revolving Credit Commitment to such Person or the
assignee is already a Revolving Credit Bank hereunder. Each Bank may,
at its own cost, grant participations in all or any part of its
Revolving Credit Commitment and the Revolving Credit Loans and Bid
Loans made by it and of its Ratable Share of Letter of Credit
Outstandings to one or more banks or other entities, without the
consent of any party hereto. In the case of an assignment of all or
any portion of a Revolving Credit Commitment, upon receipt by the
Administrative Agent of the Assignment and Assumption Agreement, the
assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and
obligations as it would have if it had been a signatory Revolving
Credit Bank hereunder, the Revolving Credit Commitments in Section
2.1 shall be adjusted accordingly, and upon surrender of any
Revolving Credit Note subject to such assignment, the Borrower shall
execute and deliver a new Revolving Credit Note to the assignee in an
amount equal to the amount of the Revolving Credit Commitment assumed
by it and a new Revolving Credit Note to the assigning Revolving
Credit Bank in an amount equal to the Revolving Credit Commitment
retained by it hereunder. The assigning Bank shall surrender its Bid
Note if it is assigning all of its Revolving Credit Commitment. The
Borrower shall executed and deliver to the assignee a Bid Note in the
form of Exhibit 1.1(B) . Any assigning Bank shall pay to the
Administrative Agent a service fee in the amount of $3,500 for each
assignment, which amount shall not be subject to reimbursement or
indemnification by the Borrower. In the case of a participation, the
participant shall only have the rights specified in Section 8.2.3
(the participant's rights against the selling Bank in respect of such
participation to be those set forth in the agreement executed by such
Bank in favor of the participant relating thereto and not to include
any voting rights except with respect to changes of the type
referenced in Sections 10.1.1, 10.1.2 and 10.1.3), all of such Bank's
obligations under this Agreement or any other Loan Document shall
remain unchanged, and all amounts payable by any Loan Party hereunder
or thereunder shall be determined as if such Bank had not sold such
participation. Any assignee or participant which is not incorporated
under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Administrative Agent the form
of
24
<PAGE> 26
FORM 10Q EXHIBIT 10
certificate described in Section 10.17 relating to federal income tax
withholding. Each Bank may furnish any publicly available information
concerning any Loan Party or its Subsidiaries and any other
information concerning any Loan Party or its Subsidiaries in the
possession of such Bank from time to time to assignees and
participants (including prospective assignees or participants),
provided that such assignees and participants agree to be bound by
the provisions of Section 10.12.
10.11.3 ASSIGNMENTS OF BID LOANS AMONG DESIGNATING BANKS AND
DESIGNATED LENDERS.
10.11.3.1 ASSIGNMENTS TO DESIGNATED LENDERS.
Any Revolving Credit Bank (each a "Designating Bank") may at any
time, subject to the consent of the Borrower which consent shall not
be unreasonably withheld and subject to the terms of this Section
10.11.3.1, designate one or more Designated Lenders to fund Bid Loans
which the Designating Bank is required to fund. The provisions of
Section 10.11.2 shall not apply to any such designation. No Revolving
Credit Bank shall be entitled to make more than two such
designations. The parties to each such designation shall execute and
deliver to the Administrative Agent, for its acceptance, a
Designation Agreement. Upon its receipt of an appropriately completed
Designation Agreement executed by a Designating Bank, a designee
representing that it is a Designated Lender and the Borrower, the
Administrative Agent will accept such Designation Agreement. From and
after the later of the date on which the Administrative Agent
receives the executed Designation Agreement and the effective date
specified in the Designation Agreement, the Designated Lender shall
become a party to this Agreement with a right to make any Bid Loan on
behalf of its Designating Bank pursuant to Section 2.11 after the
Borrower has accepted a Bid (or a portion thereof) of the Designating
Bank. The Designating Bank shall not be obligated to designate its
Designated Lender to fund any Bid Loan and such Designated Lender
shall not be obligated to fund any Bid Loan, each such designation
being subject to the agreement of the Designating Bank and its
Designated Lender and to be made at the time that such Bid Loan is
made. Each Designating Bank shall serve as the agent of the
Designated Lender for purposes of giving and receiving all
communications and notices and taking all actions hereunder,
including without limitation votes, approvals, waivers, consents and
amendments under or relating to this Agreement or the other Loan
Documents. Any such notice, communication, vote, approval, waiver,
consent or amendment shall be signed by the Designating Bank as agent
for the Designated Lender and shall not be signed by the Designated
Lender. The Borrower, the Administrative Agent and the Banks may rely
thereon without any requirement that the Designated Lender sign or
acknowledge the same. Any Designated Lender which is not incorporated
under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Administrative Agent the form
of certificate described in Section 10.17 relating to federal income
tax withholding.
10.11.3.2 ASSIGNMENTS BY DESIGNATED LENDERS.
Any Designated Lender may assign its Bid Loan to its Designating Bank
or to another Designated Lender designated by such Designating Bank
and such assignment shall not
25
<PAGE> 27
FORM 10Q EXHIBIT 10
be subject to the requirements of Section 10.11.2, provided that the
Designated Lender and Designating Bank shall notify the
Administrative Agent promptly of such assignment.
10.11.4 ASSIGNMENTS BY BANKS TO FEDERAL RESERVE BANKS.
Notwithstanding any other provision in this Agreement, any Bank may
at any time pledge or grant a security interest in all or any portion
of its rights under this Agreement, its Notes and the other Loan
Documents to any Federal Reserve Bank in accordance with Regulation A
of the FRB or US Treasury Regulation 31 CFR Section 203.14 without
notice to or consent of the Borrower or any agent. No such pledge or
grant of a security interest shall release the transferor Bank of its
obligations hereunder or under any other Loan Document."
14. NEW EXHIBITS. The following new exhibits are hereby added to the Credit
Agreement in the forms attached hereto:
Exhibit 1.1(B) - Bid Note
Exhibit 1.1(D) - Designation Agreement
Exhibit 2.1l.1 - Bid Loan Request
Exhibit 2.1l.2 - Form of Bid
Exhibit 2.1l.3(A) - Notice of Acceptance to Successful
Bidders
Exhibit 2.1l.3(B) - Notice of Acceptance to other Revolving
Credit Banks
15. AMENDMENTS TO SCHEDULES. The following schedules to the Credit Agreement
are hereby amended and restated in the forms attached hereto:
Schedule 1.1(B) - Commitments of Banks
Schedule 5.1.1 - Subsidiaries (including (i) an
explanation of the disposition of each
Subsidiary which does not appear on the
revised Schedule 5.1.1 (the "New
Version") and which did appear on the
version of such Schedule delivered on
the Closing Date (the "Prior Version")
and (ii) identification of all new
Subsidiaries (each a "New Subsidiary")
which appears on the New Version but did
not appear on the Prior Version)
Schedule 5.1.3 - Subsidiary Matters
Schedule 5.1.13 - Consents And Approvals
Schedule 5.1.18 - Material Contracts
Schedule 5.1.20 - Employee Benefit Plan Disclosures
Schedule 5.1.22 - Environmental Disclosures
Schedule 7.2.1 - Existing Indebtedness
Schedule 7.2.4 - Loans and Investments
16. REPRESENTATIONS AND WARRANTIES; CONSENT TO SELLER NOTE AND INDENTURE
AMENDMENTS.
(A) Representations and Warranties.
26
<PAGE> 28
FORM 10Q EXHIBIT 10
The Borrower represents and warrants to the Documentation Agent, the
Administrative Agent, the Syndication Agent, the Managing Agents, the
Issuing Letter of Credit Banks and each of the Post-Amendment
Revolving Credit Banks that:
(i) The Company has delivered to the Revolving Credit Banks copies of
its unaudited consolidated balance sheet and condensed statement of
operations as of the end of the fiscal year ended February 1, 1997
(the "1997 Unaudited Statements");
(ii) The 1997 Unaudited Statements were compiled from the books and
records maintained by the Company's management, are complete and
fairly represent the consolidated financial condition of the Company
and its Subsidiaries as of February 1, 1997, and the results of their
operations for the fiscal year then ended, and have been prepared in
accordance with GAAP consistently applied;
(iii) The audited financial statements for and as of the fiscal year
of Company ended February 1, 1997 which shall be delivered to the
Administrative Agent and each of the Post-Amendment Revolving Credit
Banks pursuant to Section 7.3.2 of the Credit Agreement shall be
substantially the same as the 1997 Unaudited Statements.
(B) CONSENT TO SELLER NOTE AND INDENTURE AMENDMENTS.
Each of the Revolving Credit Banks hereby consents pursuant to
Section 7.2.20 of the Credit Agreement to the Indenture Amendment in
the form of Exhibit 2(A) attached hereto which amended the Indenture
pursuant to which the Seller Note was issued.
17. ADDITION OF NEW BANKS; TERMINATION OF COMMITMENTS OF CERTAIN EXISTING
BANKS; REPAYMENT OF OUTSTANDING LOANS.
(A) ADDITION OF NEW BANKS.
Each of the New Banks hereby joins the Credit Agreement and each of
the other Loan Documents as to which the Banks are a party as a Bank
with a Commitment in the amount set forth on Schedule 1.1(B) and with
an address for notices as set forth on such Schedule 1.1(B). Each New
Bank shall have all the rights and obligations of a Bank under the
Credit Agreement and other Loan Documents on and after the effective
date of this Amendment.
(B) REMOVAL OF BANKS TO BE TERMINATED.
Each of the Banks to be Terminated shall cease to have a Commitment
and cease to be a Bank under the Credit Agreement and each of the
other Loan Documents on and after the effective date of this
Amendment.
(C) REPAYMENT OF OUTSTANDING LOANS.
The Borrower shall on the effective date of this Amendment repay each
of the Revolving Credit Loans which is outstanding on the date
hereof. The Borrower shall on the effective date hereof pay a fee
(the "Prepayment Fee") to the Administrative Agent for the ratable
accounts of the Existing
27
<PAGE> 29
FORM 10Q EXHIBIT 10
Banks in the amount set forth on EXHIBIT 17(C) hereto, in connection
with the repayment of outstanding Borrowing Tranches of Revolving
Credit Loans under the Revolving Credit Euro-Rate Option. The
Prepayment Fee shall be in full satisfaction of any amounts payable
under Section 4.6.2(i) [Indemnity] of the Credit Agreement by the
Borrower to the Existing Banks in connection with the foregoing
repayment and the Existing Banks upon receipt of the Prepayment Fee
waive any claims under such Section 4.6.2(i) in connection with such
repayment.
(D) NEW BORROWINGS.
The Post-Amendment Revolving Credit Banks hereby waive the
requirements in Section 2.5 or otherwise under the Credit Agreement
that the Borrower must deliver a Loan Request for Revolving Credit
Loans under the Revolving Credit Euro-Rate Option to be made on the
effective date of this Amendment three (3) Business Days before the
Borrowing Date for such Loans; provided that the Borrower shall
deliver a completed Loan Request for such Loans on or before 2:00
p.m. one (1) Business Day before the effective date of this
Amendment. The Post-Amendment Revolving Credit Banks shall
participate in Revolving Credit Loans made on and after the Borrowing
Date according to their Ratable Shares (after giving effect to this
Amendment), as more fully described in Section 2 of the Credit
Agreement [Revolving Credit Facility].
(E) REALLOCATION OF PARTICIPATIONS IN OUTSTANDING LETTERS OF CREDIT AND
SWING LOANS.
On and after the effective date of this Amendment, the Banks to be
Terminated shall cease to participate in any Letters of Credit or
Swing Loans which are outstanding pursuant to Section 2.9 [Letter of
Credit Subfacility], 2.10 [Swing Loans] or otherwise under the Credit
Agreement and the Post-Amendment Revolving Credit Banks shall
participate in such Letters of Credit and Swing Loans pursuant to
such Sections 2.9 and 2.10 and otherwise under the Credit Agreement.
18. WAIVERS.
(A) WAIVER UNDER SECTION 7.2.9 (SUBSIDIARIES, PARTNERSHIPS AND JOINT
VENTURES).
The Revolving Credit Banks waive any failure of the Borrower to cause
each of the New Subsidiaries (and any other Subsidiaries created
after the Closing Date but no longer existing on the date hereof)
previously to have executed and delivered to the Administrative Agent
for the benefit of the Revolving Credit Banks a Guarantor Joinder
pursuant to Section 7.2.9 of the Credit Agreement, provided that each
such New Subsidiary shall execute and deliver to the Administrative
Agent such Guarantor Joinder and otherwise comply with Section 19(C)
(Joinders etc.) hereof on or before the effective date of this
Amendment.
(B) WAIVER UNDER SECTION 7.2.14 (CHANGES IN ORGANIZATIONAL DOCUMENTS).
The Revolving Credit Banks waive any failure of the Borrower to
notify the Administrative Agent or the Revolving Credit Banks
pursuant to Section 7.2.14 of the Credit Agreement or to obtain the
consent of the Administrative Agent or the Revolving Credit Banks
under such Section 7.2.14 in connection with reorganizations of the
Subsidiaries of the Borrower between the Closing Date and the date of
this Amendment provided that the Borrower will comply with Sections
19(D) (Updates to
28
<PAGE> 30
FORM 10Q EXHIBIT 10
Schedules; Description of Prior Reorganizations) and 19(F)
(Secretary's Certificate) hereof on or before the effective date of
this Amendment.
19 CONDITIONS PRECEDENT TO EFFECTIVENESS. This Amendment shall become
effective upon satisfaction of each of the following conditions:
(A) EXECUTION OF THIS AMENDMENT. The Borrower, each of the Revolving
Credit Banks and the Agents shall have executed and delivered this
Amendment to the Administrative Agent for the benefit of the Banks.
(B) REVOLVING CREDIT NOTES AND BID NOTES. The Borrower shall have
executed and delivered to each Post-Amendment Revolving Credit Bank a
Revolving Credit Note in the form of Exhibit 1.1(R) of the Credit
Agreement and a Bid Note in the form of Exhibit 1.1(B) of this
Amendment. Each of the Revolving Credit Notes in effect prior to the
effective date of this Amendment shall be canceled and of no further
force and effect upon the effective date of this amendment and the
delivery by the Borrower of the new Revolving Credit Notes described
in the preceding sentence.
(C) JOINDERS TO MASTER GUARANTY AGREEMENT AND MASTER INTERCOMPANY
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT. Each Subsidiary (including
each of the New Subsidiaries) of the Company (i) which has not
executed the Master Guaranty Agreement shall execute and deliver to
the Administrative Agent for the benefit of the Banks the joinder in
the form attached as EXHIBIT 19(C) hereto, and (ii) which has not
executed the Master Intercompany Subordination Agreement shall
execute and deliver to the Administrative Agent for the benefit of
the Banks the joinder to the Master Intercompany Subordination
Agreement in a form attached as EXHIBIT 19(C) hereto. Each of the
parties to the Master Guaranty Agreement and Master Intercompany
Subordination Agreement shall sign an acknowledgment in the form of
EXHIBIT 19(C) hereto, acknowledging that the Master Guaranty
Agreement and Master Intercompany Subordination Agreement remain in
full force and effect after giving effect to this Amendment and the
transactions contemplated hereby.
(D) UPDATED SCHEDULES TO CREDIT AGREEMENT; DESCRIPTION OF PRIOR
REORGANIZATIONS. The Borrower shall have delivered the updated
schedules referred to in Section hereof. The Borrower shall have
provided a description of the reorganizations of the Company's
Subsidiaries which have occurred prior to the date of this Amendment
in a form satisfactory to the Managing Agents.
(E) DESIGNATION AGREEMENTS. The Borrower, the Administrative Agent and
each Post-Amendment Revolving Credit Bank which desires (as of the
date of this Amendment) to designate a Designated Lender to be
permitted to fund Bid Loans on such Revolving Credit Bank's behalf
shall have executed a Designation Agreement in the form of Exhibit
1.1(D) in connection with such designation and delivered the same to
the Administrative Agent.
(F) SECRETARY'S CERTIFICATE. There shall have been delivered to the
Administrative Agent for the benefit of each Bank a certificate dated
the date of this Amendment and signed by the Secretary or an
Assistant Secretary of each of the Company, the Borrower and each
Material Subsidiary, certifying as appropriate as to:
1. all action taken by such Loan Party in connection with this
Amendment;
29
<PAGE> 31
FORM 10Q EXHIBIT 10
2. the names of the officer or officers authorized to sign this
Amendment, the Credit Agreement and the other Loan Documents
and the true signatures of such officer or officers and
specifying the Authorized Officers permitted to act on behalf
of such Loan Party for purposes of this Amendment and the
documents executed in connection herewith and the true
signatures of such officers, on which the Administrative Agent
and each Bank may conclusively rely; and
3. copies of the organizational documents of such Loan Party
(except if there have been no changes to such organizational
documents with respect to any such Loan Party since the
Closing Date, the secretary of such Loan Party may certify to
such effect in lieu of delivering copies of such
organizational documents), including its certificate of
incorporation and bylaws as in effect on the date of this
Amendment certified by the appropriate state official where
such documents are filed in a state office together with
certificates from the appropriate state officials as to the
continued existence and good standing of the Borrower in each
state where organized.
(G) OPINION OF COUNSEL. There shall have been delivered to the
Administrative Agent for the benefit of each Post-Amendment Revolving
Credit Bank a written opinion of Benesch, Friedlander, Coplan &
Aronoff P.L.L. and of Albert J. Bell, Esquire, counsel for the Loan
Parties (who may rely on the opinions of such other counsel as may be
acceptable to the Administrative Agent), dated the date of this
Amendment and in form and substance satisfactory to the Managing
Agents and their counsel as to the matters set forth in Exhibit 19().
(H) LEGAL DETAILS. All legal details and proceedings in connection with
the transactions contemplated by this Amendment shall be in form and
substance satisfactory to the Managing Agents and their counsel, and
the Managing Agents shall have received all such other counterpart
originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and
substance satisfactory to the Managing Agents and said counsel, as
the any of the Managing Agents or said counsel may reasonably
request.
(I) PREPAYMENT FEE. The Borrower shall have paid to the Administrative
Agent for the ratable accounts of the Existing Banks the Prepayment
Fee described in Section 17(C).
(J) OFFICER'S CERTIFICATE. The representations and warranties of each of
the Loan Parties contained in Article 5 of the Credit Agreement and
in each of the other Loan Documents shall be true and accurate on and
as of the date of this Amendment with the same effect as though such
representations and warranties had been made on and as of such date
(except representations and warranties which relate solely to an
earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to
therein), and each of the Loan Parties shall have performed and
complied with all covenants and conditions hereof and thereof and no
Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall have been delivered to the
Administrative Agent for the benefit of each Post-Amendment Revolving
Credit Bank a certificate of the Borrower, the Company and each of
the Material Subsidiaries, dated the date of this Amendment and
signed by the Chief Executive Officer, President or Chief Financial
Officer of such Person, to each such effect.
(K) PAYMENT OF FACILITY FEES AND ACCRUED COMMITMENT FEES. The Borrower
shall have paid the Facility Fees payable on the effective date
hereof as provided in Section 2.3 of the Credit Agreement as
30
<PAGE> 32
FORM 10Q EXHIBIT 10
amended hereby. The Borrower shall have paid the Commitment Fees
accrued prior to the effective date hereof under Section 2.3 of the
Credit Agreement (before the amendment of such Section pursuant to
this Amendment).
20. GOVERNING LAW. This Amendment shall be deemed to be a contract under the
Laws of the State of Ohio and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Ohio without regard to its conflict of laws principles.
21. MISCELLANEOUS. All other provisions of the Credit Agreement shall remain
in full force and effect. This Amendment may be signed in counterparts.
31
<PAGE> 33
FORM 10Q EXHIBIT 10
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Amendment as of the day and year first above
written.
CONSOLIDATED STORES CORPORATION, Borrower
By:
-------------------------------------
Title:
----------------------------------
NATIONAL CITY BANK OF COLUMBUS, as
Administrative Agent, as Managing Agent
and as a Bank
By:
-------------------------------------
Title:
----------------------------------
BANK ONE, COLUMBUS, N.A.,
as Managing Agent and as a
Bank
By:
-------------------------------------
Title:
----------------------------------
PNC BANK, OHIO, NATIONAL ASSOCIATION, as
Documentation Agent, Managing Agent and
as a Bank
By:
-------------------------------------
Title:
----------------------------------
THE BANK OF NEW YORK, as Syndication
Agent, as Managing Agent and as a Bank
By:
-------------------------------------
Title:
----------------------------------
<PAGE> 34
FORM 10Q EXHIBIT 10
NATIONAL CITY BANK, as Managing Agent
By:
-------------------------------------
Title:
-----------------------------------
OTHER BANKS:
ABN AMRO BANK N.V.
By: ABN AMRO NORTH AMERICA, INC., its Agent
By:
-------------------------------------
Title:
-----------------------------------
By:
-------------------------------------
Title:
----------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
Title:
----------------------------------
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By:
--------------------------------------
Title:
-----------------------------------
THE BANK OF YOKOHAMA, LTD.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 35
FORM 10Q EXHIBIT 10
COMERICA BANK
By:
--------------------------------------
Title:
-----------------------------------
CORESTATES BANK, N.A.
By:
--------------------------------------
Title:
-----------------------------------
CREDIT LYONNAIS CHICAGO BRANCH
By:
--------------------------------------
Title:
-----------------------------------
DAI-ICHI KANGYO BANK LTD., CHICAGO BRANCH
By:
--------------------------------------
Title:
-----------------------------------
THE FIFTH THIRD BANK OF COLUMBUS
By:
--------------------------------------
Title:
-----------------------------------
FIRST HAWAIIAN BANK
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 36
FORM 10Q EXHIBIT 10
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:
--------------------------------------
Title:
-----------------------------------
FLEET NATIONAL BANK
By:
--------------------------------------
Title:
-----------------------------------
THE FUJI BANK, LIMITED
By:
--------------------------------------
Title:
-----------------------------------
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
By:
--------------------------------------
Title:
-----------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
--------------------------------------
Title:
-----------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 37
FORM 10Q EXHIBIT 10
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
THE NIPPON CREDIT BANK, LTD.
By:
--------------------------------------
Title:
-----------------------------------
NATIONSBANK, N.A.
By:
--------------------------------------
Title:
-----------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By:
--------------------------------------
Title:
-----------------------------------
THE SAKURA BANK, LIMITED
By:
--------------------------------------
Title:
-----------------------------------
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 38
FORM 10Q EXHIBIT 10
STAR BANK, N.A.
By:
--------------------------------------
Title:
-----------------------------------
THE SUMITOMO BANK, LIMITED
By:
--------------------------------------
Title:
-----------------------------------
THE TOYO TRUST & BANKING CO., LTD.
By:
--------------------------------------
Title:
-----------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By:
--------------------------------------
Title:
-----------------------------------
WACHOVIA BANK OF GEORGIA, N.A.
By:
--------------------------------------
Title:
-----------------------------------
THE YASUDA TRUST & BANKING CO., LTD.,
CHICAGO BRANCH
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 39
FORM 10Q EXHIBIT 10
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
- ---------
Schedule 1.1(B) - Commitments of Banks
Schedule 5.1.1 - Subsidiaries
Schedule 5.1.3 - Subsidiary Matters
Schedule 5.1.13 - Consents And Approvals
Schedule 5.1.18 - Material Contracts
Schedule 5.1.20 - Employee Benefit Plan Disclosures
Schedule 5.1.22 - Environmental Disclosures
Schedule 7.2.1 - Existing Indebtedness
Schedule 7.2.4 - Loans And Investments
EXHIBITS
- --------
EXHIBITS HERETO WHICH ARE ALSO
------------------------------
EXHIBITS TO THE CREDIT AGREEMENT
--------------------------------
Exhibit 1.1(B) - Bid Note
Exhibit 1.1(D) - Designation Agreement
Exhibit 2.1l.1 - Bid Loan Request
Exhibit 2.1l.2 - Bid
Exhibit 2.11.3(A) - Notice Of Acceptance To Successful Bidders
Exhibit 2.11.3(B) - Notice Of Acceptance To Other Banks
EXHIBITS HERETO WHICH ARE NOT
-----------------------------
EXHIBITS TO THE CREDIT AGREEMENT
--------------------------------
Exhibit 2(A) - Amendment To Indenture
Exhibit 17(C) - Computation of Prepayment Fee
Exhibit 19(C) - Joinder and Acknowledgment--Master
Guaranty Agreement and Master
Intercompany Subordination Agreement
Exhibit 19() - Opinion Of Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM CONSOLIDATED STORES
CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FILED IN FORM 10Q
AS OF MAY 3, 1997, AND THE THIRTEEN WEEK PERIOD THEN ENDED, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-2-1997
<PERIOD-END> MAY-3-1997
<CASH> 23,441
<SECURITIES> 0
<RECEIVABLES> 13,343
<ALLOWANCES> 0
<INVENTORY> 927,793
<CURRENT-ASSETS> 1,065,831
<PP&E> 592,616
<DEPRECIATION> 197,774
<TOTAL-ASSETS> 1,489,510
<CURRENT-LIABILITIES> 409,995
<BONDS> 353,214
<COMMON> 674
0
0
<OTHER-SE> 684,531
<TOTAL-LIABILITY-AND-EQUITY> 1,489,510
<SALES> 594,874
<TOTAL-REVENUES> 594,874
<CGS> 356,063
<TOTAL-COSTS> 602,133
<OTHER-EXPENSES> 54
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,677
<INCOME-PRETAX> (11,990)
<INCOME-TAX> (4,676)
<INCOME-CONTINUING> (7,314)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,314)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
