<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
Commission file number 1-10948
--------------------------------------------------------
OFFICE DEPOT, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 278-4800
- --------------------------------------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No
--- ---
The registrant had 150,306,766 shares of common stock outstanding as of July
27, 1995.
<PAGE> 2
OFFICE DEPOT, INC.
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Earnings
for the 13 and 26 Weeks Ended July 1, 1995
and June 25, 1994 3
Consolidated Balance Sheets as of
July 1, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows
for the 26 Weeks Ended July 1, 1995
and June 25, 1994 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 10
Part II. OTHER INFORMATION 11 - 12
SIGNATURE 13
INDEX TO EXHIBITS 14
2
<PAGE> 3
OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sales $1,200,410 $924,676 $2,551,622 $1,966,072
Cost of goods sold and occupancy costs 928,606 709,076 1,974,989 1,513,535
---------- -------- ---------- ----------
Gross profit 271,804 215,600 576,633 452,537
Store and warehouse operating
and selling expenses 179,238 142,201 382,405 302,660
Pre-opening expenses 2,912 1,973 6,164 3,232
General and administrative expenses 36,192 31,413 73,264 60,799
Amortization of goodwill 1,297 1,268 2,592 2,537
---------- -------- ---------- ----------
219,639 176,855 464,425 369,228
---------- -------- ---------- ----------
Operating Profit 52,165 38,745 112,208 83,309
Interest expense, net 6,812 3,774 11,631 7,234
---------- -------- ---------- ----------
Earnings before income taxes 45,353 34,971 100,577 76,075
Income taxes 17,935 14,162 40,685 30,720
---------- -------- ---------- ----------
Net earnings $ 27,418 $ 20,809 $ 59,892 $ 45,355
========== ======== ========== ==========
Earnings per common and
common equivalent share $ .18 $ .14 $ .39 $ .30
========== ======== ========== ==========
Average common and common
equivalent shares 153,642 152,380 153,544 152,379
========== ======== ========== ==========
</TABLE>
3
<PAGE> 4
OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 30,277 $ 32,406
Receivables, net of allowances 290,571 266,629
Merchandise inventories 984,947 936,048
Deferred income taxes 33,744 32,093
Prepaid expenses 13,702 7,046
---------- ----------
Total current assets 1,353,241 1,274,222
Property and Equipment 622,045 524,350
Less accumulated depreciation and amortization 153,700 127,121
---------- ----------
468,345 397,229
Goodwill, net of amortization 197,903 200,449
Other Assets 37,197 32,083
---------- ----------
$2,056,686 $1,903,983
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 517,810 $ 609,914
Accrued expenses 151,197 154,894
Income taxes 8,997 18,051
Current maturities of long-term debt 778 4,030
---------- ----------
Total current liabilities 678,782 786,889
Long-Term Debt, less current maturities 204,233 27,460
Deferred Taxes and Other Credits 10,659 8,023
Zero Coupon, Convertible, Subordinated Notes 374,356 366,340
Common Stockholders' Equity
Common stock - authorized 400,000,000 shares of
$.01 par value; issued 152,343,395 in 1995 and
151,536,781 in 1994 1,523 1,515
Additional paid-in capital 465,510 453,117
Foreign currency translation adjustment (2,203) (3,295)
Retained earnings 325,576 265,684
Less: 2,163,447 shares of treasury stock (1,750) (1,750)
---------- ----------
788,656 715,271
---------- ----------
$2,056,686 $1,903,983
========== ==========
</TABLE>
4
<PAGE> 5
OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 1, June 25,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Cash received from customers $ 2,512,748 $ 1,948,309
Cash paid for inventory (2,025,380) (1,482,493)
Cash paid for store and warehouse operating,
selling and general administrative expenses (522,332) (416,926)
Interest received 132 2,608
Interest paid (2,305) (1,537)
Taxes paid (50,143) (39,777)
----------- -----------
Net cash provided (used) by operating activities (87,280) 10,184
----------- -----------
Cash flows from investing activities
Capital expenditures-net (98,100) (70,996)
----------- -----------
Net cash used by investing activities (98,100) (70,996)
----------- -----------
Cash flows from financing activities
Proceeds from exercise of stock options 8,767 5,666
Foreign currency translation adjustment 1,092 251
Proceeds from long- and short-term borrowings 176,430 8,139
Payments on long- and short-term borrowings (3,038) (10,646)
S corporation distribution to stockholders -- (542)
----------- -----------
Net cash provided by financing activities 183,251 2,868
----------- -----------
Net decrease in cash and cash equivalents (2,129) (57,944)
Cash and equivalents at beginning of period 32,406 142,471
----------- -----------
Cash and equivalents at end of period $ 30,277 $ 84,527
=========== ===========
Reconciliation of net earnings to net cash
provided (used) by operating activities
Net earnings $ 59,892 $ 45,355
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities
Depreciation and amortization 30,377 23,000
Changes in assets and liabilities
Decrease (increase) in accounts receivable (23,942) 6,423
Increase in inventory (48,899) (26,658)
Increase in prepaid expenses and other assets (14,268) (12,608)
Decrease in accounts payable
and other liabilities (90,440) (25,328)
----------- -----------
Total adjustments (147,172) (35,171)
----------- -----------
Net cash provided (used) by operating activities $ (87,280) $ 10,184
=========== ===========
</TABLE>
5
<PAGE> 6
OFFICE DEPOT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim financial statements as of July 1, 1995 and for the 13 and
26 week periods ended July 1, 1995 and June 25, 1994 are unaudited;
however, such interim statements reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation
of the financial position and the results of operations for the
interim periods presented. The results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the full year. The interim financial statements should
be read in conjunction with the audited financial statements for the
year ended December 31, 1994.
2. Average common and common equivalent shares utilized in computing
second quarter earnings per share include approximately 3,708,000 and
4,631,000 shares in 1995 and 1994, respectively, as a result of
applying the treasury stock method to outstanding stock options.
3. The Consolidated Statements of Cash Flows for the 26 weeks ended July
1, 1995 and June 25, 1994 do not include noncash financing
transactions of $1,994,000 and $3,186,000, respectively, relating to
additional paid-in capital associated with tax benefits of stock
options exercised and $1,640,000 and $1,252,000, respectively,
relating to common stock and additional paid-in capital associated
with stock issued to the Office Depot Retirement Savings Plan and
related to the employee stock purchase program. In addition, the
Consolidated Statements of Cash Flows for the 26 weeks ended July 1,
1995 and June 25, 1994 do not include noncash financing transactions
of $8,145,000 and $7,787,000, respectively, associated with accreted
interest on convertible, subordinated notes.
4. In June 1995, the Company amended its credit agreement with its
principal bank and a syndicate of commercial banks to increase the
working capital line to $300,000,000 and to modify other terms. The
credit agreement provides that funds borrowed will bear interest, at
the Company's option, at .3125% over the LIBOR rate, 1.75% over the
Fed Funds rate, at a base rate linked to the prime rate or at a
competitive bid rate. The Company also pays a fee of .1875% per annum
on the total credit facility. The credit facility expires in June
2000. As of July 1, 1995 the Company had borrowed $191,430,000 under
the credit facility. In addition to the credit facility, the bank has
provided a lease facility to the Company under which the bank has
agreed to purchase up to $25,000,000 of equipment from the Company and
lease such equipment back to the Company. As of July 1, 1995, the
Company had approximately $2,865,000 outstanding under this lease
facility.
6
<PAGE> 7
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales increased 30% to $1,200,410,000 in the second quarter of 1995 from
$924,676,000 in the second quarter of 1994; and to $2,551,622,000 for the
first six months of 1995 from $1,966,072,000 for the first six months of 1994,
an increase of 30%. Comparable store sales increased 18% for the second quarter
and 19% for the first six months of 1995, respectively. The balance of the
sales increase was attributable to the 80 new stores (net of one store closure)
opened subsequent to the second quarter of 1994. The Company opened 17 stores
and closed one store in the second quarter of 1995, bringing the total number
of stores open at the end of the second quarter to 448 compared with 368 stores
at the end of the second quarter of 1994. The Company also operated 24
contract stationer and delivery warehouses (customer service centers) at the
end of both the second quarter of 1995 and 1994. Comparable store sales in the
future may be affected by competition from other stores and contract
stationers, the opening of additional Office Depot stores or the expansion of
the Company's contract stationer business in its existing markets, and general
market conditions.
Gross profit as a percentage of sales was 22.6% during both the second quarter
and first six months of 1995, compared with 23.3% and 23.0% during the second
quarter and first six months of 1994, respectively. The decrease was primarily
a result of an increase in sales of lower margin business machines and
computers and an increase in paper costs. These decreases were partially
offset by purchasing efficiencies gained through vendor volume discount
programs which increased as purchasing levels continued to increase, and by
leveraging the Company's occupancy costs through higher average sales per
store. Gross margins are slightly higher in the contract stationer portion of
the business due to a lower percentage of business machine and computer sales.
Gross margins may fluctuate in both the retail and contract stationer business
as a result of competitive pricing in more market areas, continued change in
sales product mix and increased occupancy costs in certain new markets.
Store and warehouse operating and selling expenses as a percentage of sales
were 14.9% and 15.0% in the second quarter and first six months of 1995,
respectively, compared with 15.4% in each of the comparable periods in 1994.
Store and warehouse operating and selling expenses consist primarily of payroll
and advertising expenses. Although the majority of these expenses vary
proportionately with sales, there is a fixed cost component to these expenses
such that, as sales increase within a given market area, store and warehouse
operating and selling expenses should decrease as a percentage of sales. This
benefit may not be fully realized, however, during periods when a large number
of new stores and customer service centers are being opened, as new facilities
typically generate lower sales than the average mature location, resulting in
higher operating and selling expenses as a percentage of sales for such new
facilities. This percentage is also affected when the Company enters large
metropolitan market areas where the advertising costs for the full market must
be absorbed by the small number of stores initially opened. As additional
stores in these large markets are opened, advertising costs, which are
substantially a fixed expense for a market area, typically decrease overall as
a percentage of sales. The Company has also continued
7
<PAGE> 8
a strategy of opening additional stores in existing markets. Although
increasing the number of stores increases operating income in absolute dollars,
this may have the effect of increasing overall expenses as a percentage of
sales, since the sales of certain existing stores in the market may initially
be adversely affected. Warehouse expenses in the first six months of 1995 were
adversely affected by the additional costs incurred in the integration of the
contract stationer warehouses. The integration is expected to be substantially
completed by early 1996.
Pre-opening expenses increased to $2,912,000 in the second quarter of 1995 from
$1,973,000 in the comparable period in 1994, and to $6,164,000 in the six month
period ended July 1, 1995 from $3,232,000 in the comparable 1994 period.
Pre-opening expenses in 1995 include the costs associated with replacing six
existing customer service centers with larger, more functional facilities.
Additionally, the Company added 29 stores in the first six months of 1995, as
compared with 17 stores in the comparable 1994 period. Pre-opening expenses
currently are approximately $125,000 per store and $500,000 for a customer
service center, and are predominately incurred during a six-week period prior
to the opening of the store or a twelve-week period prior to the opening of a
customer service center. Pre-opening expenses may vary based on geographical
area and customer base being serviced. These expenses consist principally of
amounts paid for salaries, occupancy costs and supplies. Since the Company's
policy is to expense these items during the period in which they occur, the
amount of pre-opening expenses in each quarter is generally proportional to the
number of new stores or customer service centers opened or in the process of
being opened during the period.
General and administrative expenses have decreased as a percentage of sales
to 3.0% in the second quarter of 1994 from 3.4% in the comparable period in
1994, and to 2.9% in the first six months of 1995 from 3.1% in the comparable
1994 period. General and administrative expenses have decreased as a
percentage of sales, primarily as a result of the Company's ability to increase
sales without a proportionate increase in corporate expenditures. The
Company's continued investment in its information systems should allow the
Company to further reduce general and administrative expenses as a percentage
of sales.
The Company incurred net interest expense of $6,812,000 and $11,631,000 in the
second quarter and first six months of 1995, respectively, as compared with
$3,774,000 and $7,234,000 in the comparable periods in 1994. This increase in
interest expense is primarily due to funds borrowed under the Company's
revolving credit agreement.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's store sales are substantially on a cash and carry basis,
cash flow generated from operating stores provides a source of liquidity to the
Company. Working capital requirements are reduced by vendor credit terms,
which allow the Company to finance a portion of its inventory. The Company
utilizes private label credit card programs administered and financed by
financial service companies; this allows the Company to expand its retail sales
without the burden of additional receivables.
Sales made through the customer service centers are generally made under
regular commercial credit terms, where the Company carries its own receivables.
As the Company expands into servicing additional large companies in the
delivery portion of its business, it is expected that the Company will carry a
greater amount of receivables.
In the second quarter of 1995, the Company added 17 stores and closed one store,
compared with 8 stores added in the comparable 1994 period. The Company also
replaced two of its existing customer service centers with larger, more
efficient facilities. As stores mature and become more profitable, and as the
number of new stores opened in a year becomes a smaller percentage of the
existing store base, cash generated from operations will provide a greater
portion of funds required for new store fixed assets, inventories and other
working capital requirements. Cash generated from operations will be affected
by an increase in receivables carried without outside financing, and an increase
in inventory at the stores and customer service centers as the Company continues
to expand its sales in computers and business machines. Net cash provided
(used) by operating activities was $(87,280,000) and $10,184,000 in the first
six months of 1995 and 1994, respectively. Capital expenditures are also
affected by the number of stores and customer service centers opened, converted
or acquired each year and the increase in computer and other equipment at the
corporate office required to support such expansion. Cash utilized for capital
expenditures was $98,100,000 and $70,996,000 in the first six months of 1995 and
1994, respectively.
During the 26 weeks ended July 1, 1995, the Company's cash balance decreased
approximately $2,129,000 and long- and short-term debt increased by
approximately $173,392,000. The decrease in cash (and increase in long-term
debt, reflecting primarily borrowings under its working capital facility) was
primarily attributable to payments for fixed assets and inventories for new
stores as well as payments for inventory mix changes resulting from an increase
in business machines and computer sales and a build up of paper inventory to
protect against rising costs and product availability.
The Company plans to open a total of approximately 40 to 50 additional stores,
replace four existing customer service centers, close three customer service
centers, and add two new customer service centers during the remainder of 1995.
Management estimates that the Company's cash requirements, exclusive of
pre-opening expenses, will be approximately $1,700,000 and $5,300,000 for each
additional store and customer service center, respectively.
The Company has recently amended its credit agreement with its principal bank
and a syndicate of commercial banks to provide for a working capital line of
$300,000,000.
9
<PAGE> 10
The credit agreement provides that funds borrowed will bear interest, at the
Company's option, at .3125% over the LIBOR rate, 1.75% over the Fed Funds
rate, at a base rate linked to the prime rate or at a competitive bid rate.
The Company also pays a fee of .1875% per annum on the total credit facility.
The credit facility expires in June 2000. As of July 1, 1995 the Company had
borrowed $191,430,000 under the credit facility. In addition to the credit
facility, the bank has provided a lease facility to the Company under which the
bank has agreed to purchase up to $25,000,000 of equipment from the Company and
lease such equipment back to the Company. As of July 1, 1995, the Company had
approximately $2,865,000 outstanding under this lease facility.
The Company's management continually reviews its financing options. It is
currently anticipated that the Company has the ability to finance its planned
expansion through 1995 from cash on hand, funds generated from operations,
equipment leased under the Company's lease facility, and funds borrowed under
the Company's amended credit facility. The Company is considering and will
continue to consider alternative financing opportunities including the issuance
of equity, debt or convertible debt, if market conditions make such
alternatives financially attractive methods of funding the Company's
short-term or long-term expansion. The Company's financing requirements in the
future will be affected by the number of new stores and customer service
centers opened, converted or acquired and additional receivables carried by the
Company.
10
<PAGE> 11
PART II. OTHER INFORMATION
Items 1-3 Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of Office Depot, Inc.
held on May 18, 1995, the nominees for election as Directors
of the Corporation were elected without opposition.
A vote of the common stock with respect to this election was:
<TABLE>
<CAPTION>
Number of Shares
Nominee For Withheld
------- --- --------
<S> <C> <C>
Mark D. Begelman 125,294,087 1,508,195
Denis Defforey 125,259,018 1,543,264
David I. Fuente 125,319,872 1,482,410
W. Scott Hedrick 125,384,280 1,418,002
John B. Mumford 125,288,962 1,513,320
Michael J. Myers 125,313,493 1,488,789
Peter J. Solomon 125,364,136 1,438,146
Cynthia Cohen Turk 125,322,153 1,480,129
Alan L. Wurtzel 125,379,460 1,422,822
</TABLE>
The number of shares of broker non-votes for the election of Directors was
none.
The following proposals of the Board of Directors were submitted for adoption.
The board proposals were adopted by the votes indicated (which constituted the
affirmative vote of more than one-half of the shares voting).
RESOLVED, that based upon the recommendation of the Board of Directors of the
Corporation, the Restated Certificate of Incorporation of the Corporation be
amended and restated in its entirety to read as set forth in Appendix A of the
Proxy.
<TABLE>
<S> <C> <C>
For the proposal: 119,527,062 Shares
Against the proposal: 6,289,909 Shares
Abstaining: 985,311 Shares
</TABLE>
The number of shares of broker non-votes in the above proposal was none.
11
<PAGE> 12
RESOLVED, that based upon the recommendation of the Board of Directors of the
Corporation, the adoption of the Office Depot, Inc. Omnibus Equity Plan is
hereby approved and adopted.
<TABLE>
<S> <C> <C>
For the proposal: 103,828,629 Shares
Against the proposal: 21,763,591 Shares
Abstaining: 1,210,062 Shares
</TABLE>
The number of shares of broker non-votes in the above proposal was none.
RESOLVED, that based upon the recommendation of the Board of Directors of the
Corporation, the adoption of the 1994-1998 Office Depot, Inc. Designated
Executive Incentive Plan, including amounts payable thereunder with respect to
the 1994 fiscal year, is hereby approved and adopted.
<TABLE>
<S> <C> <C>
For the proposal: 123,181,593 Shares
Against the proposal: 3,097,787 Shares
Abstaining: 522,902 Shares
</TABLE>
The number of shares of broker non-votes in the above proposal was none.
RESOLVED, that based upon the recommendation of the Board of Directors of the
Corporation, the appointment of Deloitte & Touche LLP as independent public
accountants to audit the Corporation's consolidated financial statements for
the fiscal year ending December 30, 1995 is hereby approved and adopted.
<TABLE>
<S> <C> <C>
For the proposal: 126,316,557 Shares
Against the proposal: 279,120 Shares
Abstaining: 206,605 Shares
</TABLE>
The number of shares of broker non-votes in the above proposal was none.
Item 5 Not applicable.
Item 6 Exhibits and Reports on Form 8-K
a. 10.6 Third Amendment to Revolving Credit and Line of Credit
Agreement dated as of June 30, 1995 by and among the company
and Sun Bank, National Association, individually and as Agent,
NationsBank of Florida, N.A., PNC Bank, Kentucky, Inc., Bank
of America National Trust and Savings Association and Royal
Bank of Canada.
27.1 Financial Data Schedule (for SEC use only)
b. No reports on Form 8-K were filed during the quarter ended
July 1, 1995.
12
<PAGE> 13
SIGNATURE
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.
OFFICE DEPOT, INC.
------------------
(Registrant)
Date: July 31, 1995 By: /s/ Barry J. Goldstein
------------------------------------------
Barry J. Goldstein
Executive Vice President-Finance
and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
Page
10.6 Third Amendment to Revolving Credit and Line of Credit 15
Agreement dated as of June 30, 1995 by and among the
company and Sun Bank, National Association, individually
and as Agent, NationsBank of Florida, N.A., PNC Bank,
Kentucky, Inc., Bank of America National Trust and Savings
Association and Royal Bank of Canada.
27.1 Financial Data Schedule (for SEC use only)
14
<PAGE> 1
EXHIBIT 10.6
THIRD AMENDMENT TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING CREDIT AND LINE OF CREDIT AGREEMENT
(the "Third Amendment") dated as of June 30, 1995, by and among Office Depot,
Inc., a Delaware corporation (the "Borrower"), the Banks signatories to the
Revolving Credit and Line of Credit Agreement (as hereinafter defined) (the
"Lenders") and Sun Bank, National Association, a national banking association,
as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, and the Agent have entered into
that certain Revolving Credit and Line of Credit Agreement dated as of
September 30, 1993, as amended by that certain First Amendment to Revolving
Credit and Line of Credit Agreement, Consent and Waiver dated as of February 1,
1994, and as further amended by that certain Second Amendment to Revolving
Credit and Line of Credit Agreement dated as of May 22, 1995 (as so amended,
the "Credit Agreement"); and
WHEREAS, the Borrower has requested an increase in the Total
Commitment to $300,000,000.00, an extension in the term and revisions in
certain covenants; and
WHEREAS, the Lenders and the Agent have agreed to increase the Total
Commitment, extend the term of the credit facility and the revisions to certain
covenants; and
WHEREAS, the Lenders and the Agent have agreed to amend the Credit
Agreement to provide for the foregoing, subject to the terms and conditions set
forth herein.
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to the Revolving Credit and Line of Credit Agreement. The
Credit Agreement is hereby amended as follows:
a. The definition of "Applicable Margin" as defined in Section
1.1 of the Credit Agreement is hereby deleted and, in lieu thereof, there is
substituted the following:
'"APPLICABLE MARGIN" shall mean the higher percentage
designated below based on the
<PAGE> 2
Borrower's fiscal quarter-end Fixed Charge Coverage Ratio
indicated below:
<TABLE>
<CAPTION>
FIXED CHARGE
APPLICABLE MARGIN COVERAGE RATIO
----------------- --------------
<S> <C>
.375% less than 2.0:1.0
.3125% greater than or equal to 2.0:1.0
and less than 2.5:1.0
.25% greater than or equal to 2.5:1.0
</TABLE>
provided, however, that:
(a) The Applicable Margin in effect as of the date of
execution and delivery of this Agreement shall be
0.3125% and shall remain in effect until such time as
the Applicable Margin may be adjusted as hereinafter
provided;
(b) So long as no Default or Event of Default has
occurred and is continuing under this Agreement,
adjustments, if any, to the Applicable Margin based
on changes in the ratios set forth above shall be
made and become effective on the first day of the
second fiscal quarter after such determination; and
(c) The Applicable Margin shall be the lowest (0.25%)
if the Borrower's senior actual or implied credit
rating is at least either Baa1 by Moody's or BBB+ by
S & P at the time of determining the Fixed Charge
Coverage Ratio."
b. The definition of "Competitive Bid Revolving Loan" as defined
in Section 1.1 of the Credit Agreement is hereby deleted and, in lieu thereof,
there is substituted the following:
'"COMPETITIVE BID REVOLVING LOAN" shall mean a Revolving Loan
made by a Lender on a Competitive Bid basis as provided
herein, consisting of either a Libor Bid Loan or a Fixed Rate
Bid Loan."
c. The definition of "Credit Documents" as defined in Section 1.1
of the Credit Agreement is hereby deleted and, in lieu thereof, there is
substituted the following:
2
<PAGE> 3
'"CREDIT DOCUMENTS" shall mean, collectively, the Agreement,
as amended from time to time, the Notes, the Guaranty
Agreements, and all other Guaranty Documents, if any."
d. The definition of "Fixed Charge Coverage Ratio" as defined in
Section 1.1 of the Credit Agreement is hereby deleted and, in lieu thereof,
there is substituted the following:
'"FIXED CHARGE COVERAGE RATIO" shall mean, as at the end of
any fiscal period of Borrower, the ratio of (A) Consolidated
EBITR for such fiscal period to (B) the sum of (i)
Consolidated Interest Expense plus (ii) Consolidated Rental
Expense plus (iii) interest and other continuing program fees
(excluding initial closing fees) related to an accounts
receivable securitization program for such fiscal period.
e. The definition of "Funded Debt" as defined in Section 1.1 of
the Credit Agreement is hereby deleted and, in lieu thereof, there is
substituted the following:
'"FUNDED DEBT" shall mean, without duplication, all
indebtedness for money borrowed, purchase money mortgages,
capitalized leases, the aggregate outstanding net investment
of a purchaser under an accounts receivable securitization
program, conditional sales contracts and similar title
retention debt instruments, including any current maturities
of such indebtedness, which by its terms matures more than one
year from the date of any calculation thereof and/or which is
renewable or extendable at the option of the obligor to a date
beyond one year from such date. The calculation of Funded Debt
shall include, without duplication, all Funded Debt of the
Borrower and its Subsidiaries, plus all Funded Debt of other
entities or Persons, other than Subsidiaries, which has been
guaranteed by the Borrower or any Subsidiary or which is
supported by a letter of credit issued for the account of the
Borrower or any Subsidiary. Funded Debt shall also include the
redemption amount with respect to any stock of the Borrower or
its Subsidiaries required to be redeemed within the next
twelve months.
f. The definition of "Line of Credit Commitment" as defined in
Section 1.1 of the Credit Agreement is hereby deleted and, in lieu thereof,
there is substituted the following:
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<PAGE> 4
'"LINE OF CREDIT COMMITMENT" shall mean at any time for Sun
Bank, Twenty-Five Million Dollars ($25,000,000.00), as the
same may be increased or decreased from time to time as a
result of any reduction thereof pursuant to Section 3.3, any
assignment thereof pursuant to Section 11.6, or any amendment
thereof pursuant to Section 11.2."
g. The definition of Termination Date" as defined in Section 1.1
of the Credit Agreement is hereby deleted and, in lieu thereof, there is
substituted the following:
'"TERMINATION DATE" shall mean June 30, 2000."
h. The following definitions are hereby inserted in Section 1.1
of the Credit Agreement to read as follows:
'"FACILITY FEE PERCENTAGE" shall mean the higher percentage
designated below based on the Borrower's fiscal quarter-end
Fixed Charge Coverage Ratio indicated below:
<TABLE>
<CAPTION>
FACILITY FEE PERCENTAGE FIXED CHARGE COVERAGE RATIO
----------------------- ---------------------------
<S> <C>
.25% less than 2.0:1.0
.1875% greater than or equal to 2.0:1.0
and less than 2.5:1.0
.125% greater than or equal to 2.5:1.0
</TABLE>
provided, however, that the Facility Fee Percentage shall be
the lowest (0.125%) if the Borrower's senior actual or implied
credit rating is at least either Baa1 by Moody's or BBB+ by
S & P at the time of determining the Fixed Charge Coverage
Ratio.
'"FEDERAL FUNDS RATE ADVANCE" shall mean an Advance made or
outstanding as a Line of Credit Loan bearing interest based on
the Federal Funds Rate.
'"FIXED RATE BID LOAN" shall mean a Competitive Bid Revolving
Loan, bearing interest based on a fixed rate.
'"FOREIGN SUBSIDIARY" shall mean a Subsidiary not organized
under the laws of any of the fifty (50) states of the United
States of America or the
4
<PAGE> 5
District of Columbia, or that is operating entirely outside of
the United States.
'"LIBOR BID LOAN" shall mean a Competitive Bid Revolving Loan,
bearing interest based on LIBOR plus (or minus) a margin.
'"MOODY'S" shall mean Moody's Investors Service, Inc. and its
successors and assigns.
'"S & P" shall mean the Standard & Poor's Corporation and its
successors and assigns."
i. The definitions of "Interest Coverage Ratio" and Working
Capital" found in Section 1.1 of the Credit Agreement are hereby deleted.
j. Sections 2.1(e) and 2.1(f) of the Credit Agreement are hereby
deleted and, in lieu thereof, there is substituted the following:
"(e) Each Revolving Loan (other than Competitive Bid Revolving
Loans) shall, at the option of Borrower, be made or continued
as, or converted into, part of one or more Borrowings that
shall consist entirely of Syndicate Revolving Loans (as Base
Rate Advances or Eurodollar Advances). The aggregate principal
amount of each Borrowing of Syndicate Revolving Loans shall be
not less than $2,000,000 or a greater integral multiple of
$500,000, provided that each Borrowing of Syndicated Revolving
Loans comprised of Base Rate Advances shall be not less than
$1,000,000 or a greater integral multiple of $100,000. At no
time shall the number of Borrowings of Syndicate Revolving
Loans comprised of Eurodollar Advances outstanding under this
Article II exceed eight (8); provided that, for the purpose of
determining the minimum amount for Borrowings resulting from
conversions or continuations, all Borrowings of Base Rate
Advances under this Facility shall be considered as one
Borrowing. The parties hereto agree that (i) the aggregate
principal balance of the Revolving Loans (including the
Competitive Bid Revolving Loans) of the Lenders as a group
shall not exceed the sum of the Revolving Loan Commitments for
each Lender, (ii) no Lender shall
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<PAGE> 6
be obligated to make Syndicate Revolving Loans in excess of
the Revolving Loan Commitment of such Lender, (iii) no Lender
shall be obligated hereunder to extend Competitive Bid
Revolving Loans or to make quotes for such Loans, (iv) a
Lender may elect, in its discretion, to extend Competitive Bid
Revolving Loans which, notwithstanding the Syndicate Revolving
Loans and Letter of Credit Obligations of such Lender, do not
alone exceed the Revolving Loan Commitment of such Lender and
(v) except for such Lender's Pro Rata Share of Letter of
Credit Obligations, which shall not be decreased by such
Lender's Competitive Bid Revolving Loans, the Competitive Bid
Revolving Loans (if any) extended by a Lender shall, while
outstanding, reduce the Commitment of such Lender to make
Revolving Loans by the amount of such Competitive Bid
Revolving Loans so extended (but not below zero).
Notwithstanding that any Lender has extended Competitive Bid
Revolving Loans, each Lender, including such Lender that has
so extended Competitive Bid Revolving Loans, shall purchase
participations in Letter of Credit Obligations based upon the
Lender's Pro Rata Share of Revolving Loan Commitment even if
such purchase would exceed the amount of such Lender's
Revolving Loan Commitment set forth opposite such Lender's
name on the signature page hereof.
"(f) The proceeds of Revolving Loans shall be used solely for
working capital and for other general corporate purposes,
including acquisitions and capital expenditures of the
Consolidated Companies."
k. Section 3.1(b) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(b) Each Line of Credit Loan shall consist entirely of
Federal Funds Rate Advances. The aggregate principal amount of
each Borrowing of Line of Credit Loans shall be not less than
$1,000,000 or a greater integral multiple of $100,000."
l. Section 4.1(a)(ii) of the Credit Agreement is hereby deleted
and, in lieu thereof, there is substituted the following:
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<PAGE> 7
"(ii) Whenever Borrower desires to make a Borrowing under the
Competitive Bid Revolving Loan Commitment (other than one
resulting from a conversion or continuation pursuant to
Section 4.1(b)(ii)), it shall give the Agent prior written
notice by facsimile not later than 10:00 A.M. (local time for
the Agent) (a "Notice of Competitive Bid Borrowing") not less
than three Business Days prior to the requested date of such
Borrowing in the case of Libor Bid Loans and one Business Day
prior to the requested date of such Borrowing in the case of
Fixed Rate Bid Loans and shall request that the Lenders
provide Competitive Bid Rates for Interest Periods of not less
than seven (7) days identified by Borrower. Agent shall give
the Lenders said "Notice of Competitive Bid Borrowing" not
later than 11:00 A.M. (local time for the Agent) on the same
Business Day such notice is received from Borrower.
Alternatively, at Borrower's option, said Notice of
Competitive Bid Borrowing shall be furnished directly to the
Lenders. Notices furnished directly to the Lenders must be
delivered by facsimile not later than 11:00 AM. (local time
for the Agent) not less than three Business Days prior to the
requested date of such Borrowing in the case of Libor Bid
Loans and one Business Day prior to the requested date of such
Borrowing in the case of Fixed Rate Bid Loans. Each Lender in
its discretion may, but shall not be obligated to, submit an
irrevocable quote to the Agent or Borrower, whichever is
applicable, in connection with such request. Each Lender shall
give the Agent or Borrower its Competitive Bid Rates for the
Interest Periods identified by the Borrower not later than
9:30 A.M. (local time for the Agent) two Business Days prior
to the requested date of such Borrowing in the case of Libor
Bid Loans and not later than 9:30 A.M. (local time for the
Agent) on the requested date of such Borrowing in the case of
Fixed Rate Bid Loans. If the Competitive Bid Rates are given
to the Agent, the Agent shall give such Competitive Bid Rates
to the Borrower no later than 10:00 A.M. (local time for the
Agent) on the same day it receives such Competitive Bid Rates.
In the event such Notice of Competitive Bid Borrowing is
furnished to the Agent and the Agent wishes to submit a
Competitive Bid Rate, then the Agent shall so submit its
Competitive Bid Rate to Borrower not later than
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<PAGE> 8
5:00 P.M. (local time for the Agent) the same day of receipt
of said Notice of Competitive Bid Borrowing and prior to the
Agent's receipt of any Competitive Bid Rates from any other
Lender. The Borrower shall then be entitled, in its sole
discretion, to elect to incur all or any part of the
Competitive Bid Revolving Loan offered by one or more of the
Lenders that have elected to provide quotes for any of the
Interest Periods and at the rate(s) quoted by such Lender(s)
provided, however, in the event two or more Lenders submit
identical quotes and the Borrower elects to incur all or any
part of the Competitive Bid Revolving Loans at such identical
quotes, such Borrowing shall be from said Lenders on a pro
rata basis determined by the amounts offered by such Lenders.
The Competitive Bid Revolving Loans incurred by the Borrower
in connection with such a request for quotes shall not exceed
(i) with respect to all Lenders then providing quotes, the
then unutilized Revolving Loan Commitment of all Lenders as a
group, and (ii) with respect to each Lender providing a quote,
the amount bid by such Lender in connection with such Lender's
quote. The Borrower shall notify the Agent and such Lender or
Lenders of its election by telephone and promptly confirmed in
writing not later than 11:00 A.M. (local time for the Agent)
two (2) Business Days prior to the requested date of such
Borrowing in the case of Libor Bid Loans and on the requested
date of such Borrowing in the event of Fixed Rate Bid Loans."
m. Section 4.2(b) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(b) No later than 3:00 P.M. (local time for the Agent) on the
date of each Borrowing with respect to the Competitive Bid
Revolving Loan (other than one resulting from a conversion or
continuation pursuant to Section 4.1(b)(ii)), the Competitive
Bid Lender will make available the amount of such Borrowing in
immediately available funds at its Payment Office or the
Payment Office of the Agent, as directed by the Borrower, on
the date of each Borrowing pursuant to the Revolving Loan
Commitments. In the event the Notice of Competitive Bid
Borrowing is given to the Agent, the Competitive Bid Lender
will make available the amount of such Borrowing in
immediately available
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<PAGE> 9
funds at the Payment Office of the Agent and the Agent will
disburse the amount of such Borrowing as provided in Section
4.2(a) above."
n. Section 4.3(a) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(a) Borrower agrees to pay interest in respect of all unpaid
principal amounts of the Revolving Loans and Line of Credit Loans from
the respective dates such principal amounts were advanced to maturity
(whether by acceleration, notice of prepayment or otherwise) at rates
per annum (on the basis of a 360 day year) equal to the applicable
rates indicated below:
(i) For Revolving Loan Base Rate Advances--The Base
Rate in effect from time to time;
(ii) For Revolving Loan Eurodollar Advances--The
relevant Adjusted LIBO Rate plus the Applicable Margin; and
(iii) For Line of Credit Loans--The Federal Funds
Rate in effect from time to time plus one and three fourths
percent (1.75%).
o. Sections 4.5(a), 4.5(b) and 4.5(d) of the Credit Agreement are
hereby deleted and, in lieu thereof, there is substituted the following:
"(a) Borrower shall pay to the Agent, for the account of and
distribution to each Lender, a Facility Fee computed at the
rate of the applicable Facility Fee Percentage on the
Revolving Loan Commitment and the Line of Credit Commitment of
each Lender regardless of usage, such fee being payable
quarterly in arrears on the last calendar day of each fiscal
quarter of Borrower and on the Termination Date.
"(b) (RESERVED)
"(d) Standby Letters of Credit. With respect to each Standby
Letter of Credit, the Borrower shall pay the Agent for the
account of each Lender, a nonrefundable fee equal to the
Applicable Margin per annum on such Lender's Pro Rata Share of
the undrawn face amount of such Letter of Credit. All fees due
pursuant to this Section 4.5(d) shall be
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<PAGE> 10
based on a year of 360 days and computed for the actual number
of days elapsed, and shall be payable in advance on the date
of such Letter of Credit for the period from the date of
issuance to the first Business Day of each calendar quarter
and thereafter on the first Business Day of each calendar
quarter."
p. Section 4.6(a) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(a) With the consent of the Lender, Borrower may prepay
Competitive Bid Revolving Loans on such terms as are mutually
agreed to by the Lender and the Borrower. Borrower may, at its
option, prepay Borrowings consisting of Base Rate Advances at
any time in whole, or from time to time in part, in amounts
aggregating $1,000,000 or any greater integral multiple of
$100,000, by paying the principal amount to be prepaid
together with interest accrued and unpaid thereon to the date
of prepayment. Those Borrowings consisting of Eurodollar
Advances may be prepaid, at Borrower's option, in whole, or
from time to time in part, in the respective minimum amounts
and multiples set forth in Section 2.1(b) with respect to the
Revolving Loan Commitments, by paying the principal amount to
be prepaid, together with interest accrued and unpaid thereon
to the date of prepayment, and all compensation payments
pursuant to Section 4.12 if such prepayment is made on a date
other than the last day of an Interest Period applicable
thereto. Each such optional prepayment shall be applied in
accordance with Section 4.6(c) below.
q. Section 7.8 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 7.8 FINANCIAL COVENANTS.
(a) Fixed Charge Coverage. Maintain as of the last
day of each fiscal quarter, a minimum Fixed Charge
Coverage Ratio, calculated for the immediately
preceding four fiscal quarters, of at least 1.5:1.0.
(b) Funded Debt to Total Capitalization. Maintain as
of the last day of each fiscal quarter, a maximum
ratio of Funded Debt to
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<PAGE> 11
Total Capitalization, of less than or equal to
0.5:1.0 through the fiscal quarter ending December
31, 1995 and 0.45:1.0 thereafter.
(c) Leverage Ratio. Maintain as of the last day of
each fiscal quarter, a maximum Leverage Ratio of less
than or equal to 0.30:1.0.
(d) Tangible Net Worth. Maintain as of the last day
of each fiscal quarter, Tangible Net Worth of at
least $450,000,000 plus fifty percent (50%) of
Consolidated Net Income earned after December 31,
1994."
r. Section 7.10 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 7.10 ADDITIONAL GUARANTORS. Promptly after (i) the
formation or acquisition (provided that nothing in this
Section shall be deemed to authorize or prohibit the
acquisition of any entity) of any Material Subsidiary not
listed on Schedule 6.1, (ii) the transfer of assets to any
Consolidated Company if notice thereof is required to be given
pursuant to Section 7.7(n) and as a result thereof the
recipient of such assets becomes a Material Subsidiary, (iii)
the occurrence of any other event creating a new Material
Subsidiary, Borrower shall execute and deliver, and cause to
be executed and delivered Guaranty Agreements from each such
Material Subsidiary, together with related documents of the
kind described in Section 5.1, all in form and substance
satisfactory to the Agent and the Required Lenders. As used in
this Section, Material Subsidiary shall not include a Foreign
Subsidiary.
s. Section 8.1(c) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(c) purchase money Indebtedness to the extent secured by a
Lien permitted by Section 8.2(b) provided such purchase money
Indebtedness does not exceed $25,000,000;"
t. Subsections (k) and (l) of Section 8.1 of the Credit Agreement
are hereby inserted to read as follows:
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<PAGE> 12
"(k) Indebtedness of not to exceed $50,000,000.00 for a period
not to exceed six (6) months to be used for working capital
and other general corporate purposes, provided that at the
time thereof there are no funds available to the Borrower
within the total Revolving Loan Commitment for all Lenders;
and
"(l) Indebtedness relating to an accounts receivable
securitization program in conjunction with the sale of
accounts receivable in an aggregate outstanding amount, at any
one time not to exceed $150,000,000.00."
u. Section 8.2(b) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
(b) any Lien on any property securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the
acquisition cost of such property and any refinancing thereof,
provided that such Lien does not extend to any other property,
and provided further that the aggregate principal amount of
Indebtedness secured by all such Liens at any time does not
exceed $25,000,000;"
v. Section 8.2(h) of the Credit Agreement is hereby inserted to
read as follows:
"(h) Liens relating to an accounts receivable securitization
program in an amount permitted by Section 8.1."
w. Section 8.3 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 8.3 MERGERS, ACQUISITIONS, SALES, ETC. Merge or
consolidate with any other Person, other than Borrower or
another Subsidiary, or sell, lease, or otherwise dispose of
its accounts, property or other assets (including capital
stock of Subsidiaries), or, except for the purchase of capital
stock as an investment in a Subsidiary as permitted by
subsections (a) and (b) in Section 8.4, below, purchase, lease
or otherwise acquire all or any substantial portion of the
property or assets (including capital stock) of any Person;
provided, however, that the foregoing restrictions on asset
sales shall not be applicable to (i)
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<PAGE> 13
sales of equipment or other personal property being replaced
by other equipment or other personal property purchased as a
capital expenditure item having comparable values, (ii) sale,
lease or transfer of assets of the Borrower or any Subsidiary
to the Borrower or to any other Subsidiary, (iii) sales of
inventory in the ordinary course of business, (iv) other asset
sales (including the stock of Subsidiaries) where, on the date
of execution of a binding obligation to make such asset sale
(provided that if the asset sale is not consummated within six
(6) months of such execution, then on the date of consummation
of such asset sale rather than on the date of execution of
such binding obligation), the Asset Value of asset sales
occurring after the Closing Date, taking into account the
Asset Value of the proposed asset sale, would not exceed
twenty-five percent (25%) of Borrower's assets, since the
Closing Date and (v) the sale of accounts receivable in an
amount permitted by Section 8.1 through an accounts receivable
securitization program; provided further, that the foregoing
restrictions on mergers shall not apply to mergers involving
Borrower and another entity, provided Borrower is the
surviving entity, and mergers between a Subsidiary of Borrower
and Borrower or between Subsidiaries of Borrower provided
that, in either case, upon consummation of such mergers,
Borrower is in compliance with Section 8.3 hereof; provided,
however, that no transaction pursuant to clauses (i), (ii),
(iv) or the second proviso above shall be permitted if any
Default or Event of Default otherwise exists at the time of
such transaction or would otherwise exist as a result of such
transaction."
x. Section 8.4(i) of the Credit Agreement is hereby inserted to
read as follows:
"(i) the sale of accounts receivable in an amount permitted by
Section 8.1 through an accounts securitization program."
y. Section 8.6 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 8.6 TRANSACTIONS WITH AFFILIATES.
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<PAGE> 14
(a) Except in conjunction with an accounts receivable
securitization program as permitted in this Agreement, enter
into any material transaction or series of related
transactions which in the aggregate would be material,
whether or not in the ordinary course of business, with any
Affiliate of any Consolidated Company (but excluding any
Affiliate which is also a Consolidated Company), other than
on terms and conditions substantially as favorable to such
Consolidated Company as would be obtained by such Consolidated
Company at the time in a comparable arm's length transaction
with a Person other than an Affiliate.
(b) Convey or transfer to any other Person (including
any other Consolidated Company) any real property,
buildings, or fixtures used in the manufacturing or production
operations of any Consolidated Company, or convey or transfer
to any other Consolidated Company any other assets
(excluding conveyances or transfers in the ordinary course of
business) if at the time of such conveyance or transfer any
Default or Event of Default exists or would exist as a result
of such conveyance or transfer."
z. Section 8.7 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 8.7 OPTIONAL PREPAYMENTS. Directly or indirectly,
prepay, purchase, redeem, retire, defease or otherwise acquire,
or make any optional payment on account of any principal of,
interest on, or premium payable in connection with the optional
prepayment, redemption or retirement of, any of its
Indebtedness, or give a notice of redemption with respect to
any such Indebtedness, or make any payment in violation of the
subordination provisions of any Subordinated Debt, except with
respect to (i) the Obligations under this Agreement and the
Notes, (ii) prepayments of Indebtedness outstanding pursuant to
revolving credit, overdraft and line of credit facilities
permitted pursuant to Section 8.1, (iii) the Series B Senior
Subordinated Notes, (iv) Intercompany Loans made or outstanding
pursuant to Section 8.1, (v) Subordinated Debt, in form and
substance acceptable to the Agent and the Required Lenders, as
evidenced by their written consent,
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<PAGE> 15
issued to refinance existing Subordinated Debt (vi) trade
payables incurred in the ordinary course of business and (vii)
prepayments of Indebtedness outstanding pursuant to an accounts
receivable securitization program as permitted in this
Agreement."
aa. Section 8.13 of the Credit Agreement is hereby deleted.
ab. Section 9.5 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 9.5 NON-PAYMENTS OF OTHER INDEBTEDNESS. Any
Consolidated Company shall fail to make when due (whether at
stated maturity, by acceleration, on demand or otherwise, and
after giving effect to any applicable grace period) any payment
of principal of or interest on any Indebtedness (other than the
Obligations) exceeding $10,000,000.00 in the aggregate;"
ac. Section 9.6 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 9.6 DEFAULTS UNDER OTHER AGREEMENTS. Any Consolidated
Company shall fail to observe or perform within any applicable
grace period any covenants or agreements (other than those
referenced in Section 9.5) contained in any agreements or
instruments relating to any of its Indebtedness exceeding
$10,000,000.00 in the aggregate, or any other event shall occur
if the effect of such failure or other event is to accelerate,
or to permit the holder of such Indebtedness or any other
Person to accelerate, the maturity of such Indebtedness; or any
such Indebtedness shall be required to be prepaid (other than
by a regularly scheduled required prepayment) in whole or in
part prior to its stated maturity;"
ad. Section 9.9 of the Credit Agreement is hereby deleted and, in
lieu thereof, there is substituted the following:
"SECTION 9.9 MONEY JUDGMENT. A judgment or order for the
payment of money in excess of $5,000,000.00 or otherwise having
a Materially Adverse Effect shall be rendered against Borrower
or any other Consolidated Company and such judgment or order
shall continue unsatisfied (in
15
<PAGE> 16
the case of a money judgment) and in effect for a period of 30
days during which execution shall not be effectively stayed or
deferred (whether by action of a court, by agreement or
otherwise);"
ae. Section 11.6(d) of the Credit Agreement is hereby deleted and,
in lieu thereof, there is substituted the following:
"(d) Each Lender may, without the consent of Borrower and the
Agent, sell participations to one or more banks or other
entities in all or a portion of its rights and obligations
under this Agreement (including all or a portion of its
Commitments in the Loans owing to it and the Notes held by it),
provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating bank
or other entity shall not be entitled to the benefit (except
through its selling Lender) of the cost protection provisions
contained in Article IV of this Agreement, and (iv) Borrower
and the Agent and other Lenders shall continue to deal solely
and directly with each Lender in connection with such Lender's
rights and obligations under this Agreement and the other
Credit Documents, and such Lender shall retain the sole right
to enforce the obligations of Borrower relating to the Loans
and to approve any amendment, modification or waiver of any
provisions of this Agreement. Any Lender selling a
participation hereunder shall provide prompt written notice to
Borrower of the name of such participant."
af. The signature pages to the Credit Agreement shall be amended as
reflected on the signature pages attached hereto.
2. Revolving Credit Notes. Borrower has executed new Revolving Credit
Notes, in the form of Exhibit "A" attached to the Credit Agreement, dated of
even date herewith, in favor of the Lenders.
3. Line of Credit Note. Borrower has executed a new Line of Credit
Note, in the form of Exhibit "C" attached to the Credit Agreement, dated of
even date herewith, in favor of Sun Bank, National Association.
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<PAGE> 17
4. Conditions to Effectiveness. The effectiveness of this Third Amendment
is subject to the satisfaction of the following conditions:
a. The Agent shall have received the following, in form and
substance reasonably satisfactory in all respects to the Agent:
i. the duly executed counterparts of this Third Amendment;
ii. the duly executed Revolving Notes evidencing the
Revolving Loan Commitments and the duly executed Line of Credit Note
evidencing the Line of Credit Commitment;
iii. Certificates of the Secretary or Assistant Secretary of
each of the Credit Parties, (A) certifying the name, title and true
signature of each officer of such entities executing the Third
Amendment and Notes and (B) attaching and certifying copies of the
Resolutions of the Board of Directors of the Credit Parties,
authorizing as applicable the execution, delivery and performance of
the Third Amendment and Notes;
iv. copies of all consents, approvals, authorizations,
registrations, or filings required to be made or obtained by the
Borrower and all Guarantors in connection with the Facility;
v. the favorable opinion of Kirkland & Ellis, counsel to
the Credit Parties, in a form acceptable to the Agent and addressed to
the Agent and each of the Lenders;
vi. receipt of the most recent annual audited financial
statements and quarterly financial statements of the Borrower and its
Subsidiaries, on a consolidated basis, and the absence of any change
in the financial condition of the Borrower and its Subsidiaries as
reflected in such financial statements which would have a Material
Adverse Effect.
b. In addition, the following conditions shall have been satisfied
or shall exist:
i. there shall exist no Default or Event of Default;
ii. all representations and warranties contained in the
Credit Agreement shall continue to be true and correct in all material
respects except those which are made as of a specific date; and
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<PAGE> 18
iii. there shall be no action or proceeding instituted or
pending before any court or other governmental authority or, to the
knowledge of the Borrower, threatened which reasonably could be
expected to have a Material Adverse Effect.
5. Counterparts. This Third Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and shall be binding
upon all parties, their successors and permitted assigns.
6. Capitalized Terms. All capitalized terms contained herein shall have
the meanings assigned to them in the Credit Agreement unless the context
herein otherwise dictates or enlists different meanings as separately assigned
to said terms herein.
7. Ratification of Loan Documents; Miscellaneous. The Credit Agreement, as
amended hereby, and all of the other Credit Documents, shall remain in full
force and effect and this Third Amendment to Revolving Credit and Line of
Credit Agreement shall not be deemed a novation. Each and every reference to
the Credit Agreement and the other Credit Documents shall be deemed to refer
to the Credit Agreement as amended by this Third Amendment. The Borrower
hereby acknowledges and represents that the Credit Documents, as amended, are,
as of the date hereof, valid and enforceable in accordance with the
respective terms and are not subject to any defenses, counterclaims or
rights of set-off whatsoever except that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or other similar laws and the effect of general
principles of equity (regardless of whether enforcement is considered in
proceedings at law or in equity).
8. Governing Law. THIS THIRD AMENDMENT SHALL BE EFFECTIVE UPON ACCEPTANCE
BY THE LENDERS IN FLORIDA, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Third Amendment as
of the day and year first above written.
BORROWER:
OFFICE DEPOT, INC.
By: Barry J. Goldstein
--------------------------------
Barry J. Goldstein
Executive Vice President - Finance
(CORPORATE SEAL)
Attest: David I. Fuente
------------------------
Name: David I. Fuente
Title: Chief Executive Officer
19
<PAGE> 20
JOINDER OF GUARANTORS
---------------------
The undersigned, as Guarantors under the Revolving Credit and Line of
Credit Agreement, hereby join in and consent to the foregoing Third Amendment
and confirm and agree that their duties and obligations under the Subsidiary
Guaranty Agreements by and between the undersigned and the Agent, remains in
full force and effect.
Dated as of the 30th day of June, 1995.
THE OFFICE CLUB, INC.
(a "Guarantor")
By: David I. Fuente
-----------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
---------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
EASTMAN OFFICE PRODUCTS CORPORATION
(a "Guarantor")
By: David I. Fuente
------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
20
<PAGE> 21
EASTMAN, INC.
(a "Guarantor")
By: David I. Fuente
-----------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
OD INTERNATIONAL, INC.
(a "Guarantor")
By: David I. Fuente
------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
L.E. MURAN CO.
(a "Guarantor")
By: David I. Fuente
-------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
----------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
21
<PAGE> 22
YORKSHIP PRESS, INC.
(a "Guarantor")
By: David I. Fuente
-----------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
SILVER'S, INC.
(a "Guarantor")
By: David I. Fuente
------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
MIDWEST CARBON COMPANY
(a "Guarantor")
By: David I. Fuente
-------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
----------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
22
<PAGE> 23
J.A. KINDEL COMPANY, INC.
(a "Guarantor")
By: David I. Fuente
-----------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
ALLSTATE OFFICE PRODUCTS, INC.
(a "Guarantor")
By: David I. Fuente
------------------------------
Name: David I. Fuente
Title: Chief Executive Officer
Attest: Barry J. Goldstein
--------------------------
Name: Barry J. Goldstein
Title: Executive Vice President, Finance
(CORPORATE SEAL)
23
<PAGE> 24
[SIGNATURE PAGE TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
BETWEEN SUN BANK, AS AGENT,
AND OFFICE DEPOT, INC.]
Address for Notices: SUN BANK, NATIONAL ASSOCIATION,
individually and as Agent
200 S. Orange Avenue
4th Floor - Tower By: Kristina L. Anderson
Orlando, Florida 32801 ---------------------------
Attn: Ms. Kristina L. Anderson Kristina L. Anderson,
Assistant Vice President Assistant Vice President
Telex No. 4415-11
Answerback: Sun Bank
Telecopy No. (407) 237-6894
Telephone No. (407) 237-4839
Payment Office:
200 S. Orange Avenue
4th Floor - Tower
- --------------------------------------------------
Revolving Loan Commitment: $74,250,000
Pro Rata Share of Revolving Loan Commitment: 27.0%
Line of Credit Commitment: $25,000,000
Pro Rata Share of Line of Credit Commitment: 100%
24
<PAGE> 25
[SIGNATURE PAGE TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
BETWEEN SUN BANK, AS AGENT,
AND OFFICE DEPOT, INC.]
Address for Notices: ROYAL BANK OF CANADA
Corporate Banking-East
Financial Square By: Peter D. Steffen
New York, NY 10005-3531 ----------------------
Attn: Peter D. Steffen Title: Senior Manager
-------------------
Telecopy No. (212) 428-6459
Telephone No. (212) 428-6494
Payment Office:
Royal Bank of Canada
Financial Square
New York, NY 10005-3531
Attn: Jewel Haines, Mgr-Loan Administration
Telephone No. (212) 428-6321
Telecopy No. (212) 428-2372
Directed through our ABA System to:
Pay Chase Manhattan Bank
New York, NY
(ABA #021000021 for credit to
Acct. No. 920-1-033363)
For Account RBC New York
CHIPS: ABA 0002
Pay Chase Manhattan Bank
For Account RBC New York
UID025408
Marked RE: OFFICE DEPOT
- --------------------------------------
Revolving Loan Commitment: $28,875,000
Pro Rata Share of Revolving Loan Commitment: 10.5%
Line of Credit Commitment: -0-
Pro Rata Share of Line of Credit Commitment: 0%
25
<PAGE> 26
[SIGNATURE PAGE TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
BETWEEN SUN BANK, AS AGENT,
AND OFFICE DEPOT, INC.]
Address for Notices: NATIONSBANK OF FLORIDA, N.A.
150 S.E. 3rd Ave., Suite 411 By: Bennie H. Duck
FL 7950-04-03 -------------------------
Miami, FL 33131 Title: Vice President
Attn: Bennie H. Duck, VP ----------------------
Telecopy No. (305) 577-5745
Telephone No. (305) 577-5992
Payment Office:
NationsBank
One NationsBank Plaza
101 North Tryon Street
NC1-001-15-03
Charlotte, North Carolina 28255
Attn: Barbara Pollock
- --------------------------------------
Revolving Loan Commitment: $61,875,000
Pro Rata Share of Revolving Loan Commitment: 22.5%
Line of Credit Commitment: -0-
Pro Rata Share of Line of Credit Commitment: 0%
26
<PAGE> 27
[SIGNATURE PAGE TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
BETWEEN SUN BANK, AS AGENT,
AND OFFICE DEPOT, INC.]
Address for Notices: PNC BANK, KENTUCKY, INC.
1950 Summit Park Drive By: Jeff Horsey
Suite 225 ---------------------------
Orlando, FL 32810 Title: Vice President
Attn: Mr. Jeffrey S. Horsey ----------------------
Vice President & Manager
Telecopy No. (407) 875-1615
Telephone No. (407) 875-0004
Payment Office:
1950 Summit Park Drive
Suite 225
Orlando, FL 32810
Attn: Mr. Jeffrey S. Horsey
Vice President & Manager
- --------------------------------------------------
Revolving Loan Commitment: $48,125,000
Pro Rata Share of Revolving Loan Commitment: 17.5%
Line of Credit Commitment: -0-
Pro Rata Share of Line of Credit Commitment: 0%
27
<PAGE> 28
[SIGNATURE PAGE TO REVOLVING CREDIT
AND LINE OF CREDIT AGREEMENT
BETWEEN SUN BANK, AS AGENT,
AND OFFICE DEPOT, INC.]
Address for Notices: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
950 E. Paces Ferry Road By: Laurens F. Schaad, Jr.
Suite 3375 ---------------------------
Atlanta, GA 30326 Title: Vice President
Attn: Laurens F. Schaad, Jr. ------------------------
Telecopy No. (404) 249-6938
Telephone No. (404) 249-6915
Payment Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attn: Atlanta Account Administrator
Telecopy No. (510) 675-7532 or 7531
Telephone No. (510) 675-7733
- --------------------------------------------------
Revolving Loan Commitment: $61,875,000
Pro Rata Share of Revolving Loan Commitment: 22.5%
Line of Credit Commitment: -0-
Pro Rata Share of Line of Credit Commitment: 0%
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OFFICE DEPOT FOR THE YEAR ENDED JULY 1, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<EXCHANGE-RATE> 1
<CASH> 30,277
<SECURITIES> 0
<RECEIVABLES> 293,300
<ALLOWANCES> 2,729
<INVENTORY> 984,947
<CURRENT-ASSETS> 1,353,241
<PP&E> 622,045
<DEPRECIATION> 153,700
<TOTAL-ASSETS> 2,056,686
<CURRENT-LIABILITIES> 678,782
<BONDS> 578,589
<COMMON> 1,523
0
0
<OTHER-SE> 787,133
<TOTAL-LIABILITY-AND-EQUITY> 2,056,686
<SALES> 2,551,622
<TOTAL-REVENUES> 2,551,622
<CGS> 1,974,989
<TOTAL-COSTS> 2,363,558
<OTHER-EXPENSES> 75,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,631
<INCOME-PRETAX> 100,577
<INCOME-TAX> 40,685
<INCOME-CONTINUING> 59,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,892
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
</TABLE>
