-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AF7Lo0TZzlGWPOcOw9YxlTcy+8oRFYX5OzKMtvm4ovtI1sIzZSmQM2et5y5gy5DQ AOY8g5yUo0FV+k12U+5Lug== 0000927016-97-001885.txt : 19970711 0000927016-97-001885.hdr.sgml : 19970711 ACCESSION NUMBER: 0000927016-97-001885 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970710 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREND LINES INC CENTRAL INDEX KEY: 0000922978 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 042722797 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24390 FILM NUMBER: 97638970 BUSINESS ADDRESS: STREET 1: 135 AMERICAN LEGION HWY CITY: REVERE STATE: MA ZIP: 02151 BUSINESS PHONE: 6178530900 MAIL ADDRESS: STREET 1: 135 AMERICAN LEGION HWY CITY: REVERE STATE: MA ZIP: 02151 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ------------------ TO ----------------- Commission file number 0-24390 ------- TREND - LINES, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2722797 ------------------------ --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 135 American Legion Highway, Revere , Massachusetts 02151 - --------------------------------------------------- --------- (Address of principal executive office) (Zip Code) (617) 853 - 0900 --------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
NUMBER OF SHARES OUTSTANDING CLASS JULY 2, 1997 ----- ---------------------------- Class A Common Stock, $.01 par value 5,817,568 Class B Common Stock, $.01 par value 4,750,026
TREND-LINES, INC. AND SUBSIDIARY INDEX
Page ---- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets May 31, 1997 (Unaudited) and March 1, 1997 3 Condensed Consolidated Statements of Operations Three Months Ended May 31, 1997 and June 1, 1996 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months Ended May 31, 1997 and June 1, 1996 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Part II - Other Information 12 Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TREND-LINES, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (In Thousands, except share amounts)
ASSETS (UNAUDITED) MAY 31, MARCH 1, 1997 1997 -------- -------- Current Assets: Cash and cash equivalents $ 337 $ 1,006 Accounts receivable, net 10,797 12,155 Inventories 83,886 85,909 Prepaid expenses and other current assets 5,709 6,462 -------- -------- Total current assets 100,729 105,532 Property and Equipment, net 15,565 14,753 Other Assets 969 769 -------- -------- $117,263 $121,054 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Bank credit facility $ 30,437 $ 25,196 Current portion of capital lease obligations 684 686 Accounts payable 34,551 43,900 Accrued expenses 6,089 5,690 -------- -------- Total current liabilities 71,761 75,472 -------- -------- Capital Lease Obligations, net of current portion 1,658 1,875 -------- -------- Deferred Income Tax Liabilities 301 301 -------- -------- Stockholders' Equity: Common stock, $.01 par value- Class A- Issued--6,312,175 and 6,302,534 shares at May 31, 1997 and March 1, 1997, respectively 63 63 Class B- Issued and outstanding--4,750,026 shares at May 31, 1997 and March 1, 1997 47 47 Additional paid-in capital 41,352 41,318 Retained earnings 4,541 4,128 Less: 500,000 and 440,000 Class A shares held in treasury at May 31, 1997 and March 1, 1997, respectively at cost (2,460) (2,150) -------- -------- Total stockholders' equity 43,543 43,406 -------- -------- $117,263 $121,054 ======== ========
See notes to condensed consolidated financial statements. 3 TREND-LINES, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, except Per share amounts) (Unaudited)
--- THREE MONTHS ENDED --- MAY 31, JUNE 1, 1997 1996 ------- ------- NET SALES $57,089 $49,311 COST OF SALES 38,157 32,895 ------- ------- Gross Profit 18,932 16,416 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 17,601 15,696 ------- ------- Income from operations 1,331 720 INTEREST EXPENSE, net of interest income 654 410 ------- ------- Income before provision for income taxes 677 310 PROVISION FOR INCOME TAXES 264 126 ------- ------- Net income $413 $184 ======= ======= NET INCOME PER COMMON SHARE $0.04 $0.02 ======= ======= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,038 11,297 ======= =======
See notes to condensed consolidated financial statements 4 TREND-LINES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows (In Thousands) (Unaudited)
THREE MONTHS ENDED -------------------- MAY 31, JUNE 1, 1997 1996 --------- --------- Cash Flows from Operating Activities: Net income $ 413 $ 184 Adjustments to reconcile net income to net cash used in operating activities- Depreciation and amortization 557 433 Loss on sale of property and equipment - 2 Changes in current assets and liabilities- Accounts receivable 1,358 (1,206) Refundable income taxes - 1,383 Inventories 2,023 (2,216) Prepaid expenses and other current assets 753 (230) Accounts payable (9,349) (6,034) Accrued expenses 399 (154) ------- ------- Net cash used in operating activities (3,846) (7,838) ------- ------- Cash Flows from Investing Activities: Purchases of property and equipment (1,378) (817) Proceeds from sale of property and equipment 9 (Increase) decrease in other assets (200) (86) ------- ------- Net cash used in investing activities (1,569) (903) ------- ------- Cash Flows from Financing Activities: Net borrowings under bank credit facilities 5,241 8,919 Payments on capital lease obligations (219) (125) Proceeds from exercise of stock options 34 - Purchases of treasury stock (310) - ------- ------- Net cash provided by financing activities 4,746 8,794 ------- ------- Net Increase (Decrease) in Cash And Cash Equivalents (669) 53 Cash and Cash Equivalents, Beginning of Period 1,006 436 ------- ------- Cash and Cash Equivalents, End of Period $ 337 $ 489 ======= ======= Supplemental Disclosure of Cash Flow Information: Cash paid for- Interest $ 600 $ 280 ======= ======= Income taxes $ 863 $ 1 ======= =======
See notes to condensed consolidated financial statements 5 TREND-LINES, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - ------------------------ The information set forth in these financial statements is unaudited and may be subject to normal year end adjustments. In the opinion of management, the information reflects all adjustments, which consist of normal recurring accruals, that are considered necessary to present a fair statement of the results of operations of Trend-Lines, Inc. (the Company) for the interim periods presented. The operating results for the three months ended May 31, 1997 are not necessarily indicative of the results to be expected for the fiscal year ending February 28, 1998. The financial statements presented herein should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended March 1, 1997. Certain information in footnote disclosures normally included in financial statements have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. 2. EARNINGS PER SHARE DATA - -------------------------- Net income per share for the three months ended May 31, 1997 and June 1, 1996 is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents are calculated using the treasury stock method and consist of common stock issuable upon the exercise of outstanding stock options. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This statement is effective for the fiscal years ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fiscal year ending February 28, 1998. 6 Pro forma calculations of basic and diluted earnings per share as required by SFAS No. 128 are as follows (in thousands, except per share data):
--- FISCAL PERIOD ENDED --- MAY 31, JUNE 1, 1997 1996 ------- ------- Basic EPS Net income $ 413 $ 184 Weighted average common shares outstanding 10,586 11,048 ------- ------- Basic EPS $ .04 $ .02 ======= ======= Diluted EPS Net income $ 413 $ 184 Weighted average common and common equivalent shares outstanding 11,038 11,297 ------- ------- Diluted EPS $ .04 $ .02 ======= =======
3. BANK CREDIT FACILITY ------------------------ During fiscal 1996, the Company entered into a secured line of credit agreement with a bank that expires on July 3, 1999. The facility bears interest at the bank's reference rate plus .75% (9.0% at March 1, 1997) or LIBOR plus 2.25% (7.63% at March 1, 1997). If for any 12 month rolling period, effective as of March 1, 1997, the fixed charges ratio exceeds certain limits, as defined, the bank's interest rate on the facility is decreased by .25% for the period immediately following such rolling period. Since March 1, 1997 the Company has exceeded the fixed charges ratio. A commitment fee of .375% per year of the average unused commitment amount, as defined, is payable monthly. Effective June 16, 1997 the Company's revolving credit facility line of credit was increased from $40 million to $50 million (borrowings include amounts reserved for outstanding letters of credit and a foreign exchange facility). Borrowings are based on a formula related to inventory levels, as defined. At May 31, 1997, the Company had approximately $30.4 million of borrowings outstanding and approximately $1.1 million of letters of credit outstanding. The Company had approximately $8.5 million in available borrowings under this facility at May 31, 1997. The maximum and average outstanding loan balances during fiscal 1997 under this facility were $31.4 million and 7 $28.6 million,respectively. The bank has a security interest in substantially all assets of the Company. The bank credit facility agreement contains certain restrictive covenants, including, but not limited to, maintenance of certain levels of tangible net worth, interest coverage ratio's and limitations on capital expenditures. The Company was in compliance with all bank covenants at May 31, 1997. 4. RESTRUCTURING CHARGE - ------------------------ In the fourth quarter of fiscal 1995, the Company recorded a restructuring charge of approximately $1.4 million, representing the costs associated with reorganizing its operations. These costs include a $954,000 charge for the rent and related expenses for closing 12 retail store locations and the severance and related benefits for terminated employees. Additionally, $443,000 was charged for the consolidation of the Company's distribution centers. As of May 31, 1997, the 12 retail store locations were closed, as anticipated when the restructuring reserve was established. For the three months ended May 31, 1997 approximately $0.1 million was charged against the restructuring reserve for store closing related activities and approximately $0.1 million associated with the consolidation of the Company's distribution centers was also charged against the restructuring reserve. As of May 31, 1997 and March 1, 1997, approximately $0.1 million and $0.3 million, respectively of restructuring costs are included in accrued expenses in the accompanying consolidated balance sheets. There were no non-cash adjustments to the accrual during the three months ended May 31,1997. 5. TREASURY STOCK - ------------------ On August 15, 1996, the Company's Board of Directors approved a stock repurchase plan, whereby the Company may purchase up to 500,000 shares of common stock at fair market value, to be used for future stock option programs, investment and/or other corporate purposes. As of May 31, 1997, the Company had purchased 500,000 shares of Class A common stock for approximately $2.5 million. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net sales for the first quarter of fiscal 1997 increased by $7.8 million, or 15.8%, from $49.3 million for the first quarter of fiscal 1996 to $57.1 million. Net catalog sales for the first quarter of fiscal 1997 decreased $0.8 million or 4.2%, from $18.9 million for the first quarter of fiscal 1996 to $18.1 million for the first quarter of fiscal 1997. Net retail sales for the first quarter of 1997 increased $8.6 million or 28.3% from $30.4 million for the first quarter of fiscal 1996 to $39.0 million. The decrease in net catalog sales was primarily attributable to both the reduced response rate to the Trend-Lines catalog and to the Company's opening of retail stores in areas previously only served by its catalog. The revenue growth of retail stores is attributable to the maturation and expansion of the Company's retail store base. The store base expanded over 7% from 147 locations at the end of the first quarter of fiscal 1996 to 158 locations at the end of the first quarter of fiscal 1997. Also, comparable net store sales for Woodworkers Warehouse / Post Tool stores and Golf Day stores for the first quarter of fiscal 1997 increased by 17.3% as compared to the first quarter of fiscal 1996. Gross profit for the first quarter of fiscal 1997 increased 15.3% from $16.4 million for the first quarter of fiscal 1996 to $18.9 million for the first quarter of fiscal 1997. As a percentage of net sales, gross profit decreased from 33.3% of net sales for the first quarter of fiscal 1996 to 33.2% of net sales in the first quarter of fiscal 1997. The decrease in the Company's gross profit percentage is primarily the result of the Company's changing sales mix, which is caused by the increase in retail sales as a percentage of total sales (retail store sales generally have lower overall gross margins than catalog sales). Selling, general and administrative expenses for the first quarter of fiscal 1997 increased 12.1%, or $1.9 million from $15.7 million for the first quarter of fiscal 1996 to $17.6 million for the first quarter of fiscal 1997. As a percentage of net sales, selling, general and administrative expenses decreased from 31.8% of net sales in the first quarter of fiscal 1996 to 30.8% of net sales in the first quarter of fiscal 1997. The decrease in selling, general and administrative expenses as a percentage of net sales is primarily attributable to the maturation of the store sales base (and associated comparable store sales gains), as well as lower operating costs of retail stores as compared to the catalog business. The dollar increases in selling, general and administrative expenses are primarily related to the Company's continuing retail expansion. As the result of the above factors, income from operations for the first quarter of fiscal 1997 increased by $.6 million, or 83.5%, from $0.7 million in the first quarter of fiscal 1996 to $1.3 million in the first quarter of fiscal 1997. As a percentage of net sales, income from operations 9 increased from 1.5% of net sales in the first quarter of fiscal 1996 to 2.3% of net sales in the first quarter of fiscal 1997. Interest expense, net of interest income, for the first quarter of fiscal 1997 increased by $244,000 from $410,000 in the first quarter of fiscal 1996 to $654,000 in the first quarter of fiscal 1997. The increase in interest expense is attributable to the increase in the Company's borrowings under its bank credit facility. Liquidity and Capital Resources - -------------------------------- The Company's working capital decreased by $1.1 million, from $30.1 million as of March 1, 1997 to $29.0 million as of May 31, 1997. The decrease resulted primarily from a $9.3 million decrease in accounts payable, which was only partially offset by a $5.2 million increase in bank debt, primarily to support the Company's expanding retail operations, a $2.0 million decrease in inventories and a $1.4 million decrease in accounts receivable. The Company anticipates that in fiscal 1997, it will continue to invest in leasehold improvements and equipment to support its retail store expansion plans. In addition, the Company's expansion plans will require the use of cash to fund increased inventories associated with the operation of additional retail stores. The Company opened one store and closed two stores in the first quarter.__For fiscal 1997, the Company currently plans to open approximately 40 to 50 retail stores. Effective June 16, 1997 the Company's revolving credit facility line of credit was increased from $40 million to $50 million. The Company believes that the cash generated from operating activities, trade credit and available bank borrowings will be sufficient to fund its operations and its retail store expansion program for the next twelve months. Impact of Inflation - ------------------- The Company does not believe that inflation has had a material impact on its net sales or results of operations. Safe Harbor Statement under the Private Securities Litigation Reform Act of - --------------------------------------------------------------------------- 1995 - ---- Statements included in this report that do not relate to present or historical conditions are "forward-looking statements" within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents other than this report that are filed with the Securities and Exchange Commission. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements in this report and elsewhere may include without limitation, 10 statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the adequacy of the Company's resources to fund its planned operations and expansion will be adversely affected if it is not able to renew or refinance its credit facility on a timely basis; (iii) the Company's ability to open the planned number of stores will depend upon a number of other factors, including securing desirable locations, negotiating leases with acceptable terms, and hiring, training and retaining qualified personnel; (i ii v) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory; ( i v) the Company's tool and golf businesses are highly competitive and the entrance of new competitors into or the expansion of the operations by existing competitors in the Company's and other changes in the tool or golf retail climate could adversely markets affect the Company's plans and results of operations; and (vi) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. 11 TREND - LINES, INC. AND SUBSIDIARY 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 a vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Reference -------------- --------- 10.1 Amendment No. 2, dated as of January 28, 1997 Filed to the Loan and Credit Agreement dated herewith July 3, 1996, among the Registrant, Post Tool, Inc. as Borrowers and Bank America Business Credit, Inc., as Lender. 10.2 Amendment No. 3, dated as of June 16, 1997, to the Filed Loan and Credit Agreement dated July 3, 1996, among herewith the Registrant, Post Tool, Inc., as Borrowers and Bank America Business Credit, Inc., as Lender. (b) Reports on Form 8-K - not applicable 12 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. TREND-LINES, INC ----------------- Registrant Date: July 8, 1997 ___________________ Stanley D. Black (Chief Executive Officer) ___________________ Karl P. Sniady (Executive Vice President, Chief Financial Officer) 13 EX-10.1 2 AMEND. #2 TO LOAN & CREDIT AGREEMENT AMENDMENT No. 2, dated as of January 28, 1997 (this "Amendment"), to the --------- Loan and Security Agreement, dated as of July 3, 1996 (as heretofore amended, supplemented and otherwise modified, the "Agreement"), among Trend-Lines, Inc. --------- and Post Tool, Inc. (collectively the "Borrowers") and BankAmerica Business Credit, Inc. (the "Lender"). W I T N E S S E T H: WHEREAS, the Borrowers and the Lender are parties to the Agreement; WHEREAS, the Borrowers have requested that the Lender modify certain provisions of the Agreement and the Lender is willing to do so on the terms and conditions as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms ------------- used herein have the respective meanings ascribed thereto in the Agreement. 2. Amendments to the Agreement. The Agreement is hereby amended as --------------------------- follows: (a) Paragraph (b) of the definition of "Availability" in Section 1 of the Agreement is amended in its entirety to read as follows: (b) the sum of (i) Outstanding Credit to such Borrower at such time, (ii) reserves for accrued interest on the Obligations of such Borrower, (iii) the Environmental Compliance Reserve for such Borrower, (iv) the Rental Reserve for such Borrower, (v) in the case of Trend-Lines, a reserve of $550,000 in connection with the Indemnification Agreement, and (vi) all other reserves which the Lender deems necessary in the exercise of its reasonable credit judgment to maintain with respect to such Borrower's account, including, without limitation, reserves for any amounts which the Lender may be obligated to pay in the future for the account of such Borrower. (b) Two new definitions are added after the definition of "Barn:" in such Section to read as follows: "Bank of Boston" means First National Bank of Boston, N.A. -------------- "Bank of Boston Letter of Credit" means a Letter of Credit issued ------------------------------- by Bank of Boston and referred to in the Indemnification Agreement. (c) A new definition is added after the definition of "Guaranty" in such Section to read as follows: "Indemnification Agreement" means the Indemnification Agreement ------------------------- made and entered into the 28th day of January, 1997 by and among Trend-Lines, the Lender and Bank of Boston. (d) The definition of "Loan Documents" in such Section is amended by adding the phrase "the Indemnification Agreement," after the phrase "the Stock Pledge Agreement" in such Section. (e) The phrase "or the Indemnification Agreement" is added at the end of the last sentence of the definition of "Obligations" in such Section. (f) Section 2.3(a) is amended in its entirety to read as follows: 2.3. Letters of Credit. (a) Subject to the terms and conditions of ----------------- this Agreement, the Lender shall, upon a Borrower's request from time to time, cause merchandise or standby letters of credit to be issued for such Borrower's account by the Bank or another issuer reasonably acceptable to such Borrower and the Lender (the "Letters of Credit"). The Lender will not cause to be issued any Letter of Credit if: (i) the maximum face amount of the requested Letter of Credit, plus the aggregate undrawn face amount of all outstanding Letters of Credit and the maximum claim (matured or unmatured) of Bank of Boston under the Indemnification Agreement, would exceed $2,500,000; (ii) the maximum face amount of the requested Letter of Credit, and all commissions, fees, and charges due from such Borrower to the Lender in connection with the opening thereof, would cause the Availability to be exceeded at such time; or (iii) the expiration date of the Letter of Credit would exceed the Stated Termination Date or any renewal term or be greater than (A) 12 months from the date of issuance if such Letter of Credit is a standby Letter of Credit or (B) 180 days from the date of issuance if such Letter of Credit is a merchandise Letter of Credit. All payments made and expenses incurred by the Lender pursuant to or in connection with the Letters of Credit or the Indemnification Agreement will be charged to such Borrower's loan account as Reference Rate Loans. (g) Section 2.3(d) is amended in its entirety to read as follows: (d) Payments Pursuant to Letters of Credit and Bank of Boston Letters ----------------------------------------------------------------- of Credit. - --------- (1) Payment of Letter of Credit and Bank of Boston Letter of Credit --------------------------------------------------------------- Obligations. The Borrowers agree to reimburse the issuer for any draw ----------- under any Letter of Credit or Bank of Boston Letter of Credit immediately upon demand and to pay the issuer of such Letter of Credit or the Bank of Boston, respectively, the amount of all other obligations and other amounts payable to such issuer or such Bank under or in connection with such Letter of Credit or Bank of Boston Letter of Credit immediately when due, irrespective of any claim, setoff, defense or other right which either Borrower may have at any time against such issuer, such Bank or any other Person. 2 (2) Reference Rate Loans to Satisfy Reimbursement Obligations. In the --------------------------------------------------------- event that the issuer of any Letter of Credit or the Bank of Boston honors a draw under such Letter of Credit or a Bank of Boston Letter of Credit, respectively, and the relevant Borrower shall not have repaid such amount to such issuer or such Bank, respectively, pursuant to Section 2. 3(d)(1), the Lender shall pay such issuer or such Bank, respectively, and such amount when paid shall constitute a Reference Rate Loan which shall be deemed to have been requested by such Borrower. (h) The first sentence of Section 2.3(fl(1) is amended in its entirety to read as follows: "In addition to amounts payable as elsewhere provided in this Section 2.3, the Borrowers hereby agree to protect, indemnify, pay and save the Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including, without limitation, reasonable attorneys' fees) which the Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or the provision of any credit support or enhancement in connection therewith or (B) the Indemnification Agreement.". (i) The phrase "or Bank of Boston Letters of Credit" is inserted after the word "Credit" in each of Sections 2.3(f)(4) and 2.3(f)(6). (j) The phrase "or Bank of Boston Letter of Credit" is inserted after the word "Credit" each time such word appears in Section 2.3(g). (k) Section 9.9 is amended by adding the phrase "(other than those arising under or in connection with the Indemnification Agreement)" after the word "Obligations" in clause (a) of such Section, deleting the word "and" before clause (d), and inserting the following phrase after the word "hereby": "and (e) Indebtedness, as such term is defined in the Indemnification Agreement (without giving effect to any amendment to such definition after January 28, 1997), in an amount not greater than $550,000". (l) Section 10.11 is amended by adding the phrase "(other than those arising under or in connection with the Indemnification Agreement)" after the word "Obligations" in clause (a) of such Section, deleting the word "and" before clause (c), and inserting the following phrase after the number "B-1":"; and (d) --- Indebtedness, as such term is defined in the Indemnification Agreement (without giving effect to any amendment to such definition after January 28, 1997), in an amount not greater than $550,000". (m) The phrase "and Bank of Boston Letters of Credit" is inserted after the word "Credit" in the penultimate sentence of Section 14. (n) Section 15.11 is amended by changing the address for notices to "Williams & Harris" to read as follows: Williams & Harris LLP One Battery Park Plaza, 27th Floor New York, New York 10004 Attention: Homer L. Harris 3 3. Representations and Warranties. To induce the Lender to enter into this Amendment, the Borrowers hereby represent and warrant as follows, with the same effect as if such representations and warranties were set forth in the Agreement: (i) Each Borrower has the power and authority to enter into this Amendment and has taken all corporate action required to authorize such Borrower's execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered by each Borrower, and the Agreement, as amended hereby, constitutes the valid and binding obligation of the Borrowers, enforceable against each Borrower in accordance with its terms. The execution, delivery, and performance of this Amendment and the Agreement, as amended hereby, by each Borrower will not violate its respective certificate of incorporation or by- laws or any agreement or legal requirement binding on such Borrower. (ii) On the date hereof and after giving effect to the terms of this Amendment, (A) the Agreement and the other Loan Documents are in full force and effect and, to the extent that a Borrower is a party thereto, constitutes its binding obligation, enforceable against it in accordance with their respective terms; (B) no Default or Event of Default has occurred and is continuing; and (C) no Borrower has any defense to or setoff, counterclaim or claim against payment of the Obligations and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. (iii) The Collateral is entirely free and clear of all security interests, liens, pledges and other charges and encumbrances, except those (A) created by the Agreement as amended hereby, or (B) permitted pursuant to the terms of the Agreement as so amended, and the Borrowers have not entered into any agreement pursuant to which any security interests, liens, pledges, or other charges or encumbrances will be imposed or created directly, or as a result of any act or event, upon any of the Collateral. Without limiting the generality of the foregoing, the Collateral does and shall continue to secure the payment of all Obligations. 4. Limited Effect. Except as expressly amended hereby, all of the -------------- covenants and provisions of the Agreement are and shall continue to be in full force and effect. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, ------------- AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK. 4 6. Counterparts. This Amendment may be executed by the parties ------------ hereto in any number of separate counterparts, each of which shall be an original, and all of which taken together shall be deemed to constitute one and the same instrument. 7. Amendment. No modification or waiver of any provision --------- of this Amendment, or any consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. TREND LINES, INC. BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Stanley D. Black By: /s/ Lisa Palmieri ----------------------- ------------------------ Name: Stanley D. Black Name: Lisa Palmieri ---------------------- ---------------------- Title: Chairman of the Board Title: Sr. Account Executive ---------------------- --------------------- POST TOOL, INC. By: /s/ Stanley D. Black -------------------- Name: Stanley D. Black ------------------ Title: President ----------------- 6 EX-10.2 3 AMEND. #3 TO LOAN & CREDIT AGREEMENT AMENDMENT No. 3, dated as of June 16, 1997 (this "Amendment"), to the Loan --------- and Security Agreement, dated as of July 3, 1996 (as heretofore amended, supplemented and otherwise modified, the "Agreement"), among Trend-Lines, Inc. --------- and Post Tool, Inc., (collectively, the "Borrowers") and BankAmerica Business Credit, Inc. (the "Lender"). WITNESSETH: WHEREAS, the Borrowers and the Lender are parties to the Agreement; WHEREAS, the Borrowers have requested that the Lender modify certain provisions of the Agreement and the Lender is willing to do so on the terms and conditions as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used ------------- herein have the respective meanings ascribed thereto in the Agreement. 2. Amendments to the Agreement. The Agreement is hereby amended as --------------------------- follows: (a) The definition of Borrowing Base in Section I of the Agreement is amended in its entirety to read as follows: "Borrowing Base" means, with respect to either Borrower, (a)(i) -------------- from January 1 - August 31 and December 16 - December 31 of any year, 55% of the value, at the lower of cost (on a first-in, first-out basis) or market, of all Eligible Inventory of such Borrower and (ii) from September 1 - December 15 of any year, 65% of such value, in either case, (b) without duplication, 50% of the undrawn face amount of Letters of Credit issued or caused to be issued by the Lender for the account of such Borrower for the purchase of goods which will become Eligible Inventory. (b) The definition of Fixed Charges Ratio in such Section is amended by adding the following language to the end thereof: "provided that, for the purposes of this definition, Capital Expenditures shall not include the first $1.1 million expended by the Borrowers for Warehouse MIS on and after the Closing Date". (c) The definition of Interest Adjustment Date in such Section is amended in its entirety to read as follows: "Interest Adjustment Date" means, with respect to any Rolling ------------------------ Period in connection with the adjustment of the Applicable Margin: (i) In the case of any Reference Rate Loan outstanding during the Interest Adjustment Period immediately following such Rolling Period: (A) the first day of the calendar month in which the certificate relating to Fixed Charges Ratio referred to in Section 8.2(c) is delivered to the Lender with respect to such Rolling Period, provided that such certificate is delivered no later than four Business Days prior to the last day of the month following such Rolling Period; or (B) the first day of the calendar month following the month in which such certificate is delivered if it is delivered later than four Business Days prior to, but no later than, the last day of such month following such Rolling Period; or (C) if such certificate is not delivered until after the end of the month following such Rolling Period, the first day of such month but the Applicable Margin shall be three-quarters of one percent (0.75 %), provided, that, in the event that, with respect to any calendar month, there would be a conflict between the provisions of (A) and the provisions of (B) above, the provisions of (A) shall prevail with respect to such month; and (ii) In the case of any LIBOR Rate Loan: (A) the day such certificate is delivered to the Lender, if such certificate is delivered within 30 days after the end of such Rolling Period; or (B) if such certificate is not delivered within such 30 days, the previous Interest Adjustment Date (that is, there is no change in Applicable Margin based on Fixed Charges Ratio for such Rolling Period). (d) The definition of Unused Line Amount in such Section is amended in its entirety to read as follows: "Unused Line Amount" means (a) during the period beginning on the ------------------ Closing Date and ending on June 16,1997, $30,000,000, (b)during the period beginning on June 17, 1997 and ending on the day before the first Anniversary Date, $40,000,000, (c) during the period beginning on the first Anniversary Date and ending on the day before the second Anniversary Date, $45,000,000, and (d) during the period beginning on the second Anniversary Date and ending on the third Anniversary Date, $50,000,000. 2 (e) A new definition entitled "Warehouse MIS" is added to the end of such Section to read as follows: "Warehouse MIS" means management information systems to be used ------------- with respect to one or more warehouses; whether an expenditure constitutes an expenditure for such a system shall be determined by the Lender in its reasonable commercial discretion. (f) Section 2.1 is amended by changing the Total Facility from $40,000,000 to $50,000,000. (g) The following language is added to the end of Section 2. 2(b)(i)(C): "provided that, to the extent a Revolving Loan is based on the increase in the Borrowing Base factor from 55% to 65% that occurs from September 1 to December 15 in any year, only the portion of such Revolving Loan that is provided as a result of such increase shall be a Reference Rate Loan and may not be converted into a LIBOR Rate Loan pursuant to Section 3.2 at anytime." (h) The number $1,000,000 that appears in Section 10.17 shall be amended to read "$6,000,000". (i) The number $5,250,000 that appears in Section 10.20(b) shall be amended to read "$7,500,000". (j) Section 12.1(n) shall be amended to read in its entirety as follows: "Trend-Lines shall cease to own 100% of the voting stock of Post Tool or any person other than Stanley Black, Emilia F. Black, his spouse, and his or her respective Affiliates shall own more than 50% of the voting stock of Trend-Lines or have the power to control (such term having the meaning given to it in the definition of Affiliate herein) the Board of Directors of Trend-Lines." (k) Section 15.11 is amended by inserting: "Robinson & Cole LLP One Boston Place Boston, MA 02108-04 Attention: David Garbus" in place of the following: Brown, Rudnick, Freed & Gesmer, PC One Financial Center Boston, MA 02111 Attention: Howard L. Levin 3 3. Representations and Warranties. To induce the Lender to enter into ------------------------------ this Amendment, the Borrowers hereby represent and warrant as follows, with the same effect as if such representations and warranties were set forth in the Agreement: (i) Each Borrower has the power and authority to enter into this Amendment and has taken all corporate action required to authorize such Borrower's execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered by each Borrower, and the Agreement, as amended hereby, constitutes the valid and binding obligation of the Borrowers, enforceable against each Borrower in accordance with its terms. The execution, delivery, and performance of this Amendment and the Agreement, as amended hereby, by each Borrower will not violate its respective certificate of incorporation or by-laws or any agreement or legal requirement binding on such Borrower. (ii) On the date hereof and after giving effect to the terms of this Amendment, (A) the Agreement and the other Loan Documents are in full force and effect and, to the extent that a Borrower is a party thereto, constitutes its binding obligation, enforceable against it in accordance with their respective terms; (B) no Default or Event of Default has occurred and is continuing; and (C) neither Borrower has any defense to or setoff, counterclaim or claim against payment of the Obligations and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. 4. Limited Effect. Except as expressly amended hereby, all of the -------------- covenants, representations and warranties (including, without limitation, those found in Section 9.2), and provisions of the Agreement are and shall continue to be in full force and effect. Upon the effectiveness of this Amendment, each reference in the Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import and each reference in the other Loan Documents to the Agreement shall mean and be a reference to the Agreement as amended hereby. 5. Conditions of Effectiveness. This Amendment shall become effective --------------------------- when and only when (i) this Amendment shall be executed by the Borrower and (ii) the Lender shall have received such opinions of counsel, such other documents (including, without limitation, certified resolutions), and such evidence of filings, as the Lender shall request. 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ------------- INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK. 7. Counterparts. This Amendment may be executed by the parties hereto in ------------ any number of separate counterparts, each of which shall be an original, and all of which taken together shall be deemed to constitute one and the same instrument. 4 8. Amendment. No modification or waiver of any provision of this --------- Amendment, or any consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. TREND LINES, INC. BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Stanley D. Black By: /s/ Lisa Palmieri -------------------- ----------------- Name: Stanley D. Black Name: Lisa Palmieri ------------------- ----------------- Title: Chairman of the Board Title: Sr. Account Executive ----------------------- ----------------------- POST TOOL, INC. By: Stanley D. Black ------------------- Name: Stanley D. Black ----------------- Title: President --------------- 5 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL CONDITION AT MAY 31, 1997 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS FEB-28-1998 MAR-02-1997 MAY-31-1997 337 0 10,797 0 83,886 100,729 15,565 0 117,263 71,761 0 0 0 110 43,433 117,263 57,089 57,089 38,157 38,157 17,601 0 654 677 0 677 0 0 0 413 .04 .04
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