1
UNITED STATES
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 MARCH 1, 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 1-14202
MORRISON FRESH COOKING, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 63-1155967
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
The Hartsfield Colonnade
4893 Riverdale Road, Suite 260
Atlanta, GA 30337
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770)991-0351
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 .
9,047,821
(Number of shares of $0.01 par value common stock outstanding as of
March 24, 1997)
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF MARCH 1,
1997 AND JUNE 1, 1996............................ 3
STATEMENTS OF OPERATIONS FOR THE
THIRTEEN WEEKS AND THIRTY-NINE WEEKS ENDED
MARCH 1, 1997 AND MARCH 2, 1996.................. 4
STATEMENTS OF CASH FLOWS FOR THE
THIRTY-NINE WEEKS ENDED MARCH 1,
1997 AND MARCH 2, 1996........................... 5
NOTES TO FINANCIAL
STATEMENTS....................................... 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................. 7-10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 11
ITEM 2. CHANGES IN SECURITIES.......................... NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................... NONE
ITEM 5. OTHER INFORMATION.............................. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 11-12
SIGNATURES............................................. 12
PART I - FINANCIAL INFORMATION
ITEM 1
MORRISON FRESH COOKING, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
MARCH 1, 1997 JUNE 1, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments........... $ 749 $1,561
Receivables - accounts and notes (net)..... 1,989 1,907
Inventories................................ 2,482 2,416
Prepaid other expenses..................... 2,444 1,791
Current deferred income tax benefit........ 4,978 5,605
Total current assets................. 12,642 13,280
PROPERTY AND EQUIPMENT - at cost................. 161,365 154,942
Less accumulated depreciation and amortization (100,473) (95,828)
60,892 59,114
DEFERRED INCOME TAX BENEFITS...................... 1,861 2,226
OTHER ASSETS...................................... 7,218 7,820
TOTAL ASSETS............................ $ 82,613 $ 82,440
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................ $ 7,266 $ 9,579
Accrued liabilities (see Note D)............ 23,050 17,455
Total current liabilities............... 30,316 27,034
CAPITAL LEASE OBLIGATIONS......................... 688 775
EMPLOYEE BENEFIT OBLIGATIONS...................... 7,858 8,620
OTHER DEFERRED LIABILITIES........................ 3,667 6,167
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,048 shares issued)............. 90 90
Capital in excess of par value............... 40,673 40,279
Accumulated deficit.......................... (323) (70)
40,440 40,299
Less common stock held in treasury - at cost
(54 shares @ 03/01/97)
(48 shares @ 06/01/96) (356) (455)
40,084 39,844
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY. $ 82,613 $ 82,440
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
Thirteen Weeks Thirty-nine Weeks
Ended Ended
Mar 1, Mar 2, Mar 1, Mar 2,
1997 1996 1997 1996
<TABLE>
<S> <C> <C> <C> <C>
Net sales.............................$ 61,921 $ 65,260 $ 188,056 $ 203,278
Operating costs and expenses:
Cost of merchandise................ 16,920 18,386 53,107 57,688
Payroll and related costs.......... 23,481 25,622 69,563 77,521
Other operating costs.............. 13,966 12,478 41,616 41,066
Depreciation and amortization...... 2,508 2,755 7,348 8,097
Selling, general and administrative 3,860 4,873 12,841 13,601
Loss on impairment of assets....... 0 13,789 0 13,789
Restructure costs.................. 0 8,290 0 8,290
Interest expense, net.............. 77 124 107 15
60,812 86,317 184,582 220,067
Income (loss) before income taxes.... 1,109 (21,057) 3,474 (16,789)
Provision for (benefit from) federal
and state income taxes............. 408 (7,935) 1,288 (6,174)
Net income (loss) ................$ 701 $(13,122) $ 2,186 $ (10,615)
Earnings per common and common
equivalent share....................$ 0.08 $ (1.49) $ 0.24 $ (1.20)
Common and common equivalent shares..... 9,072 8,760 9,083 8,823
</TABLE>
The accompanying notes are an integral part of the financial
statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Thirty-Nine Weeks Ended
Mar 1, 1997 Mar 2, 1996
<TABLE>
<S> <C> <C>
Operating Activities:
Net Income (Loss)................................. $ 2,186 $ (10,615)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 7,348 8,097
Loss on disposition and write-down of assets 172 15,182
Deferred income taxes........................... 992 (3,839)
Other, net...................................... 0 (541)
Changes in operating assets and liabilities:
Increase in receivables....................... (82) (57)
(Increase)/decrease in inventories............ (66) 569
(Increase)/decrease in prepaid and other
assets...................................... (51) 753
(Decrease)/increase in accounts payable, accrued
and other liabilities....................... (6,417) 982
Increase in income taxes payable.............. 0 1,038
Net cash provided by operating activities......... 4,082 11,569
Investing activities:
Purchases of property and equipment............... (10,479) (12,443)
Proceeds from disposal of assets.................. 129 1,124
Other, net........................................ 99 (2,193)
Net cash used by investing activities............. (10,251) (13,512)
Financing activities:
Principal payments on capital leases.............. (64) (56)
Net transfers from Morrison Restaurants Inc....... 0 2,198
Short-term borrowings............................. 7,466 0
Proceeds from option exercises.................... 394 0
Dividends paid.................................... (2,439) 0
Net cash provided by financing activities......... 5,357 2,142
Increase/(decrease) in cash and short-term
investments..................................... (812) 199
Cash and short-term investments:
Beginning of period............................. 1,561 1,632
End of period................................... $ 749 $ 1,831
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
_______________________________________________________________________
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q, and do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The statements
should be read in conjunction with the notes to the financial
statements included in Morrison Fresh Cooking, Inc.'s annual report for
the fiscal year ended June 1, 1996. The accompanying unaudited
financial statements reflect all adjustments for normal recurring
accruals. These adjustments are necessary, in the opinion of
management, for a fair presentation of the financial position, the
results of operations and the cash flows for the interim periods
presented. The results of operations for the interim periods reported
herein are not necessarily indicative of results to be expected for the
full year.
NOTE B - SPIN-OFF OF MORRISON FRESH COOKING, INC.
_______________________________________________________________________
On March 7, 1996, the shareholders of Morrison Restaurants Inc.
approved the distribution of the common stock of the Company, which
comprised the family dining restaurant business of Morrison Restaurants
Inc., to its shareholders. The effective date of the distribution for
accounting purposes was March 3, 1996. Morrison Restaurants Inc.
shareholders received one share of the Company common stock for every
four shares of Morrison Restaurants Inc. common stock then held. The
financial statements of the Company, for periods prior to the
distribution, are presented as if the Company was a separate stand-
alone entity for the dates reflected in the financial statements.
NOTE C - EARNINGS PER SHARE
_______________________________________________________________________
Earnings per share are based on the weighted average number of shares
outstanding during each quarter and are adjusted for the assumed
conversion of shares issuable upon exercise of options, after the
assumed repurchase of common shares with the related proceeds. For
periods prior to the distribution, shares outstanding were based on the
number of shares of Morrison Restaurants Inc. common stock outstanding
adjusted using the 1-for-4 distribution ratio.
NOTE D - CREDIT FACILITY
_______________________________________________________________________
The Company has a line of credit facility which contains various
financial covenants such as net worth requirements, fixed charge
coverage ratios and the number of days the facility is required to
remain unused during a given period. At March 1, 1997, the Company had
$7.47 million in borrowings under this $15 million line of credit
facility included in accrued liabilities. The Company's fixed charge
coverage ratio for the third quarter of fiscal 1997 was 1.41:1 and,
therefore, at March 1, 1997, the Company was not in compliance with the
fixed charge coverage ratio requirement of 1.50:1. Subsequent to the
end of the quarter, the Company and the lender have entered into an
amendment to this line of credit facility to waive any past non-
compliance and to modify certain covenants, including the fixed charge
coverage ratio covenant, and to change the committed portion of the
facility to $10 million with a non-committed facility of $5 million.
The $10 million commitment is subject to reduction in the event of the
sale of significant assets by the Company. Also, the interest rate on
the line of credit was increased to prime rate as a result of this
modification. The Company is currently negotiating with various other
financial institutions and expects to replace this line of credit with
another credit facility more suitable to the Company's capital
requirements and financing needs prior to the end of the first quarter
of fiscal 1998.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
_______________________________________________________________________
GENERAL
The Company reported net income from operations of $0.7 million and
$2.2 million for the thirteen and thirty-nine week periods ended March
1, 1997, compared with a net loss of $(13.1) and $(10.6) million
reported for the corresponding periods of the prior fiscal year. The
Company operated four fewer units compared to the same thirteen week
period in the prior year.
The following table shows year-to-date restaurant openings and closings
as well as total restaurants open at the end of the third quarter.
To-Date To-Date Total Open at End
Openings Closings of Third Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1997 1996 1997 1996 1997 1996
Traditional 0 0 4 7 129 136
Small/contemporary 2 4 0 0 11 8
Buffets 0 0 0 1 3 3
QSRs 1 3 0 15 11 11
Total 3 7 4 23 154 158
The Company closed three traditional cafeterias and opened one small
cafeteria in the third quarter of fiscal 1997. There are no anticipated
openings or closings in the fourth quarter of fiscal 1997. The Company
operated 154 locations at the end of the quarter.
RESULTS OF OPERATIONS
The following table sets forth selected data as a percentage of sales
for the periods indicated.
For the For the
13 weeks ended 39 weeks ended
Mar 1, Mar 2, Mar 1, Mar 2,
1997 1996 1997 1996
<TABLE>
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise 27.3 28.2 28.2 28.4
Payroll and related costs 37.9 39.3 37.0 38.1
Other operating costs 22.6 19.1 22.1 20.2
Depreciation and amortization 4.1 4.2 3.9 4.0
Selling, general and
administrative 6.2 7.5 6.9 6.7
Loss on impairment of assets 0.0 21.1 0.0 6.8
Restructure costs 0.0 12.7 0.0 4.1
Interest expense 0.1 0.2 0.1 0.0
Total operating costs 98.2 132.3 98.2 108.3
Income (loss) from operations
before taxes 1.8 (32.3) 1.8 (8.3)
Provision for (benefit from)
income taxes 0.7 (12.2) 0.6 (3.0)
Net income (loss) 1.1% (20.1)% 1.2% (5.3)%
</TABLE>
_______________________________________________________________________
Company Restaurant Sales
Company restaurant sales decreased $3.3 million or 5.1% to $61.9
million for the quarter and decreased $15.2 million or 7.5% to $188.1
for the thirty-nine weeks ended March 1, 1997. At the end of the third
quarter of fiscal 1997, the Company operated four fewer units as
compared with the same period of the prior fiscal year. Same store
sales were equal to the same quarter of the prior year. The
stabilization is attributed to the price increase implemented in
October of 1996.
_______________________________________________________________________
Cost of Merchandise, Payroll and Related Costs and Other Operating
Costs
Cost of merchandise decreased as a percentage of sales for the quarter
and for the thirty-nine weeks from the comparable periods in the prior
year. For the quarter, cost of merchandise decreased 90 basis points
due to the retail price increase taken in October of 1996, and a slight
increase in volume discounts and vendor rebates.
Payroll and related costs for the quarter and the thirty-nine weeks
ended decreased as a percentage of sales from the same periods in the
prior year. This decrease was due to a reduction in management labor, a
reduction in the use of full-time labor and increased use of part-time
labor. The increased use of part-time labor contributed to a decrease
in the wage rate and the associated fringe benefit costs. Workers'
compensation expense also decreased as a result of improved claims
experience. The decrease in payroll costs was partially offset by the
increase in the federal minimum wage rate for the 1997 periods which
became effective on October 1, 1996.
Other operating costs increased as a percentage of sales primarily due
to the utilization of accruals for unit closing expenses in the same
quarter of the prior year and increases in other operating expenses as
a result of the Company operating as a separate company.
Depreciation expense decreased slightly as a percentage of sales
compared to the same period of the prior year as a result of reduced
depreciation associated with asset write-downs in the same quarter of
the prior year.
Selling, general and administrative costs decreased as a percentage of
sales from the prior year primarily due to a reduction in advertising
expense for the year. This decrease was partially offset by an increase
in management labor due to additional supervisory operations positions
compared to the same quarter of the prior year.
_______________________________________________________________________
Interest Expense (Interest Income), net
In the prior year periods interest expense was incurred by Morrison
Restaurants Inc. Interest expense for the fiscal 1997 periods is
associated with borrowings on the Company's line of credit.
_______________________________________________________________________
Income Taxes
The effective income tax rate on continuing operations for the thirteen
weeks ended March 1, 1997 was 36.8%, as compared to 37.7% for the same
period of the prior year. This decrease is due to lower tax rates in
the southern geographic regions where the Company operates exclusively,
in the prior year the Company used a blended state tax rate of Morrison
Restaurants Inc. Also, the federal rate was reduced from 35% to 34%
based on the expected annual income of the separate Company.
_______________________________________________________________________
Earnings per Share
Earnings per share are based on the weighted average number of shares
outstanding during each quarter and are adjusted for the assumed
conversion of shares issuable upon exercise of options, after the
assumed repurchase of common shares with the related proceeds. For
periods prior to the distribution, shares outstanding were based on the
number of shares of Morrison Restaurants Inc. common stock outstanding
adjusted using the 1-for-4 distribution ratio.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________________________________________________
Total assets at March 1, 1997 were $82.6 million, a $0.2 million
increase from $82.4 million as of the prior fiscal year end. Net
property and equipment increased $1.8 million from June 1, 1996.
Total liabilities at March 1, 1997 were $42.5 million, a $0.1 million
decrease from $42.6 as of the end of the prior fiscal year. Current
liabilities have increased $3.3 million, primarily due to short-term
borrowings on the Company's line of credit.
At March 1, 1997, the Company had $7.47 million in borrowings under its
line of credit facility included in accrued liabilities. The Company is
currently negotiating with various other financial institutions and
expects to replace this line of credit with another credit facility
more suitable to the Company's capital requirements and financing needs
prior to the end of the first quarter of fiscal 1998. See Note D to the
financial statements for more information.
Cash dividends paid during the third quarter of fiscal year 1997
amounted to $0.8 million or $0.09 per share.
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
_______________________________________________________________________
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be
adopted for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods' earnings per
share. The impact of this statement is not expected to result in a
material change in the Company's earnings per share.
Note Regarding Forward-Looking Information
The foregoing sections contain "forward-looking" statements which
represent the Company's expectations or beliefs concerning results and
growth during the remainder of fiscal year 1997. The Company cautions
that a number of important factors could, individually or in the
aggregate, cause actual results to differ materially from such forward-
looking statements including, without limitation, the following:
general economic conditions; consumer spending trends; mall traffic
trends; increased competition in the restaurant industry; the ability
to obtain suitable financing; and changes in the laws and regulations
affecting labor and employee benefits.
PART II - OTHER INFORMATION
ITEM 1
______________________________________________________________
LEGAL PROCEEDINGS
The Company is presently, and from time to time, subject to
pending claims and suits arising in the ordinary course of its
business. In the opinion of management, the ultimate
resolution of these pending legal proceedings will not have a
material adverse effect on the Company's operations or
financial position.
ITEM 5
______________________________________________________________
OTHER INFORMATION
At its quarterly meeting held on March 27, 1997, the Board of
Directors declared a cash dividend of $0.09 per share, payable
on April 30, 1997 to shareholders of record as of April 11,
1997.
On April 4, 1997, Christopher P. Elliott resigned as President
and Chief Operating Officer of the Company and its Board of
Directors effective immediately. Ronnie Tatum, Chief Executive
Officer, will assume Mr. Elliott's duties on a permanent
basis. No search for a replacement will be made. Also
effective on this date was the resignation of Scears Lee, III
Vice President of Human Resources. A search for his
replacement is underway.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
______________________________________________________________
EXHIBITS
The following exhibits are filed as part of this report.
Exhibit No.
11 Computation of Primary and Fully Diluted
Earnings Per Share
27 Financial Data Schedule
99 Waiver and Amendment No. 1 to Credit Agreement
dated as of April 8, 1997 by and between the
Registrant and SunTrust Bank, Atlanta
REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K
during the quarter ended March 1, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
MORRISON FRESH COOKING, INC.
(Registrant)
04/15/97 /s/ Craig D. Nelson
DATE CRAIG D. NELSON
Senior Vice President, Finance
(Senior Vice President and
Principal Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Primary and Fully Diluted
Earnings Per Share
27 Financial Data Schedule
99 Waiver and Amendment No. 1 to Credit Agreement
dated as of April 8, 1997 by and between the
Registrant and SunTrust Bank, Atlanta
MORRISON FRESH COOKING, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
13 weeks ended 39 weeks ended
Mar 1, Mar 2, Mar 1, Mar 2,
1997 1996 1997 1996
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
<TABLE>
<S> <C> <C> <C> <C>
Average common shares outstanding...... 9,048 (1) 9,048 (1)
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at 24 35
the average market price)............
Number of shares used in computation
of primary earnings per share........ 9,072 8,760 9,083 8,823
Net Income............................. $ 701 $(13,122) $2,186 $(10,615)
Primary earnings per common and
common equivalent share.............. $0.08 $(1.49) $0.24 $(1.20)
FULLY DILUTED EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
Average common shares outstanding...... 9,048 (1) 9,048 (1)
Average additional common shares issuable
on exercise of dilutive stock options
(computed by use of the "treasury stock
method", at the higher of period-end 24 24
or average market price).............
Number of shares used in computation of
fully diluted earnings per share..... 9,072 8,760 9,072 8,823
Net Income............................. $ 701 $(13,122) $2,186 $(10,615)
Fully diluted earnings per common and
common equivalent share.............. $0.08 $(1.49) $0.24 $(1.20)
</TABLE>
(1) Prior to the Distribution earnings per share was calculated based on
the average number of Morrison Restaurant Inc. common shares
outstanding adjusted for the 1-for-4 distribution ratio
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MORRISON
FRESH COOKING, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 1,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERNECE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAR-01-1997
<CASH> 749
<SECURITIES> 0
<RECEIVABLES> 219
<ALLOWANCES> 0
<INVENTORY> 2,482
<CURRENT-ASSETS> 12,642
<PP&E> 161,365
<DEPRECIATION> 100,473
<TOTAL-ASSETS> 82,613
<CURRENT-LIABILITIES> 30,316
<BONDS> 688
0
0
<COMMON> 90
<OTHER-SE> 39,994
<TOTAL-LIABILITY-AND-EQUITY> 82,613
<SALES> 188,056
<TOTAL-REVENUES> 188,056
<CGS> 53,107
<TOTAL-COSTS> 171,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107
<INCOME-PRETAX> 3,474
<INCOME-TAX> 1,288
<INCOME-CONTINUING> 2,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,186
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
EXECUTION COUNTERPART
WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT
(this "Amendment") dated as of April 8, 1997 by and among
MORRISON FRESH COOKING, INC., a Georgia corporation (the
"Borrower") and SUNTRUST BANK, ATLANTA, as lender (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender are parties to a
certain Credit Agreement dated as of March 6, 1996 (the "Credit
Agreement"; defined terms used herein without definition shall
have the meaning ascribed to such terms in the Credit Agreement);
WHEREAS, the Borrower and the Lender have agreed to (i)
waive compliance with certain financial covenants set forth in
the Credit Agreement, and (ii) amend certain provisions of the
Credit Agreement, all as more particularly set forth below;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
SECTION I. Amendments to Credit Agreement. Subject to
the satisfaction of the conditions precedent set forth in
Section 3 hereof, and effective as of February 28, 1997 (the
"Effective Date"), the Credit Agreement is hereby amended as
follows:
a. Section 1.1 of the Credit Agreement is hereby
amended by deleting the existing definition of "Revolving Loan
Commitment" in its entirety and substituting the following in
lieu thereof:
"Revolving Loan Commitment" shall mean the Lender's
commitment to make advances to the Borrower in an aggregate
amount outstanding not to exceed the amount of $10,000,000,
as the same may be increased or decreased from time to time
as a result of any reduction thereof pursuant to Section
2.03, any assignment thereof pursuant to Section 9.06 or any
amendment thereof pursuant to Section 9.02."
b. Section 1.1 of the Credit Agreement is hereby
amended by adding the following definitions of "Net Proceeds of
Asset Sales" and "Uncommitted Note" in appropriate alphabetical
order:
"Net Proceeds of Asset Sales" shall mean, with respect
to any sale or other disposition of assets, all cash or cash
receivables received by the Borrower or one of its
Subsidiaries as a result of or in connection with such
transaction, net of reasonable sale expenses, fees and
commission incurred and taxes paid or expected to be paid
within the succeeding twelve months in connection
therewith."
"Uncommitted Note" shall mean that certain Uncommitted
Note dated as of April _, 1997, made by the Borrower in
favor of Lender in the amount of $5,000,000 evidencing
advances made by the Lender to the Borrower pursuant thereto
in Lender's sole discretion, which advances are payable upon
demand by Lender, either as originally executed or as
hereafter amended, modified or supplemented."
c. Section 2.01(b) of the Credit Agreement is hereby
amended by deleting such subsection in its entirety and adding
the following subsection (b) in lieu thereof:
"(b) Amount and Terms of Loans. Effective as of
March 19, 1997, each Loan outstanding hereunder shall be
deemed to have been made and shall continue to be
outstanding as a Base Rate Loan and shall be in a principal
amount of not less than $500,000 or a greater integral
multiple of $50,000; provided that no breakage charges shall
be assessed against the Borrower for any conversion of
Eurodollar Loans to Base Rate Loans as of such date.
Notwithstanding any provision of this Agreement to the
contrary, the Borrower shall not be entitled to request any
Overnight Loan or Eurodollar Loan hereunder following March
19, 1997.
d. Section 2.03 is hereby amended by deleting such
Section in its entirety and substituting the following Section
2.03 in lieu thereof:
"Section 2.03. Reduction of Revolving Loan Commitment.
(a) Voluntary Reduction of Revolving Loan Commitment.
Upon at least three (3) Business Days' prior telephonic
notice (promptly confirmed in writing) to the Lender,
Borrower shall have the right, without premium or penalty,
to terminate the unutilized portion of the Revolving Loan
Commitment, in part or in whole, provided that, any partial
termination pursuant to this Section 2.03(a) shall be in an
amount of at least $5,000,000 and in integral multiples of
$1,000,000.
(b) Mandatory Reduction of Revolving Loan Commitment.
Within ten (10) Business Days after the Borrower or any
Subsidiary shall receive the Net Proceeds of Asset Sales of
any asset sale or disposition pursuant to Section
7.03(b)(iv), the Borrower shall simultaneously (i) deliver a
written notice to the Lender of such sale or disposition
together with a calculation of the Net Proceeds of Asset
Sales thereof, and (ii) shall prepay the Loans outstanding
pursuant to the Revolving Loan Commitment in the amount of
such Net Proceeds of Asset Sales. The Revolving Loan
Commitment shall automatically be permanently reduced by the
amount of such Net Proceeds of Asset Sales on the earlier of
(i) the date of delivery of the Borrower's certificate
required by the preceding sentence and (ii) the date which
is ten (10) Business Days after Borrower's receipt of such
Net Proceeds of Asset Sales. Upon reduction of the
Revolving Credit Commitment hereunder, the Lender shall
increase the amount of the Uncommitted Note by the amount of
such reduction; provided that, nothing set forth herein
shall be construed as an obligation of the Lender to make or
continue any advance pursuant to the Uncommitted Note, each
of which advances shall be made in the sole discretion of
the Lender and shall be payable on demand."
e. Section 2.04 is hereby amended by deleting such
section in its entirety and substituting the following in lieu
thereof:
"Section 2.04. Mandatory Pay-Out of Revolving Loans.
Commencing with the last day of the first fiscal quarter of
Borrower's Fiscal Year 1998 and continuing throughout the
remaining term of the Revolving Loan Commitment, on any date
of determination, there shall have been at least ninety (90)
days during the four most recently ended fiscal quarters of
the Borrower when no Loans shall have been outstanding
pursuant to the Revolving Loan Commitment (which days need
not be consecutive but all of which shall coincide with
dates when the amounts outstanding pursuant to the
Uncommitted Note permitted by Section 7.01(i) hereof shall
also have been reduced to $0) .
f. Section 6.08(a) of the Credit Agreement is hereby
amended by deleting such subsection in its entirety and
substituting the following subsection (a) in lieu thereof:
"(a) Fixed Charge Coverage. Maintain at all times
during the periods set forth below, a Fixed Charge Coverage
Ratio greater than the ratio set forth opposite such period
below, measured as of the last day of each fiscal quarter of
the Borrower for the immediately preceding four fiscal
quarters of the Borrower ending on such date:
Period Fixed Charge Coverage Ratio
Fiscal Year End 1996 to but not
including the last day of Third Fiscal
Quarter 1997 1.50:1.0
Last Day of Third Fiscal Quarter 1997
to but not including the last day of
First Fiscal Quarter 1998 1.00:1.0
Last Day of First Fiscal Quarter 1998 and
thereafter 1.75:1.0
Notwithstanding the foregoing: (i) the calculation of the
Fixed Charge Coverage Ratio on June 1, 1996 shall be made
solely with respect to the fiscal quarter ending on such
date, (ii) the calculation of the Fixed Charge Coverage
Ratio on August 31, 1996 shall be made solely with respect
to the two fiscal quarters ending on that date, and
(iii) the calculation of the Fixed Charge Coverage Ratio on
November 30, 1996 shall be calculated solely with respect to
the three fiscal quarters ending on such date."
g. Section 7.01(i) of the Credit Agreement is hereby
amended by deleting such subsection (i) in its entirety and
substituting the following in lieu thereof:
"(i) Unsecured Indebtedness of the Borrower pursuant to
the Uncommitted Note provided that, effective as of the end
of the first Fiscal Quarter of 1998, all of such
Indebtedness shall simultaneously be paid to $0 for a period
of 90 days during each four fiscal quarters of the Borrower
which days shall coincide with the days when the Revolving
Loans are reduced to $0 in accordance with Section 2.04
hereof; and"
h. Section 7.03(b)(iv) of the Credit Agreement is
hereby amended by deleting such clause (iv) in its entirety.
i. Section 7.05 of the Credit Agreement is hereby
amended by deleting the reference to "$25,000,000" in the last
line thereof and substituting the same with a reference to
"$15,000,000".
j. The Credit Agreement is hereby amended by deleting
the reference to the Revolving Loan Commitment on the signature
page of the Lender thereto.
SECTION 2. Waiver. The Borrower has informed the Lender
that the Borrower was not in compliance with Section 6.08(a)
(Fixed Charge Coverage Ratio) of the Credit Agreement for the
period ending on November 30, 1996. Therefore, the Lender hereby
waives any Default or Event of Default caused by any such failure
of the Borrower to comply with such provision of the Credit
Agreement for such fiscal period.
SECTION 3. Conditions of Effectiveness. This Amendment
shall become effective as of the Effective Date on the first day
when each of the following conditions shall have been satisfied:
a. This Amendment shall have been executed by the
Lender and executed and delivered to the Lender by the Borrower.
b. The Borrower shall have executed and delivered to
the Lender the Uncommitted Note.
c. The Borrower shall have delivered to the Bank a
Secretary's Certificate with respect to resolutions and
incumbency evidencing the corporate authority of the officers of
the Borrower executing and delivering this Amendment and the
Uncommitted Note to do so.
SECTION 4. Representations and Warranties of Borrower.
Borrower, without limiting the representations and warranties
provided in the Credit Agreement, represents and warrants to the
Lender as follows:
a. The execution, delivery and performance by
Borrower of this Amendment are within Borrower's corporate
powers, have been duly authorized by all necessary corporate
action (including any necessary shareholder action) and do not
and will not (a) violate any provision of any law, rule or
regulation, any judgment, order or ruling of any court or
governmental agency, the articles of incorporation or by-laws of
Borrower or any indenture, agreement or other instrument to which
the Borrower is a party or by which the Borrower or any of its
properties is bound or (b) be in conflict with, result in a
breach of, or constitute with notice or lapse of time or both a
default under any such indenture, agreement or other instrument.
b. This Amendment constitutes the legal, valid and
binding obligation of Borrower, enforceable against Borrower in
accordance with its terms.
c. No Default or Event of Default has occurred and is
continuing as of the Effective Date.
SECTION 5. Survival. Each of the foregoing representations
and warranties and each of the representations and warranties
made in the Credit Agreement shall be made at and as of the
Effective Date. Each of the foregoing representations and
warranties shall constitute a representation and warranty of
Borrower under the Credit Agreement, and it shall be an Event of
Default if any such representation and warranty shall prove to
have been incorrect or false in any material respect at the time
when made. Each of the representations and warranties made under
the Credit Agreement (including those made herein) shall survive
and not be waived by the execution and delivery of this Amendment
or any investigation by the Lender.
SECTION 6. No Waiver, Etc. Borrower hereby agrees that
except as expressly set forth in Section 2 above, nothing herein
shall constitute a waiver by the Lender of any Default or Event
of Default, whether known or unknown, which may exist under the
Credit Agreement. Borrower hereby further agrees that no action,
inaction or agreement by the Lender, including without
limitation, any indulgence, waiver, consent or agreement altering
the provisions of the Credit Agreement which may have occurred
with respect to the non-payment of any obligation during the
terms of the Credit Agreement or any portion thereof, or any
other matter relating to the Credit Agreement, shall require or
imply any future indulgence, waiver, or agreement by the Lender.
In addition, Borrower acknowledges and agrees that it has no
knowledge of any defenses, counterclaims, offsets or objections
in its favor against the Lender with regard to any of the
obligations due under the terms of the Credit Agreement as of the
date of this Amendment.
SECTION 7. Affirmation of Covenants. Borrower hereby
affirms and restates as of the date hereof all covenants set
forth in the Credit Agreement, as amended hereby, and such
covenants are incorporated by reference herein as if set forth
herein directly.
SECTION 8. Ratification of Credit Agreement. Except as
expressly amended herein, all terms, covenants and conditions of
the Credit Agreement and the other Loan Documents shall remain in
full force and effect, and the parties hereto do expressly ratify
and confirm the Credit Agreement as amended herein. All future
references to the Credit Agreement shall be deemed to refer to
the Credit Agreement as amended hereby.
SECTION 9. Binding Nature. This Amendment shall be binding
upon and inure to the benefit of the parties hereto, their
respective heirs, successors, successors-in-titles, and assigns.
SECTION 10. Costs and Expenses. The Borrower agrees to pay
on demand all reasonable costs and expenses of the Lender in
connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Lender with respect
thereto and with respect to advising the Lender as to its rights
and responsibilities hereunder and thereunder.
SECTION 11. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the
State of Georgia.
SECTION 12. Entire Understanding. This Amendment sets
forth the entire understanding of the parties with respect to the
matters set forth herein, and shall supersede any prior negotia
tions or agreements, whether written or oral, with respect
thereto.
SECTION 13. Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in
separate counterparts and may be delivered by telecopier. Each
counterpart so executed and delivered shall be deemed an original
and all of which taken together shall constitute but one and the
same instrument.
[SIGNATURES SET FORTH ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment through their authorized officers as of the date
first above written.
MORRISON FRESH COOKING, INC.
By: /s/ Craig D. Nelson
Name:
Craig D. Nelson
Title: Senior Vice President, Finance
[CORPORATE SEAL]
Attest: /s/ Mitchell S. Block
Name: Mitchell S. Block
Title: Secretary
SUNTRUST BANK, ATLANTA
By: /s/ Jeffrey A. Howard
Name: Jeffrey A. Howard
Title: Vice President
By: /s/ F. M. Deover
Name: F. M. Deover
Title:
Group Vice President
DEMAND NOTE
April 8, 1997
MORRISON FRESH COOKING, INC., a Georgia corporation (the
"Company"), promises to pay to the order of SUNTRUST BANK,
ATLANTA (the "Bank") ON DEMAND the principal sum of FIVE MILLION
DOLLARS ($5,000,000) or so much thereof as may be from time to
time disbursed hereunder, plus interest on the unpaid principal
balance as hereinafter provided.
Principal may be disbursed hereunder in the sole discretion
of the Bank in one or more disbursements (hereinafter an
"Advance" and collectively the "Advances"), which in the
aggregate shall at no time exceed the principal amount of this
Note. The interest period of any Advance shall not exceed 90
days. On the last day of any applicable interest period with
respect to each Advance, the Company may request a renewal of
such Advance; provided, that the Bank shall have no obligation or
commitment to renew such Advance, notwithstanding that the Bank
may have previously renewed such Advance or any other Advance.
Interest shall accrue at the Quoted Rate and shall be due
and payable on the last day of each interest period and ON DEMAND
for final payment. Should the Company fail for any reason to pay
this Note in full on the date of any demand, the Company further
promises to pay interest on the unpaid amount from such date
until the date of final payment at a default rate equal to the
Bank's Prime Rate plus 4% per annum. Should legal action or an
attorney at law be utilized to collect any amount due hereunder,
the Company further promises to pay all costs of collection,
including 15% of such unpaid amount as attorneys' fees. All
amounts due hereunder may be paid at any office of Bank.
"Prime Rate" shall mean that rate of interest designated by
the Bank from time to time as its Prime Rate, which may not be
its lowest rate of interest. "Quoted Rate" shall mean the per
annum rate of interest quoted by the Bank in its discretion to
the Company on the day of any requested advance.
The amount of interest accruing and payable hereunder shall
be calculated on the basis of a 360-day year for the actual
number of days elapsed.
As security for the payment of this and any other liability
of the Company to the Bank, direct or contingent, irrespective of
the nature of such liability or the time it arises, the Company
hereby grants a security interest to the Bank in all property of
the Company in or coming into the possession, control or custody
of the Bank, or in which the Bank has or hereafter acquires a
lien, security interest, or other right. Upon default, the Bank
may, without notice, immediately take possession of and then sell
or otherwise dispose of the collateral, signing any necessary
documents as the Company's attorney-in-fact, and apply the
proceeds against any liability of the Company to the Bank. Upon
demand, the Company will furnish such additional collateral, and
execute any appropriate documents related thereto, deemed
necessary by the Bank for its security. The Company further
authorizes the Bank, without notice, to set-off any deposit or
account and apply any indebtedness due or to become due from the
Bank to the Company in satisfaction of any liability described in
this paragraph, whether or not matured. The Bank may, without
notice, transfer or register any property constituting security
for this note into its or its nominee name with or without any
indication of its security interest therein.
This Note shall immediately become due and payable, without
notice or demand, upon the filing of any petition or the
commencement of any proceeding by or against the Company for
relief under bankruptcy or insolvency laws, or any law relating
to the relief of debtors, readjustment or indebtedness, debtor
reorganization, or composition or extension of debt.
The failure or forbearance of the of the Bank to exercise
any right hereunder, or otherwise granted by law or another
agreement, shall not affect or release the liability of the
Company, and shall not constitute a waiver of such right unless
so stated by the Bank in writing. The Bank may enforce its
rights against the Company or any property securing this Note
without enforcing its rights against any guarantor or other
obligor, property, or indebtedness due or to become due to any
such guarantor or obligor. The Company agrees that the Bank
shall have no responsibility for the collection or protection of
any property securing the Note, and expressly consents that the
Bank may from time to time, without notice, extend the time for
payment of this Note, or any part thereof, waive its rights with
respect to any property or indebtedness, and release any
guarantor or other obligor from liability, without releasing the
Company from any liability to the Bank. THIS NOTE SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF GEORGIA. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY WAIVES ITS RIGHT TO A JURY TRIAL. TIME IS OF THE
ESSENCE. PRESENTMENT, NOTICE OF DISHONOR, NOTICE OF DEMAND AND
PROTEST ARE HEREBY WAIVED BY THE COMPANY.
Executed under hand and seal on the date set forth
above.
MORRISON FRESH COOKING, INC.
By: /s/ Craig D. Nelson
CRAIG D. NELSON
Senior Vice President - Finance
Attested By: /s/ Mitchell S. Block
MITCHELL S. BLOCK
Secretary
