<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(MARK ONE)
FORM 10-Q
X
--- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 21, 2000
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OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5364
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FRANK'S NURSERY & CRAFTS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-1561374
-------------------------------- -----------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1175 West Long Lake Road, Troy, Michigan 48098
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (248) 712-7000
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date: Common Stock, $1.00
par value, 1,000 shares outstanding as of July 5, 2000 held by FNC Holdings
Inc. There is no public trading market for the outstanding shares.
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FRANK'S NURSERY & CRAFTS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRANK'S NURSERY & CRAFTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
-----------------------
MAY 21, May 23,
2000 1999
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<S> <C> <C>
NET SALES $ 166,956 $ 186,342
OPERATING COSTS AND EXPENSES:
Cost of sales, including buying and occupancy 111,341 119,806
Selling, general and administrative 44,970 44,611
Amortization of goodwill 750 750
Other (income) expense 11 (224)
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Total operating costs and expenses 157,072 164,943
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INCOME FROM OPERATIONS 9,884 21,399
INTEREST AND DEBT EXPENSE 7,499 6,825
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INCOME BEFORE INCOME TAXES 2,385 14,574
INCOME TAX BENEFIT (949) -
--------- ---------
NET INCOME $ 3,334 $ 14,574
========= =========
</TABLE>
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FRANK'S NURSERY & CRAFTS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 21, May 23, January 30,
2000 1999 2000
--------- --------- -----------
(UNAUDITED) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,700 $ 39,410 $ 8,855
Marketable securities 2,305 - 2,522
Notes receivable 1,500 - -
Accounts receivable 999 2,003 1,941
Merchandise inventory 119,899 140,975 100,823
Prepaid expenses and other
current assets 4,945 5,150 7,260
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Total current assets 150,348 187,538 121,401
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PROPERTY, PLANT AND EQUIPMENT,NET 220,899 208,933 220,450
GOODWILL, LESS ACCUMULATED
AMORTIZATION OF $5,763,
$3,525 AND $5,013 91,879 94,317 92,629
OTHER ASSETS AND DEFERRED CHARGES 14,660 15,256 15,153
--------- --------- ---------
$ 477,786 $ 506,044 $ 449,633
========= ========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 82,598 $ 109,437 $ 14,998
Accrued expenses 46,464 44,193 41,172
Notes payable to banks - - 62,000
Current portion of long-term debt 8,741 4,308 4,675
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Total current liabilities 137,803 157,938 122,845
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LONG-TERM DEBT:
Senior debt 46,632 54,847 51,741
Subordinated debt 115,000 115,000 115,000
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Total long-term debt 161,632 169,847 166,741
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OTHER LIABILITIES AND DEFERRED CREDITS 12,207 12,685 12,221
SHAREHOLDER'S EQUITY:
Common stock $1.00 par value,
1,000 shares authorized,
1,000 shares issued 1 1 1
Capital in excess of par value 165,999 165,999 165,999
Net parent investment 16,636 (4,470) 1,652
Retained earnings (deficit) (16,492) 4,044 (19,826)
--------- --------- ---------
Total shareholder's equity 166,144 165,574 147,826
--------- --------- ---------
$ 477,786 $ 506,044 $ 449,633
========= ========= =========
</TABLE>
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FRANK'S NURSERY & CRAFTS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
-----------------------
MAY 21, May 23,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,334 $ 14,574
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 5,565 5,150
Amortization 1,169 1,138
Other 61 (127)
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10,129 20,735
Changes in operating assets and liabilities:
Marketable securities (41) -
Notes receivable (1,500) -
Accounts receivable 942 860
Inventory (19,076) (43,044)
Prepaid expenses 2,315 1,002
Accounts payable 67,600 75,655
Accrued expenses 5,549 4,477
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Net cash provided by operating activities 65,918 59,685
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CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to property, plant and equipment (6,014) (4,828)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in net parent investment 14,984 (63)
Decrease in notes payable to banks (62,000) (20,000)
Payment of long-term debt and capital lease
obligations (1,043) (540)
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Net cash used in financing activities (48,059) (20,603)
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Increase in cash and cash equivalents 11,845 34,254
Cash and cash equivalents at beginning of period 8,855 5,156
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Cash and cash equivalents at end of period $ 20,700 $ 39,410
========= =========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS)
NOTE 1: BASIS OF PRESENTATION
In the opinion of the Company, the financial statements
reflect all adjustments necessary for a fair statement of the
results for the interim periods presented herein. In the
opinion of management such adjustments consisted of normal
recurring items. Financial results of the interim period are
not necessarily indicative of results that may be expected for
any other interim period or for the fiscal year. For further
information, refer to the financial statements and footnotes
thereto included in the Company's report on Form 10-K for the
fiscal year ended January 30, 2000 dated April 28, 2000.
NOTE 2: DEBT
At May 21, 2000 the Company had a credit facility with various
banks and financial institutions providing for total
borrowings of up to $128.5 million. The Company had borrowings
outstanding under the credit facility of $18.5 million and
outstanding letters of credit of $2.2 million at May 21, 2000.
The credit facility requires the Company to maintain certain
financial ratios. The Company was not in compliance with two
of its covenants under the credit facility, the cash interest
expense coverage ratio and the leverage ratio. The Company
obtained an amendment dated June 29, 2000 that revised the
interest coverage and leverage ratios for May 21, 2000 through
May 19, 2002 and increased the interest rate by 50 basis
points. In addition the amendment establishes a borrowing base
tied to inventory and company-owned real estate properties
which will determine the borrowing availability under the
credit facility at any given time. Also capital expenditures
will be limited to $27 million in fiscal 2000 and $5 million
in fiscal 2001 and 2002.
NOTE 3: NET PARENT INVESTMENT
On April 27, 2000 Cypress contributed $15 million and received
2,801,204 shares of FNC Holdings Inc. ("Holdings") common
stock. The capital contribution is intended for the funding of
the Company's new point-of-sale system for $12.5 million and
$2.5 million for general corporate purposes. As a result of
the capital contribution, the net parent investment increased
by $15 million due to the cash transfer from Holdings to the
Company.
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NOTE 4:INCOME TAXES
Income taxes for the 2000 first quarter represent a benefit
resulting from the realization of certain net operating losses
for which a full valuation allowance had been previously
established. The Company reduced their valuation allowance by
$.9 million based upon regulatory approval for certain tax
matters and immediately realized the related deferred tax
asset when the tax refund was received. As of May 21, 2000,
the Company's remaining net deferred tax asset position is
fully offset with a valuation allowance, due to the Company's
historical operating results.
Due to previously unrecognized tax benefits, no income tax
provision has been provided for the first quarters of 2000 and
1999.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations
Net Sales
NET SALES were $167 million for the sixteen week 2000 first quarter
which ended May 21, 2000 compared with $186.3 million for the sixteen week 1999
first quarter which ended on May 23, 1999. Total net sales decreased 10.4% and
comparable store sales decreased 12% for the 2000 first quarter. Comparative net
sales were negatively impacted by unfavorable weather patterns in virtually all
markets where the Company operates with the northeast and midwest especially
adversely affected.
Earnings
COST OF SALES, INCLUDING BUYING AND OCCUPANCY EXPENSES, were $111.3
million in the 2000 first quarter compared to $119.8 million in the 1999 first
quarter. Cost of sales, as a percentage of net sales, increased to 66.7% in the
2000 first quarter compared to 64.3% in the 1999 first quarter, an increase of
2.4 percentage points. Merchandise margins declined by .4 of a percentage point
primarily due to increased promotional activity in the craft categories being
phased out. Buying and occupancy costs increased by approximately 5% due
principally to occupancy costs in the 2000 first quarter for the new stores
opened subsequent to the 1999 first quarter. This cost increase and the 10.4%
sales decrease results in a 2 percentage point increase in buying and occupancy
costs as a percentage of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in the 2000 first quarter
were $45 million compared to $44.6 million in the 1999 first quarter. This
increase of approximately $.4 million or 1% is net of a $1 million increase in
payroll and other store expenses for new stores opened subsequent to the 1999
first quarter. As a percentage of net sales, selling general and administrative
expenses increased 3 percentage points to 26.9% in the 2000 first quarter
compared to 23.9% in the 1999 quarter.
OPERATING INCOME (DEFINED AS "NET SALES LESS COST OF SALES, INCLUDING
BUYING AND OCCUPANCY COSTS, AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES")
for the 2000 first quarter was $10.6 million, a decrease of $11.3 million or
51.6%, compared to $21.9 million for the 1999 first quarter. The decline in
operating income was primarily the result of decreased sales levels. Operating
income, as a percentage of net sales, declined to 6.3% of net sales for the 2000
first quarter, a decrease of 5.5 percentage points over the 11.8% for the 1999
quarter.
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OTHER (INCOME) EXPENSE was $11,000 for the 2000 first quarter compared
with $(224,000) for the 1999 first quarter.
INTEREST AND DEBT EXPENSE was $7.5 million for the 2000 first quarter
compared with $6.8 million for the 1999 first quarter due to a higher level of
outstanding borrowings and higher interest rates under the credit facility
during the 2000 first quarter.
INCOME TAXES for the 2000 first quarter represent a benefit resulting
from the realization of certain net operating losses for which a full valuation
allowance had been previously established. The Company reduced their valuation
allowance by $.9 million based upon regulatory approval for certain tax matters
and immediately realized the related deferred tax asset when the tax refund was
received. As of May 21, 2000, the Company's remaining net deferred tax asset
position is fully offset with a valuation allowance, due to the Company's
historical operating results. Due to previously unrecognized tax benefits, no
income tax provision has been provided for in the first quarters of 2000 and
1999.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Net cash provided by operations in the 2000 first
quarter was $65.9 million compared to $59.7 million in the 1999 first quarter.
The lower level of earnings for the 2000 first quarter was more than offset by
the $21 million reduction in inventory levels as compared to the 1999 first
quarter. The reduction in inventory occurred in two principal sectors. First,
the lawn and garden hardline inventory, including fertilizers, tools and
planters, was significantly reduced to bring the inventory levels in line with
requirements. Second, the Company's strategy to phase out of certain product
classes, especially general and juvenile crafts, reduced the inventory of these
items.
INVESTING ACTIVITIES. Net cash used in investing activities in the 1999
first quarter was $6 million for capital expenditures, of which $3.6 million was
for the three new stores opened in the first quarter and $1.7 million for the
new point-of-sale system that is expected to be implemented in 2000.
FINANCING ACTIVITIES. Net cash used in financing activities in the 2000
first quarter was $48.1 million which related primarily to the pay-down of bank
debt of $62 million.
On April 27, 2000 Cypress contributed $15 million and received
2,801,204 shares of FNC Holdings Inc. ("Holdings") common stock. The capital
contribution is intended for the funding of the Company's new point-of-sale
system for $12.5 million and $2.5 million for general corporate purposes. As a
result of the capital contribution the Company's net parent investment increased
by $15 million due to the cash transfer from Holdings to the Company.
-8-
<PAGE> 9
At May 21, 2000 the Company had a Senior Secured Credit Facility (the
"credit facility") with various banks and financial institutions which provides
for (i) a term loan facility (the "Term Loan Facility) of up to $18.5 million
and (ii) a revolving credit facility of up to $110 million (the "Revolving
Facility") in revolving credit loans and letters of credit. The Company had
borrowings outstanding under the Term Loan facility of $18.5 million and
outstanding letters of credit of $2.2 million under the Revolving Facility at
May 21, 2000. The credit facility requires the Company to maintain certain
financial ratios. The Company was not in compliance with two of its covenants
under the credit facility, the cash interest expense coverage ratio and the
leverage ratio. The Company obtained an amendment dated June 29, 2000 that
revised the interest coverage and leverage ratios for May 21, 2000 through May
19, 2002 and increased the interest rate by 50 basis points. In addition the
amendment establishes a borrowing base tied to inventory and company-owned real
estate properties which will determine the borrowing availability under the
credit facility at any given time. Also capital expenditures will be limited to
$27 million in fiscal 2000 and $5 million in fiscal 2001 and 2002. Total
long-term debt (including the current portion of long-term debt) at May 21, 2000
was $170.4 million including borrowings under the credit facility, mortgages,
capital leases and subordinated notes. Cash and cash equivalents were $20.7
million at the end of the 2000 first quarter.
The Company has $115 million of subordinated notes outstanding. The
Company and/or its affiliates may from time to time acquire subordinated notes
on the open market or in private transactions.
The Company believes its cash flow from operations, cash on hand and
utilization of available borrowings under its credit facility will be adequate
to meet the Company's ongoing liquidity needs. Management anticipates that total
capital expenditures for fiscal 2000 will be approximately $27 million for new
stores, general refurbishments and fixtures for existing stores and the
implementation of a new point-of-sale system. The Company anticipates opening
seven new stores in fiscal 2000, of which three stores were opened in the 2000
first quarter. Four of the seven new stores expected to open in fiscal 2000 will
be in a new market-the Tidewater area of Virginia. The remaining new stores
will be in existing markets.
ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
There have been no significant changes that would require disclosure
since January 30, 2000.
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Part II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10.5) Amendment No, 4 dated as of June 29, 2000
to the Credit Agreement dated as of
December 24, 1997, as amended by
Amendment No. 3, dated as of April 20,
2000, Amendment No. 2, dated as of
December 25, 1999 and Amendment No. 1,
dated as of April 15, 1998, among Frank's
Nursery & Crafts, Inc. FNC Holdings Inc.,
the lenders party thereto, The Chase
Manhattan Bank and Goldman Sachs Credit
Partners L.P. (Filed herewith)
(27) Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter and through the date of this
Report, the Registrant filed no reports on Form 8- K.
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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.
FRANK'S NURSERY & CRAFTS, INC.
By: /s/ Joseph R. Baczko
-------------------------------
Joseph R. Baczko
Chairman, Chief Executive
Officer
By: /s/ Larry T. Lakin
-------------------------------
Larry T. Lakin
Vice Chairman,
Chief Financial Officer
Dated: July 5, 2000
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------- ----------------------
(10.5) Amendment No. 4 dated as of June 29, 2000 to the
Credit Agreement dated as of December 24, 1997, as
amended by Amendment No. 3, dated as of April 20,
2000, Amendment No. 2, dated as of December 25,
1999 and Amendment No. 1, dated as of April 15,
1998, among Frank's Nursery & Crafts, Inc. FNC
Holdings Inc., the lenders party thereto, The Chase
Manhattan Bank and Goldman Sachs Credit Partners
L.P. (Filed herewith)
(27) Financial Data Schedule.
<PAGE> 13
EXHIBIT 10.5
AMENDMENT NO. 4, dated as of June 29, 2000, to the
Credit Agreement dated as of December 24, 1997, as amended
(the "Credit Agreement"), among Frank's Nursery & Crafts, Inc.
(the "Borrower"), FNC Holdings Inc. ("Holdings"), formerly
known as General Host Corporation, the Lenders (as defined in
the Credit Agreement), The Chase Manhattan Bank, as
administrative agent (in such capacity, the "Administrative
Agent") and collateral agent (in such capacity, the
"Collateral Agent") for the Lenders, as swingline lender (in
such capacity, the "Swingline Lender") and as an Issuing Bank
(as defined in the Credit Agreement), and Goldman Sachs Credit
Partners, L.P., as documentation agent.
A. Pursuant to the Credit Agreement, the Lenders, the
Swingline Lender and the Issuing Banks have extended credit to the Borrower and
have agreed to extend credit to the Borrower, in each case pursuant to the terms
and subject to the conditions set forth therein.
B. The Borrower and Holdings have requested that
the Credit Agreement be amended as set forth herein.
C. The undersigned Lenders are willing to amend
the Credit Agreement pursuant to the terms and subject to
the conditions set forth herein.
D. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in
the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments to Section 1.01 of the Credit Agreement
(Defined Terms). (a) The Credit Agreement is hereby amended by attaching
Exhibit J hereto as Exhibit J thereto.
(b) Section 1.01 of the Credit Agreement is hereby amended by
inserting the following definitions in their appropriate alphabetical positions:
"Accounting Period" means a four-calendar-week
period within a fiscal year of the Borrower with the first such period
commencing on the first day of a fiscal year and each subsequent such
four-calender-week
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2
period subsequently commencing at the end of the immediately preceding
period, resulting in thirteen four-week periods in one fiscal year;
each such "Accounting Period" is referred to herein consecutively as
Accounting Period 1 through Accounting Period 13.
"Borrowing Base" means, as of any date of
determination, an amount equal to (a) the sum, without duplication, of
(i) 50% of Eligible Inventory that constitutes Live Plants Inventory at
such time, plus (ii) 60% of Eligible Inventory that constitutes Lawn &
Garden Inventory at such time during Accounting Periods 1 through 10,
or 45% of Eligible Inventory that constitutes Lawn & Garden Inventory
at such time during Accounting Periods 11 through 13, plus (iii) 60% of
Eligible Inventory that constitutes Christmas Inventory at such time
during Accounting Periods 8 through 12, or 30% of Eligible Inventory
that constitutes Christmas Inventory at such time during Accounting
Periods 1 through 7 and 13, plus (iv) 50% of Eligible Inventory that
constitutes Floral, Crafts and Home Decor Inventory at such time, plus
(v) 50% of the Real Estate Value of Eligible Real Estate at such time,
minus (b) the sum of (i) the Lease Reserve at such time, plus (ii) the
aggregate principal amount of Term Loans outstanding at such time. For
the purposes of determining the Borrowing Base, Inventory shall be
valued at the lower of cost or market in accordance with GAAP
consistently applied. The Borrowing Base shall be computed as of the
end of each week and the Borrowing Base Certificate presenting the
Borrower's computation of the Borrowing Base will be delivered to the
Administrative Agent no later than the third Business Day of the
following week. The Borrowing Base at any time in effect shall be
determined by reference to the Borrowing Base Certificate most recently
delivered hereunder, absent any error in such Borrowing Base
Certificate. The Administrative Agent or the Required Lenders may, in
their reasonable discretion, from time to time (a) decrease the advance
rates for the Borrowing Base, (b) establish and revise reserves
reducing the amount of Eligible Inventory or the Real Estate Value of
any Eligible Real Estate and (c) impose additional eligibility criteria
to be applicable to Eligible Inventory or Eligible Real Estate (any
such action referred to in clause (a), (b) or (c), a "Borrowing Base
Adjustment"); provided that (i) Borrowing Base Adjustments shall be
made only in the event that the Administrative Agent or the Required
Lenders determine (based upon an evaluation or appraisal referred to in
Section 5.09 or other objectively determinable facts or circumstances)
that (A) the turnover rate for Inventory for any period has
<PAGE> 15
3
adversely changed compared with comparable periods in prior years, (B)
the gross margins being realized upon the sale of Inventory for any
period has adversely changed, recognizing the seasonality of the
business, (C) the nature, quality or mix of the Inventory has adversely
changed, (D) the Inventory or Eligible Real Estate (as applicable) or
its value, or the security interests therein granted under the Security
Agreement or Mortgages (as applicable), are adversely affected by any
events, conditions, contingencies or risks that are not already
adequately reflected in the calculation of the Borrowing Base or (E)
the Borrower's calculation of the Borrowing Base is inaccurate, (ii)
each Borrowing Base Adjustment shall bear a reasonable relationship to
the event, condition or circumstance that is the basis therefor and
(iii) each Borrowing Base Adjustment shall not be effective until the
first Accounting Period-end computation that occurs at least 10 days
after delivery of notice of such Borrowing Base Adjustment to the
Borrower.
"Borrowing Base Adjustment" has the meaning assigned
to such term in the definition of "Borrowing Base".
"Borrowing Base Certificate" means a certificate in
the form of Exhibit J (revised to reflect any Borrowing Base
Adjustments) or any other form approved by the Borrower and the
Administrative Agent, together with all supporting documentation and
supplemental reporting information outlined in Schedule I to Exhibit J
and as reasonably requested by the Administrative Agent.
"Christmas Inventory" means all Inventory consisting
of Christmas tree electronics, lifelike Christmas trees, Christmas tree
decorations, boutique items, Christmas tree stands, stationary,
wreaths, garland and all other Inventory included in Department 7;
provided that Christmas Inventory does not include Christmas Nursery.
"Christmas Nursery" means all live Christmas plants
and trees included in Department 1.
"Department 1" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 1" consisting primarily of Outdoor Live Plants.
"Department 2" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 2" consisting
<PAGE> 16
4
primarily of indoor live foliage, indoor flowering plants, hanging
baskets, table plants and indoor bedding and hanging plants.
"Department 3" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 3" consisting primarily of planters and plant accessories.
"Department 4" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 4" consisting primarily of gardening tools, gardening
accessories, water management tools and seasonal accessories (except
for Christmas accessories).
"Department 5" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 5" consisting primarily of fertilizer, spreaders,
chemicals, sprayers and seeds.
"Department 6" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 6" consisting primarily of bird food, bird feeders, bird
accessories, outdoor living, seasonal hardgoods and outdoor bulk goods.
"Department 7" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 7" consisting primarily of Christmas Inventory.
"Department 8" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 8" consisting primarily of annual and perennial bedding
plants and bulbs.
"Department 9" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 9" consisting primarily of silk and dried flowers, potted
trees and floral craft arrangements.
"Department 10" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 10" consisting primarily of paints, paint accessories, wood
crafts, craft accessories, ribbon, furniture, garden decor, candles,
party goods, frames and door mats.
<PAGE> 17
5
"Department 999" means the category of inventory
historically referred to by the Borrower in its books and records as
"Department 999".
"Discontinued Classes" means, as of any date of
determination, all Inventory then remaining within an inventory class
that is being discontinued.
"Eligible Inventory" means, as of any date of
determination, all Net Eligible Inventory at such time minus, (a) the
Shrink Reserve at such time and (b) the Markout Reserve at such time.
"Eligible Real Estate" means, as of any date of
determination, each real property then-owned by the Borrower or a
Subsidiary Loan Party that is subject to a Mortgage and with respect to
which the Administrative Agent shall have received the title insurance,
surveys and other documentation required by Section 5.13(d); provided
that any such real property shall not constitute Eligible Real Estate
until (a) a period of 90 days shall have elapsed since the date that
the Mortgage with respect to such real property shall have been filed
and recorded as necessary to perfect the Lien of such Mortgage and (b)
in the case of any such real property acquired by the Borrower or a
Subsidiary Loan Party after the Fourth Amendment Effective Date, the
Administrative Agent shall have received an appraisal with respect
thereto in accordance with Section 5.09.
"Floral, Crafts & Home Decor Inventory" means all
Inventory consisting of silk and dried flowers, potted trees, floral
crafts, furniture, garden decor, paints, paint accessories, wood
crafts, craft accessories, candles, party goods, frames, door mats,
ribbon and all other Inventory included in Department 9, Department 10
and Department 999.
"Fourth Amendment Effective Date" means June 29,
2000.
"Lease Reserve" means, as of any date of
determination, an amount equal to the sum of (a) rent(including fixed
rent and percentage rent), plus (b) common area maintenance charges,
plus (c) other monetary obligations, in each case for the next three
Accounting Periods under all leases of real property under which the
Borrower or any Subsidiary is a lessee or tenant. For purposes of
determining the
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6
Lease Reserve, contingent items (such as percentage rent) shall be
based on good faith estimates.
"Live Plants Inventory" means all Inventory
consisting of Outdoor Live Plants, indoor live foliage, flowering
plants, hanging baskets, table plants, annual and perennial bulbs,
bedding and hanging plants and all other Inventory included in
Department 1, Department 2 and Department 8.
"Lawn & Garden Inventory" means all Inventory
consisting of planters, planting accessories, gardening tools,
gardening accessories, water management tools, seasonal accessories,
fertilizer, spreaders, chemicals, sprayers, seed, bird food, bird
feeders, bird accessories, outdoor living, seasonal hardgoods, outdoor
bulk goods and all other Inventory included in Department 3, Department
4, Department 5 and Department 6.
"Maintenance Reserve" means, as of any date of
determination, an amount equal to 5% of Inventory that constitutes Live
Plants Inventory at such time (excluding Live Plants Inventory that
constitutes Outdoor Live Plants during Accounting Periods 1 and 13).
"Markout Reserve" means, as of any date of
determination, an amount equal to (a) a percentage equal to the actual
amount of unsalable Live Plants Inventory marked out of the cost of
Live Plants Inventory in the previous fiscal year's subsequent
Accounting Period divided by the ending Live Plants Inventory for the
previous fiscal year's current Accounting Period, multiplied by 2,
multiplied by (b) the amount of Net Eligible Inventory that constitutes
Live Plants Inventory at such time.
"Net Eligible Inventory" means, as of any date of
determination (and subject to any Borrowing Base Adjustments), (a) the
value determined at the lower of cost or market on a first-in,
first-out basis of all Inventory owned by the Borrower or any
Subsidiary Loan Party and located in the United States of America,
minus (b) the Maintenance Reserve at such time. Notwithstanding the
foregoing, no Inventory shall be "Net Eligible Inventory" if:
(i) such item of Inventory (A) is held on
consignment, or (B) is owned by the Borrower or a Subsidiary
Loan Party and has been consigned to other Persons, or (C) is
located at, or in the possession of, a vendor of the Borrower
or a
<PAGE> 19
7
Subsidiary Loan Party, or (D) is in transit to or from, or
held or stored by, third parties (excluding any item of
Inventory that has been imported into the United States and is
reasonably expected to be received by any distribution center
of the Borrower or the Subsidiary Loan Parties within two
weeks from the date of import); or
(ii) such item of Inventory includes any profits or
transfer price additions charged or accrued in connection with
transfers of such Inventory between the Borrower and its
Subsidiaries or among the Subsidiaries of the Borrower;
provided that such Inventory shall only be excluded as
Eligible Inventory up to an amount equal to such profits and
transfer price additions; or
(iii) such item of Inventory is comprised of shipping
supplies and/or packaging (other than prepackaged items),
selling or display materials; or
(iv) the Borrower or a Subsidiary Loan Party shall
not have good and marketable title as sole owner of such item
of Inventory or any nonfrivolous claim disputing the title of
the Borrower or a Subsidiary Loan Party to, or right to
possession of or dominion over, such item of Inventory shall
have been asserted; or
(v) such item of Inventory is not subject to a
valid and perfected, first priority (except for Permitted
Encumbrances of the type described in clause (b) of the
definition of "Permitted Encumbrances" that have priority as a
matter of law) security interest in favor of the Collateral
Agent pursuant to the Security Agreement; or
(vi) such item of Inventory is subject to any Lien
whatsoever, other than Permitted Encumbrances and Liens
created under the Loan Documents; or
(vii) such item of Inventory (A) is damaged or not in
good condition, (B) does not meet all material standards
imposed by any Governmental Authority having regulatory
authority over such item of Inventory, its use or sale or (C)
shall not be readily usable or salable under the customary
terms upon which it usually is sold or at prices approximating
at least the cost thereof (after giving effect to any
write-downs applicable thereto); or
<PAGE> 20
8
(viii) such item of Inventory is included in
Discontinued Classes; or
(ix) such item of Inventory constitutes Outdoor
Live Plants; provided that this clause (ix) shall only apply
when determining Net Eligible Inventory for Accounting Periods
1 and 13.
"Outdoor Live Plants" means all Inventory consisting
of trees, shrubs, bushes, evergreens, Christmas Nursery and all other
Inventory included in Department 1.
"Real Estate Value" means, as of any date of
determination with respect to any Eligible Real Estate, an amount equal
to (a) prior to the delivery of appraisals under Section 5.09(d), the
most recent appraised values of the Eligible Real Estate set forth in
the schedule to Amendment No. 4 to the Credit Agreement and (b) after
delivery of any appraisal under Section 5.09(d), the appraised value as
set forth therein.
"Shrink Reserve" means, as of any date of
determination, the shrink results will be calculated with respect to
all Inventory of the Borrower and the Subsidiary Loan Parties based on
the mathematical average of the actual results of the two previous wall
to wall physical inventories conducted in a manner consistent with the
Borrower's historical annual wall to wall physical inventory taking
process, expressed as a percentage of sales, multiplied by an amount
equal to Net Eligible Inventory at such time.
(c) The definition of the term "Applicable Rate" is
hereby amended and restated in its entirety to read as follows:
"Applicable Rate" means, (a) with respect to any ABR
Loan (excluding Swingline Loans) that is a Revolving Loan, a rate per
annum equal to 2.25%, (b) with respect to any Eurodollar Loan that is a
Revolving Loan a rate per annum equal to 3.25%, (c) with respect to any
ABR Loan, that is a Term Loan a rate per annum equal to 2.50%, (d) with
respect to any Eurodollar Loan that is a Term Loan, a rate per annum
equal to 3.50%, or (e) with respect to the commitment fees payable
hereunder in respect of the Revolving Commitments, a rate per annum
equal to 0.50%.
<PAGE> 21
9
(d) The definition of the term "Consolidated EBITDA" is hereby
amended (i) by inserting "(A)" before the words "any non-cash gains for such
period" in the third to last line thereof; and (ii) by inserting the words "and
(B) an aggregate amount of up to $700,000 used to pay fees and expenses for
appraisals on real property" before the words ", all as determined on a
consolidated basis" in the third to last line thereof.
SECTION 2. Amendment to Section 2.01 of the Credit Agreement
(Commitments). Section 2.01 of the Credit Agreement is hereby amended by
inserting "(i)" before the words "such Lender's Revolving Exposure" in clause
(b) of the first sentence thereof and inserting the words "or (ii) the sum of
the total Revolving Exposures exceeding the Borrowing Base then in effect" at
the end of the first sentence thereof.
SECTION 3. Amendment to Section 2.04 of the Credit Agreement
(Swingline Loans). Section 2.04(a) of the Credit Agreement is hereby amended by
inserting the words "or (iii) the sum of the total Revolving Exposures exceeding
the Borrowing Base then in effect" before the words ", provided that the
Swingline Lender" in the first sentence of paragraph (a) thereof.
SECTION 4. Amendment to Section 2.05 of the Credit Agreement
(Letters of Credit). Section 2.05 of the Credit Agreement is hereby amended (a)
by replacing the words "and (ii)" with ", (ii)" in the last sentence in
paragraph (b) thereof; (b) by inserting the words "and (iii) the total Revolving
Exposures shall not exceed the Borrowing Base then in effect" prior to the end
of paragraph (b) thereof; and (c) by inserting the following sentence after the
second sentence in paragraph (k) thereof:
The Borrower also shall deposit cash collateral pursuant to this
paragraph as and to the extent required by Section 2.11(h), and any
such cash collateral so deposited and held by the Administrative Agent
hereunder shall constitute part of the Borrowing Base for purposes of
determining compliance with this Agreement.
SECTION 5. Amendment to Section 2.11 of the Credit Agreement
(Prepayment of Loans). Section 2.11 of the Credit Agreement is hereby amended by
inserting the following paragraph at the end thereof:
(h) In the event and on each occasion that the total
Revolving Exposures exceeds the Borrowing Base then in effect, the
Borrower shall prepay Revolving Borrowings or Swingline Borrowings (or,
if no
<PAGE> 22
10
such Borrowings are outstanding, deposit cash collateral in an account
with the Administrative Agent pursuant to Section 2.05(k)) in an
aggregate amount equal to such excess.
SECTION 6. Amendment to Section 2.13 of the Credit Agreement
(Interest). Section 2.13(a) of the Credit Agreement is hereby amended by
replacing the percentage "1.25%" therein with the percentage "2.25%".
SECTION 7. Amendment to Section 4.02 of the Credit Agreement
(Each Credit Event). Section 4.02 of the Credit Agreement is hereby amended (a)
by inserting the following paragraph after paragraph (b) thereof:
(c) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, the total Revolving Exposures shall
not exceed the Borrowing Base then in effect.
; and (b) by replacing the words "paragraphs (a) and (b)" in the last sentence
thereof with the words "paragraphs (a), (b) and (c)".
SECTION 8. Amendment to Section 5.01 of the Credit Agreement
(Financial Statements and Other Information). Section 5.01 of the Credit
Agreement is hereby amended by (a) deleting the word "and" at the end of
paragraph (h) thereof; (b) replacing the punctuation at the end of paragraph (i)
thereof with "; and"; and (c) inserting the following paragraph at the end
thereof:
(j) within three Business Days after the end of each week, a
completed Borrowing Base Certificate calculating and certifying the
Borrowing Base as of the end of such week, signed on behalf of the
Borrower by a Financial Officer and accompanied by the reports and
supporting information contemplated by the Borrowing Base Certificate;
provided that the first Borrowing Base Certificate delivered hereunder
shall calculate and certify the Borrowing Base for the week ended June
18, 2000, and the subsequently delivered Borrowing Base Certificate
shall calculate and certify the Borrowing Base for the week ended July
2, 2000.
SECTION 9. Amendment to Section 5.09 of the Credit Agreement
(Books and Records; Inspection and Audit Rights). Section 5.09 of the Credit
Agreement is hereby amended by inserting "(a)" before the first sentence thereof
and inserting the following paragraphs at the end thereof:
<PAGE> 23
11
(b) Each of Holdings and the Borrower will, and will
cause each of the Subsidiaries to, permit the Administrative Agent or
any representatives designated by the Administrative Agent (including
any consultants, accountants, lawyers and appraisers retained by the
Administrative Agent) to conduct evaluations of the Borrower's
computation of the Borrowing Base, the assets included in the Borrowing
Base and related systems and procedures, all at such reasonable times
and as often as reasonably requested. The Borrower shall pay the
reasonable fees and expenses of the Administrative Agent or any
representatives retained by the Administrative Agent to conduct any
such evaluation, including the reasonable and customary fees and
expenses associated with the Administrative Agent's Collateral Agent
Services Group.
(c) Each of Holdings and the Borrower will, and will
cause each of the Subsidiaries to, permit any representatives
designated by the Administrative Agent or the Required Lenders
(including any consultants, accountants, lawyers and appraisers) to
conduct a liquidation analysis, evaluation and appraisal of the
Inventory, all at such reasonable times and, unless an Event of Default
has occurred and is continuing, no more frequently than two times in
any fiscal year. The Borrower shall pay the reasonable fees and
expenses of any representatives retained by the Administrative Agent or
the Required Lenders to conduct such liquidation analysis, evaluation
or appraisal.
(d) On or before the date that is 90 days after the
Fourth Amendment Effective Date, the Administrative Agent shall have
received appraisals reasonably satisfactory to the Administrative Agent
appraising the fair market value of all Eligible Real Estate as of the
Fourth Amendment Effective Date. For any real property eligible to
become Eligible Real Estate acquired after the Fourth Amendment
Effective Date, such appraisals shall be delivered to the
Administrative Agent on or before the date that is 90 days after the
date such real property is acquired. All such appraisals shall be
prepared by appraisers chosen in the reasonable discretion of the
Administrative Agent after consultation with the Borrower. Each of
Holdings and the Borrower will, and will cause each of the Subsidiaries
to, permit such appraisers to evaluate the Eligible Real Estate and the
real property eligible to become Eligible Real Estate in accordance
with Section 5.09(a). The Borrower shall pay the reasonable fees and
expenses of such appraisers.
<PAGE> 24
12
SECTION 10. Amendment to Section 6.02 of the Credit Agreement
(Liens). Section 6.02 of the Credit Agreement is hereby amended by replacing the
word "Mortgage" therein with the word "mortgage" in each place it appears in
paragraph (i) therein.
SECTION 11. Amendment to Section 6.13 of the Credit Agreement
(Capital Expenditures). Section 6.13 of the Credit Agreement is hereby amended
(a) by deleting the table set forth therein and substituting therefor the
following:
<TABLE>
<CAPTION>
Fiscal Year Amount
-------------- --------
<S> <C>
February 2, 1998--January 31, 1999 $22,000,000
February 1, 1999--January 30, 2000 $27,000,000
January 31, 2000--January 28, 2001 $27,000,000
January 29, 2001--January 27, 2002 $5,000,000
January 28, 2002--January 26, 2003 $5,000,000
January 27, 2003--January 25, 2004 $29,500,000
January 26, 2005--January 30, 2005 $31,000,000
</TABLE>
; and (b) by deleting the paragraphs following such table and substituting
therefor the following:
Capital Expenditures set forth above in respect of the fiscal year
ending on or about January 28, 2001 in an amount not less than
$11,500,000, shall be used solely to purchase a point of sale system
during such fiscal year only.
<PAGE> 25
13
SECTION 12. Amendment to Section 6.14 of the Credit Agreement
(Leverage Ratio). Section 6.14 of the Credit Agreement is hereby amended by
deleting the table set forth in paragraph (b) thereof and substituting therefor
the following:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
May 23, 1999--August 15, 1999 5.00 to 1.00
August 16, 1999---November 7, 1999 6.25 to 1.00
November 8, 1999--January 30, 2000 7.80 to 1.00
January 31, 2000--May 21, 2000 11.00 to 1.00
May 22, 2000--August 13, 2000 13.50 to 1.00
August 14, 2000--November 5, 2000 12.00 to 1.00
November 6, 2000--January 28, 2001 9.00 to 1.00
January 29, 2001--May 20, 2001 7.00 to 1.00
May 21, 2001--August 12, 2001 7.70 to 1.00
August 13, 2001--November 4, 2001 7.60 to 1.00
November 5, 2001--January 27, 2002 6.60 to 1.00
January 28, 2002--May 19, 2002 5.10 to 1.00
May 20, 2002--August 11, 2002 4.25 to 1.00
August 12, 2002--November 3, 2002 4.00 to 1.00
November 4, 2002--January 26, 2003 3.50 to 1.00
January 27, 2003--January 25, 2004 3.00 to 1.00
January 26, 2004--thereafter 2.50 to 1.00
</TABLE>
SECTION 13. Amendment to Section 6.15 of the Credit Agreement
(Consolidated Net Cash Interest Expense Coverage Ratio). Section 6.15 of the
Credit Agreement is hereby amended by deleting the table set forth in clause (b)
thereof and substituting therefor the following:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
January 31, 1999 1.75 to 1.00
May 23, 1999--August 15, 1999 2.10 to 1.00
August 16, 1999--November 7, 1999 1.60 to 1.00
November 8, 1999--January 30, 2000 1.30 to 1.00
January 31, 2000--May 21, 2000 0.80 to 1.00
May 22, 2000--August 13, 2000 0.75 to 1.00
August 14, 2000--November 5, 2000 0.85 to 1.00
November 6, 2000--January 28, 2001 1.05 to 1.00
January 29, 2001--May 20, 2001 1.20 to 1.00
May 21, 2001--August 12, 2001 1.30 to 1.00
August 13, 2001--November 4, 2001 1.30 to 1.00
November 5, 2001--January 27, 2002 1.40 to 1.00
January 28, 2002--May 19, 2002 1.50 to 1.00
May 20, 2002--August 11, 2002 2.25 to 1.00
August 12, 2002--November 3, 2002 2.50 to 1.00
November 4, 2002--January 26, 2003 2.50 to 1.00
January 27, 2003--thereafter 3.00 to 1.00
</TABLE>
<PAGE> 26
14
SECTION 14. Amendment to Section 6.20 of the Credit Agreement
(Ratio of Inventory to Revolving Exposures). Section 6.20 of the Credit
Agreement is hereby amended by deleting such Section 6.20 in its entirety.
SECTION 15. Representations and Warranties. Each of Holdings
and the Borrower represents and warrants to the Administrative Agent and to each
of the Lenders that:
(a) This Amendment has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding
in equity or at law, and an implied covenant of good faith and fair
dealing.
(b) After giving effect to this Amendment, the representations
and warranties set forth in Article III of the Credit Agreement are
true and correct in all material respects on and as of the date hereof,
except to the extent such representations and warranties expressly
relate to an earlier date, in which case such representations and
warranties are, to such extent, true and correct in all material
respects as of such earlier date.
(c) After giving effect to this Amendment, no
Default has occurred and is continuing.
SECTION 16. Fees. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender that delivers an executed
counterpart of this Amendment prior to 3:00 p.m., New York City time, on June
29, 2000, an amendment fee (an "Amendment Fee") in an amount equal to 0.25% of
the sum of (i) the aggregate unpaid principal amount Term Loans held by such
Lender as of June 29, 2000, and (ii) such Lender's Revolving Commitment in
effect on June 29, 2000; provided that the Borrower shall not be required to pay
the Amendment Fee unless this Amendment becomes effective as provided in Section
17 hereof.
SECTION 17. Conditions to Effectiveness. This Amendment shall
become effective as of the date (the "Amendment Effective Date") when the
Administrative Agent shall have received (a) counterparts of this Amendment
that, when taken together, bear the signatures of Holdings, the Borrower and the
Required Lenders, (b) a completed Borrowing Base Certificate calculating and
certifying the Borrowing Base as of the week ended June 18, 2000, signed on
behalf of
<PAGE> 27
15
the Borrower by a Financial Officer, (c) reimbursement or payment of all
expenses incurred by the Administrative Agent that are required to be reimbursed
or paid by the Borrower, to the extent invoices therefor have been presented to
the Borrower, (d) an amendment to the Security Agreement, in the form attached
hereto, signed by the parties thereto, and (e) the Amendment Fee. Without
limiting the foregoing, the amendments set forth herein that affect the interest
rates under the Credit Agreement shall apply to all Loans outstanding on or
after the Amendment Effective Date from and including the Amendment Effective
Date.
SECTION 18. Effect of this Amendment. Except as expressly set
forth herein, this Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Lenders, the Swingline Lender, any Issuing Bank, the Collateral Agent or the
Administrative Agent under the Credit Agreement or any other Loan Document and
shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing herein shall
be deemed to entitle the Borrower or Holdings to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any
other Loan Document in similar or different circumstances. After the date
hereof, any reference to the Credit Agreement shall mean the Credit Agreement as
amended hereby. This Amendment shall constitute a Loan Document for all purposes
under the Credit Agreement and the other Loan Documents.
SECTION 19. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. Delivery of any executed counterpart of a signature page of
this Amendment by facsimile transmission shall be as effective as delivery of a
manually executed counterpart hereof.
SECTION 21. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in connection
with this Amendment, including the reasonable fees, charges and disbursements of
Cravath, Swaine & Moore, counsel for the Administrative Agent.
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
FRANK'S NURSERY & CRAFTS, INC.,
as Borrower,
by /s/Larry T. Lakin
--------------------------
Name: Larry T. Lakin
Title: Vice Chairman and CFO
FNC HOLDINGS INC.,
by /s/Larry T. Lakin
--------------------------
Name: Larry T. Lakin
Title: Vice Chairman and CFO
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by /s/Neil R. Boylan
--------------------------
Name: Neil R. Boylan
Title: Managing Director
GOLDMAN SACHS CREDIT PARTNERS,
L.P.,
by /s/Elizabeth Fischer
--------------------------
Name: Elizabeth Fischer
Title: Authorized Signatory
IBJ WHITEHALL BANK & TRUST CO.,
by /s/Patricia G. McCormack
---------------------------
Name: Patricia G. McCormack
Title: Managing Director
PPM FINANCE, INC., as Attorney
in Fact for Jackson National
Life Insurance Co.,
by /s/Michael Williams
--------------------------
Name: Michael Williams
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
by /s/Perry Vavoules
--------------------------
Name: Perry Vavoules
Title: Senior Vice President
<PAGE> 29
SCHEDULE I
Real Estate Values
As of the Fourth Amendment Effective Date
For Eligible Real Estate
<TABLE>
<CAPTION>
REAL ESTATE
STORE NO. ADDRESS TOWN STATE ZIP VALUE
<S> <C> <C> <C> <C> <C>
5 25488 Michigan Avenue Dearborn Heights MI 48125 1,200,000
15 2170 Dix Road Lincoln Park MI 48146 819,000
23 5580 W. State St. Saginaw MI 48603 1,600,000
26 7141 E. Broad Columbus OH 43213 1,300,000
27 5500 W. Broad St. Columbus OH 43228 1,350,000
28 6303 S. Anthony Ft. Wayne IN 46816 450,000
29 1133 Coliseum Blvd. Ft. Wayne IN 46805 550,000
30 47340 Van Dyke Utica MI 48317 1,610,000
45 7940 Penn Ave. S. Bloomington MN 55431 1,540,000
58 3333 Refugee Road Columbus OH 43232 1,350,000
81 3001 28th St. S.W. Grandville MI 49418 1,300,000
84 43473 Ford Road Canton Twp. MI 48188 1,200,000
85 325 Mall Drive Portage MI 49002 1,200,000
86 8032 Ken-18 Burlington Pk. Florence KY 41042 1,700,000
87 3720 95th St. Evergreen Park IL 60642 880,000
88 720 N. Green Bay Rd. Waukegan IL 60087 880,000
90 2999 E. Lincoln Hwy. Merrillville IN 46410 1,300,000
93 5737 S. Pennsylvania Lansing MI 48911 1,100,000
94 6142 Telegrraph Toledo OH 43612 1,450,000
98 1950 State St. St. Charles IL 60174 920,000
102 10901 Bustleton Philadelphia PA 19116 2,150,000
103 3707 Coon Rapids Blvd. Coon Rapids MN 55433 1,100,000
104 10550 Reisterstown Rd. Owings Mills MD 21117 1,600,000
105 190 W. Lincoln Hwy. Exton PA 19341 2,485,000
107 1520 Aurora Naperville IL 60563 900,000
110 4315 E. Bay Drive Clearwater FL 34624 1,495,000
111 5501 49th St. N. St. Petersburg FL 33709 1,425,000
112 255 89th Avenue Blaine MN 55434 1,465,000
113 4720 U.S. 19 New Port Richey FL 34652 1,300,000
</TABLE>
<PAGE> 30
2
<TABLE>
<CAPTION> REAL ESTATE
STORE NO. ADDRESS TOWN STATE ZIP VALUE
<S> <C> <C> <C> <C> <C>
117 6401 W. Waters Avenue Tampa FL 33634 1,430,000
118 4366 Pierson Road Flint MI 48504 1,400,000
119 12756 Walsingham Rd. Largo FL 34644 1,460,000
120 3805 Mapledale Blvd. Tampa FL 33624 1,325,000
134 15031 Manchester Road Ballwin MO 63011 1,200,000
141 7456 South State Rd. Bedford Park IL 60638 1,700,000
151 2295 10 Mile Road Warren MI 48091 1,700,000
156 3822 S. Franklin Michigan City IN 46360 1,000,000
164 2997 E. Wilder Road Bay City MI 48706 960,000
178 2685 Tittabawassee Rd. Saginaw MI 48604 1,200,000
179 4532 Woodville Rd. Northwood OH 43619 1,360,000
181 3530 Mona Kai Drive Norton Shores MI 49441 785,000
188 448 N. Lexington Parkway St. Paul MN 55104 800,000
189 1210 N. Byrne Toledo OH 43607 860,000
199 1238 Upper Valley Pike Rd. Springfield OH 45505 1,250,000
202 3365 Highland Ave. Cincinnati OH 45213 800,000
213 4902 Cortez Rd. Bradenton FL 34210 1,350,000
214 3526 Towne Blvd. Franklin OH 45005 1,550,000
219 3075 Middle Road Columbus IN 47203 1,260,000
240 7325 Old Troy Pike Huber Heights OH 45424 1,450,000
259 5225 N. Grape Rd. Mishawaka IN 46545 1,550,000
266 10808 Montgomery Rd. Cincinnati OH 45242 1,950,000
267 1910 E. Ireland Rd. South Bend IN 46614 1,000,000
272 20 E. Main Street Westfield MA 01085 1,100,000
286 2145 Highway 35 Wall Twp. Sea Girt NJ 08750 1,300,000
401(f/k/a 15300 Hall Road Clinton Township MI 48038 1,500,000
Store No.
92)
605 210 Monmouth Road W. Long Branch NJ 07764 1,150,000
622 945 North Street Milford CT 06460 750,000
624 840 Route 46 Kenvil NJ 07847 2,225,000
625 2931 Highway 35 Hazlet NJ 07730 2,220,000
638 4250 Route 9 South Howell NJ 07731 1,080,000
</TABLE>
<PAGE> 31
3
<TABLE>
<CAPTION>
REAL ESTATE
STORE NO. ADDRESS TOWN STATE ZIP VALUE
<S> <C> <C> <C> <C> <C>
645 447 Winthrop St. (Rte. 44) Taunton MA 02780 1,000,000
648 76 Campanelli Drive Brockton MA 02401 1,600,000
649 310 Russell St. (Rte. 9) Hadley MA 01035 1,250,000
652 840 Boston Road (Rte. 20) Springfield MA 01119 1,350,000
</TABLE>
<PAGE> 32
FRANK'S NURSERY & CRAFTS, INC. EXHIBIT J
BORROWING BASE CERTIFICATE Page 1 of 2
FOR THE WEEK ENDED ________________(1)
<TABLE>
<CAPTION>
Department #'s 1,2,8 3,4,5,6 7 9,10,999
LAWN & FLORAL, CRAFTS
LIVE PLANTS GARDEN CHRISTMAS & HOME DECOR TOTAL
<S> <C> <C> <C> <C> <C>
Inventory (excluding in-transit Inventory)
In-transit Inventory
Total Inventory
Reserve and ineligible Inventory
Maintenance Reserve
Discontinued Classes
Outdoor Live Plants (2)
In-transit (not eligible per Credit Agreement)
Foreign
Supplies, Display & Packaging
Other (to comply with terms of Credit Agreement)
Total reserve and ineligible Inventory
Net Eligible Inventory
Less: Shrink Reserve
Markout Reserve
Subtotal
Eligible Inventory
(3) (4)
Advance Rate 50% 60% 30% 50%
Availability prior to Lease Reserve
Availability from Eligible Real Estate
Less: Lease Reserve
Term Loans
Borrowing Base
Revolving Loans
Swingline Exposure
LC Exposure
Revolving Exposure
Excess Availability
</TABLE>
<PAGE> 33
EXHIBIT J
Page 2 of 2
Notes:
(1) The Borrowing Base shall be computed as of the end of each week and the
Borrowing Base Certificate will be delivered to the Administrative
Agent no later than the third Business Day of the following week.
(2) Outdoor Live Plants to be excluded during Accounting Periods 1 and 13.
(3) Advance rate on Lawn and Garden Inventory to be 45% in periods 11, 12
and 13 and 60% in periods 1 through 10.
(4) Advance rate on Christmas Inventory to be 30% during periods 13 and 1
through 7 and 60% in periods 8 -12.
Officer's Certification
Pursuant to the Credit Agreement dated as of December 24, 1997 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), among
Frank's Nursery & Crafts, Inc. (the "Company"), FNC Holdings Inc. (f/k/a General
Host Corporation), the Lenders defined therein, The Chase Manhattan Bank, as
administrative agent (in such capacity, the "Administrative Agent") and
collateral agent for the Lenders, as swingline lender and as an issuing bank,
and Goldman Sachs Credit Partners, L.P., as documentation agent, the undersigned
certifies that the information provided in this certificate to the
Administrative Agent, is complete and correct based on the accounting records of
the Company. Capitalized terms used herein and not otherwise defined herein have
the meanings assigned thereto in the Credit Agreement.
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Signature, Title, Date
<PAGE> 34
SCHEDULE 1
TO EXHIBIT J
Page 1 of 1
FRANK'S NURSERY & CRAFTS, INC.
COLLATERAL MONITORING REPORTING REQUIREMENTS
DOCUMENTS TO BE SUBMITTED TO THE ADMINISTRATIVE AGENT
The following information is to be submitted for Frank's Nursery &
Crafts, Inc.:
IN CONNECTION WITH WEEKLY BORROWING BASE CERTIFICATE SUBMISSION:
1) Trended Cost Inventory Report, and
2) summary of in-transit Inventory and supporting documentation,
including original title or other documentation creating a valid
and perfected first priority security interest in
favor of the Collateral Agent; and
WITHIN 15 BUSINESS DAYS AFTER THE LAST DAY OF EACH ACCOUNTING PERIOD:
1) Open to Buy Report,
2) Inventory analysis (reconciliation to general ledger), and
3) top five accounts payable vendor balances.
IN ADDITION, THE RESULTS OF PHYSICAL WALL TO WALL INVENTORIES ARE TO BE
SUBMITTED UPON COMPLETION.
SUBMIT TO:
The Chase Manhattan Bank
Collateral Agent Services Group
Attn: Scott Troy
270 Park Avenue - 29th floor
New York, NY 10017
Phone: (212) 270-4628
Fax: (212) 270-7449
