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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
January 3, 1998 0-785
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NASH-FINCH COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 41-0431960
(State of Incorporation) (I.R.S. Employer
Identification No.)
7600 France Avenue South
P.O. Box 355
Minneapolis, Minnesota
(Address of principal 55440-0355
executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 832-0534
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.66-2/3 per share
Common Stock Purchase Rights
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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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 23, 1998, 11,338,371 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the Common Stock of the
Registrant as of that date (based upon the last reported sale price of the
Common Stock at that date by the Nasdaq National Market), excluding outstanding
shares deemed beneficially owned by directors and officers, was approximately
$216,901,640.
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Parts I, II and IV of this Annual Report on Form 10-K incorporate by
reference information (to the extent specific pages are referred to herein) from
the Registrant's Annual Report to Stockholders for the Year Ended January 3,
1998 (the "1997 Annual Report"). Parts II and III of this Annual Report on Form
10-K incorporate by reference information (to the extent specific sections are
referred to herein) from the Registrant's Proxy Statement for its Annual Meeting
to be held May 12, 1998 (the "1998 Proxy Statement").
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PART I
ITEM 1. BUSINESS.
A. GENERAL DEVELOPMENT OF BUSINESS.
Nash Finch Company, a Delaware corporation organized in 1921 as the
successor to a business founded in 1885, has its principal executive offices at
7600 France Avenue South, Edina, Minnesota 55435. Its telephone number is (612)
832-0534. Unless the context otherwise indicates, the term "Company," as used
in this Report, means Nash Finch Company and its consolidated subsidiaries.
The Company is one of the largest food wholesalers in the United States,
serving primarily the Midwestern and Southeastern regions of the United States.
In addition, the Company operates 97 conventional and warehouse supermarkets
in 13 states. The Company's wholesale operations, which currently include 21
distribution centers serving approximately 2,250 affiliated and independent
supermarkets, U.S. military commissaries and other customers in approximately
30 states, accounted for 79.8% of the Company's total revenues in fiscal
1997, while its retail operations accounted for 18.7%. No one customer
accounts for a significant portion of the Company's sales.
The Company's wholesale operations serve two primary markets: (i)
supermarkets (70.4% of wholesale revenues in fiscal 1997), where the Company
combines a wide offering of national brand and private label products with
comprehensive support services to develop strong relationships with
customers; and (ii) military commissaries (29.6% of wholesale revenues in
fiscal 1997), where the Company believes it is currently the largest
distributor of groceries and related products to such facilities in the
United States. The Company's broad product offering includes dry groceries,
fresh fruits and vegetables, frozen foods, fresh and processed meat products
and dairy products, as well as a wide variety of non-food products, including
health and beauty care, tobacco, paper products, cleaning supplies and small
household items. Private label products are branded primarily under the OUR
FAMILY-Registered Trademark- trademark, a long-standing private label of the
Company, and FAME-Registered Trademark-, a trademark acquired in the
acquisition of Super Food Services, Inc. ("Super Food") in November 1996.
The Company offers a wide range of support services to its independent
retailers to help them compete more effectively in their markets and to build
customer loyalty, including supermarket merchandising support, accounting
services, price management systems, retail technology support, advertising
and promotional programs, training and human resource development services,
market research and store development services.
The Company's retail stores, as well as many of the retail outlets supplied
by the Company's wholesale operations, are located primarily in small to
mid-sized markets and rural areas. The Company's retail operations consist of
66 conventional supermarkets, averaging approximately 23,300 square feet in
size, operating principally under the SUN MART-TM-, EASTER FOODS-TM- and FOOD
FOLKS-TM- trade names; 27 warehouse stores, averaging approximately 42,900
square feet in size, operating principally under the ECONOFOODS -Registered
Trademark- trade name; and four combination general merchandise/food stores
averaging approximately 43,000 square feet in size, operating under the
FAMILY THRIFT CENTER-TM- trade name.
The Company also packages, ships and markets fresh produce from California
and the countries of Chile and Mexico to a variety of buyers across the United
States, Canada and overseas.
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In June 1997, the Company acquired the business and certain assets from
United-A.G. Cooperative, Inc. ("United A.G."), a cooperative wholesale
grocery distributor located in Omaha, Nebraska. United A.G. distributed a
full-line of food and related non-food products to independent grocery
retailers in Colorado, Iowa, Kansas, Nebraska and South Dakota. The Company
subsequently consolidated the operations of its Lincoln, Nebraska
distribution center with United A.G.'s distribution center in Omaha, has
closed the Lincoln distribution center in 1998 and intends to sell the
property.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Financial information about the Company's business segments for the most
recent three fiscal years is contained on page 29 of the 1997 Annual Report
(Note 14 to Consolidated Financial Statements). For segment financial reporting
purposes, a portion of the operational profits of wholesale distribution centers
are allocated to retail operations to the extent that merchandise is purchased
by these distribution centers and transferred to retail stores directly operated
by the Company. For fiscal 1997, 44% of such warehouse operational profits were
allocated to retail operations.
C. NARRATIVE DESCRIPTION OF BUSINESS.
1. WHOLESALE OPERATIONS
The Company distributes and sells a full line of food products, including
dry groceries, fresh fruits and vegetables, frozen foods, fresh and processed
meat products and dairy products, and a variety of non-food products, including
health and beauty care, tobacco, paper products, cleaning supplies and small
household items. The Company primarily distributes and sells nationally
advertised brand products and a number of unbranded products (principally meats
and produce) purchased directly from various manufacturers, processors and
suppliers or through manufacturers' representatives and brokers. The Company
also distributes and sells private label products using the Company's own
trademarks, including principally the OUR FAMILY-Registered Trademark- private
label that the Company has owned and developed over many years, and the
FAME-Registered Trademark- private label that the Company acquired in the
acquisition of Super Food. A wide variety of grocery, dairy, packaged meat,
frozen foods, health and beauty care products, paper and household products,
beverages, and other packaged products are manufactured or processed by others
for the Company and sold under the Company's private labels.
As of January 3, 1998, the Company distributed food and non-food products,
on a wholesale basis, to approximately 2,250 affiliated and independent
supermarkets, U.S. military commissaries and other customers. The Company's
wholesale customers are primarily self-service supermarkets that carry a wide
variety of grocery products, health and beauty care products and general
merchandise. Many stores also have one or more specialty departments such as
delicatessens, in-store bakeries, restaurants, pharmacies and flower shops.
Stores served by the Company's wholesale operations range in size from small
stores to large warehouse stores of over 100,000 square feet.
The Company offers to affiliated independent retailers a broad range of
services, including promotional, advertising and merchandising programs, the
installation of computerized ordering, receiving and scanning systems, the
establishment and supervision of computerized retail accounting, budgeting and
payroll systems, personnel management assistance and employee training, consumer
and market research, store development services and insurance programs. The
Company's retail counselors and other Company personnel advise and counsel
affiliated independent retailers, and directly provide many of the above
services. Separate charges are made for some of these services. Other
independent
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stores are charged for services on a negotiated basis. The Company also
provides retailers with marketing and store upgrade services, many of which have
been developed in connection with Company owned stores. For example, the
Company assists retailers in installing and operating delicatessens and other
specialty food sections. Rather than offering a single program for the services
it provides, the Company has developed multiple, flexible programs to serve the
needs of most affiliated independent retailers, whether rural or urban, large or
small.
The Company's assistance to affiliated independent retailers in store
development provides a means of continued growth for the Company through the
development of new retail store locations and the enlargement or remodeling of
existing retail stores. Services provided include site selection, marketing
studies, building design, store layout and equipment planning and procurement.
The Company assists wholesale customers in securing existing supermarkets that
are for sale from time to time in market areas served by the Company and,
occasionally, acquires existing stores for resale to wholesale customers.
The Company also provides financial assistance to its independent retailers
generally in connection with new store development and the upgrading or
expansion of existing stores. The Company makes secured loans to some of its
independent retailers, generally repayable over a period of five or seven years,
for inventories, store fixtures and equipment, working capital and store
improvements. Loans are secured by liens on inventory or equipment or both, by
personal guarantees and by other types of security. As of January 3, 1998, the
Company had approximately $39.0 million outstanding of such secured loans to 147
independent retailers. In addition, the Company may provide such assistance to
independent retailers by guarantying loans from financial institutions and
leases entered into directly with lessors. The Company also uses its credit
strength to lease supermarket locations for sublease to independent retailers,
at rates that are at least as high as the rent paid by the Company.
The Company currently distributes products from 21 distribution centers
located in Colorado, Georgia, Iowa, Kansas, Maryland, Michigan, Minnesota,
Nebraska (2), North Carolina (2), North Dakota (2), Ohio (3), South Dakota (2),
Virginia (2) and Wisconsin. The Company's distribution centers are located at
strategic points to efficiently serve Company owned stores, independent
customers and military commissaries. The distribution centers are equipped with
modern materials handling equipment for receiving, storing and shipping goods
and merchandise and are designed for high-volume operations at low unit costs.
Distribution centers serve as central sources of supply for Company owned
and independent stores, military commissaries and other institutional customers
within their operating areas. Generally, the distribution centers maintain
complete inventories containing most national brand grocery products sold in
supermarkets and a wide variety of high-volume private label items. In
addition, distribution centers provide full lines of perishables, including
fresh meats and poultry, fresh fruits and vegetables (except Super Food
distribution centers), dairy and delicatessen products and frozen foods. Health
and beauty care products, general merchandise and specialty grocery products are
distributed from a dedicated area of a distribution center located in
Bellefontaine, Ohio, and from the distribution center located in Sioux Falls,
South Dakota. Retailers order their inventory requirements at regular intervals
through direct linkage with the Company's computers. Deliveries are made
primarily by the Company's transportation fleet. The frequency of deliveries
varies, depending upon customer needs. The Company currently has a modern fleet
of approximately 500 tractors and 1,200 semi-trailers, most of which are
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owned by the Company. In addition, many types of meats, dairy products, bakery
and other products are sold by the Company but are delivered by the suppliers
directly to retail food stores.
Virtually all of the Company's wholesale sales to independent retailers are
made on a market price-plus-fee and freight basis, with the fee based on the
type of commodity and quantity purchased. Selling prices are changed promptly,
based on the latest market information.
The Company distributes groceries and related products directly to military
commissaries in the U.S., and distribution centers also provide products for
distribution to U.S. military commissaries in Europe and to ships afloat. These
distribution services are provided primarily under contractual arrangements with
the manufacturers of those products. The Company provides storage, handling and
transportation services for the manufacturers and, as products ordered from the
Company by the commissaries are delivered to the commissaries, the Company
invoices the manufacturers for the cost of the merchandise delivered plus
negotiated fees.
2. RETAIL OPERATIONS
As of January 3, 1998, the Company owned and operated 97 retail outlets,
including 66 supermarkets, 27 warehouse stores and four combination general
merchandise/food stores. The Company has devoted considerable resources in
recent years to acquire, construct, enlarge and modernize its stores. By
constructing new stores or expanding existing stores, the Company seeks to add
either larger conventional supermarkets (at least 30,000 square feet) or
warehouse stores (at least 45,000 square feet), as appropriate. The Company's
stores use a number of automated systems to provide inventory control at
delivery and checkout points, reduce shrinkage and increase labor efficiency.
The Company operates 66 conventional supermarkets principally under the
names SUN MART-TM-, EASTER FOODS-TM- and FOOD FOLKS-TM-. These stores, 12 of
which the Company owns (the remainder are leased), range in size up to
approximately 46,000 square feet. These stores are primarily self-service
supermarkets that carry a wide variety of grocery products, health and beauty
care products and general merchandise. Many stores also have one or more
specialty departments such as delicatessens, in-store bakeries, restaurants,
pharmacies and floral departments.
The Company operates 27 warehouse stores, principally under the name
ECONOFOODS-Registered Trademark-. These stores, six of which the Company owns
(the remainder are leased), range in size up to approximately 106,000 square
feet. The Company's warehouse stores offer a wide variety of high quality
groceries, fresh fruits and vegetables, dairy products, frozen foods, fresh
fish, fresh and processed meat and health and beauty care products, all at lower
prices. Many have specialty departments such as delicatessens, bakeries,
pharmacies, banks and floral and video departments. These stores appeal to
quality and price-conscious customers who want broad selection and availability
of convenience foods, but are willing, in some cases, to forgo standard
supermarket services. The stores offer lower prices due to increased business
volume as well as the limited services available.
The Company also operates four combination general merchandise/food stores
under the name FAMILY THRIFT CENTER-TM-. These stores, two of which are owned,
range in size up to approximately 60,000 square feet. In addition to
traditional supermarket food departments, these stores have expanded general
merchandise and health and beauty care products departments and pharmacies, and
some also have sit-down restaurants, full-service floral departments and book
departments.
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3. PRODUCE MARKETING OPERATIONS
Through a wholly owned subsidiary, Nash-DeCamp Company ("Nash-DeCamp"), the
Company grows, packs, ships and markets fresh fruits and vegetables from
locations in California and the countries of Chile and Mexico to customers in
the United States, Canada and overseas. For regulatory reasons, the amount of
business between Nash-DeCamp and the Company is limited. The Company owns and
operates three modern packing, shipping and/or cold storage facilities that ship
fresh grapes, plums, peaches, nectarines, apricots, pears, persimmons, kiwi
fruit and other products. The Company also acts as marketing agent for other
packers of fresh produce in California and in the countries of Chile and Mexico.
For the above services, the Company receives, in addition to a selling
commission, a fee for packing, handling and shipping produce. The Company also
owns vineyards and orchards for the production of table grapes, tree fruit, kiwi
and citrus.
4. INFORMATION SYSTEMS
The Company, working in conjunction with SAP America and a number of other
vendors and consultants, has committed substantial resources over the last two
years to the development and implementation of HORIZONS, a client server based
enterprise management and financial information system. The Company currently
expects to spend approximately $76 million between 1996 and 2004 on the design
and installation of, and training for, the HORIZONS project, approximately half
of which has been spent through the end of fiscal 1997. The HORIZONS system
will be a fully integrated and scaleable system that management believes will
provide the Company with competitive advantages that can be aggressively
marketed to retail customers. Implementation of the HORIZONS system is
scheduled to be substantially completed in 1999, and is expected to provide (i)
a solution to the Company's Year 2000 software issues, (ii) greater flexibility
for the changing business environment (iii) greater connectivity opportunities
with customers and suppliers, (iv) the ability to integrate and standardize
information systems throughout the Company, (v) timely and easy-to-use
information, (vi) greater business process and workflow efficiencies, and (vii)
more powerful decision-making and analysis tools. To parallel the development
and implementation of the HORIZONS project, management has led a cultural change
and training initiative designed to prepare the Company's workforce for changes
in the industry and in the use of the HORIZONS system to address these changes.
5. COMPETITION.
All segments of the Company's business are highly competitive. The Company
competes directly at the wholesale level with a number of wholesalers that
supply independent retailers, including "cooperative" wholesalers that are owned
by their retail customers and "voluntary" wholesalers who, like the Company, are
not owned by their retail customers but sponsor a program under which
single-unit or multi-unit independent retailers may affiliate under a common
name. Certain of these competing wholesalers may also engage in distribution to
military commissaries. The Company also competes indirectly with the warehouse
and distribution operations of the large integrated chains, which consist of
single entities owning both wholesale and retail operations. At the wholesale
level, the principal methods of competition are price, quality, breadth and
availability of products offered, strength of private label brands offered,
schedules and reliability of deliveries and the range and quality of services
offered, such as store financing and use of store names, and the services
offered to manufacturers of products sold to military commissaries. The success
of the Company's wholesale business also depends upon the ability of its retail
store customers to compete successfully with other retail food stores.
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The Company competes on the retail level in a fragmented market with many
organizations of various sizes, ranging from national chains and voluntary or
cooperative groups to local chains and privately owned unaffiliated stores.
Depending on the product and location involved, the principal methods of
competition at the retail level include price, quality and assortment, store
location and format, sales promotions, advertising, availability of parking,
hours of operation and store appeal.
The Company competes directly in its produce marketing operations with a
large number of other firms that pack, ship and market produce, and competes
indirectly with larger, integrated firms that grow, pack, ship and market
produce. The principal methods of competition in this segment are service
provided to growers and the ability to sell produce at the most favorable
prices.
6. EMPLOYEES.
As of January 3, 1998, the Company employed approximately 12,200 persons,
approximately 5,400 of which were employed on a part-time basis. All employees
are non-union, except approximately 774 employees in a variety of functions who
are unionized under various bargaining agreements. The Company considers its
employee relations to be good.
ITEM 2. PROPERTIES.
The principal executive offices of the Company are located in Edina,
Minnesota, and consist of approximately 68,000 square feet of office space in a
building owned by the Company. In addition to the executive offices, the Company
leases an additional 15,275 square feet of office space in Edina, Minnesota.
The locations and sizes of the Company's distribution centers, as of
January 3, 1998, are listed below (all of which are owned, except as indicated).
The distribution center facilities which are leased have varying terms, all with
remaining terms of less than 20 years.
<TABLE>
<CAPTION>
Approx. Size
Location (Square Feet)
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<S> <C>
Midwest/West:
Denver, Colorado (a) 335,800
Cedar Rapids, Iowa 351,900
Liberal, Kansas 177,000
St. Cloud, Minnesota 329,000
Grand Island, Nebraska 177,700
Lincoln, Nebraska (b) 226,300
Omaha, Nebraska (a) 530,000
Fargo, North Dakota 288,800
Minot, North Dakota 185,200
Rapid City, South Dakota 187,100
Sioux Falls, South Dakota (c) 271,100
Appleton, Wisconsin 430,900
Southeast:
Statesboro, Georgia (a) (d) 287,800
Baltimore, Maryland (a) 350,500
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Lumberton, North Carolina (a) (e) 256,600
Rocky Mount, North Carolina (a) 191,800
Bluefield, Virginia 186,400
Norfolk, Virginia (a) (f) 543,600
Super Food Services, Inc.
Bellefontaine, Ohio (g) 863,000
Cincinnati, Ohio 445,600
Bridgeport, Michigan (a) 581,300
Lexington, Kentucky (a) (h) 334,700
Total Square Footage 7,532,100
</TABLE>
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(a) Leased facility.
(b) The operations of the Lincoln distribution center have been consolidated
with the operations of the Company's distribution center in Omaha,
Nebraska, and the Company has closed the Lincoln distribution center and
intends to sell the property.
(c) Includes 79,300 square feet that are leased by the Company.
(d) Includes 46,400 square feet that are owned by the Company.
(e) Includes 16,100 square feet of produce warehouse space located in
Wilmington, North Carolina that are leased by the Company.
(f) Includes 52,800 square feet that are owned by the Company.
(g) Includes 197,000 square feet that are leased by the Company. General
Merchandise Services, an operating unit of Super Food, utilizes
approximately 487,800 square feet of the total space (owned and leased) for
the distribution of health and beauty care products, general merchandise
and specialty grocery products.
(h) The Company closed the Lexington distribution center in March 1998, having
consolidated its operations with the Cincinnati, Ohio and Bluefield,
Virginia distribution centers.
The following table shows the number and aggregate size of Company-owned
and operated supermarkets and warehouse stores at January 3, 1998:
<TABLE>
<S> <C>
Conventional Supermarkets:
Number of stores 66
Total square feet 1,459,532
Warehouse stores:
Number of stores 27
Total square feet 1,168,875
Combination General Merchandise/Food:
Number of stores 4
Total square feet 180,399
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Totals:
Number of stores 97
Total square feet 2,808,806
</TABLE>
Nash-DeCamp has executive offices comprising approximately 11,600 square
feet of leased space in an office building located in Visalia, California.
It owns and operates three packing, shipping and/or cold storage facilities
in California in connection with its produce marketing operations, with total
space of approximately 174,000 square feet. In addition to such storage
facilities, Nash-DeCamp also owns approximately 879 acres for the production
of table grapes, 40 acres for the production of kiwi fruit, 796 acres for the
production of peaches, plums, apricots and nectarines, 245 acres for the
production of citrus, and 194 acres of open ground for future development,
all in San Joaquin Valley of California. Nash-DeCamp also leases 236 acres
for the production of tree fruit located in the San Joaquin Valley and,
through a 99%-owned Chilean subsidiary, approximately 740 acres in Chile for
the production of table grapes.
ITEM 3. LEGAL PROCEEDINGS.
In November 1992, Jin Ku Kim, currently an employee of the Company,
commenced an action against the Company in U.S. District Court for the
Northern District of Iowa claiming damages as a result of the alleged failure
of the Company to promote Mr. Kim to the position of shipping foreman in
November 1990 and April 1992 because of his national origin and race, and the
alleged retaliation against him by the Company in terms and conditions of
employment after he filed charges of employment discrimination with the Cedar
Rapids, Iowa, Civil Rights Commission. In September 1994, a jury verdict was
entered against the Company in the amount of $8,786,000, including $36,000 in
back pay, $1,750,000 in mental anguish and loss of enjoyment of life and
$7,000,000 in punitive damages. In April 1995, the U.S. District Court
entered an Amended Judgment reducing the jury award to a total of $421,000
plus attorneys' fees and costs of $114,556. Both Mr. Kim and the Company
filed appeals from the Amended Judgment with the United States Court of
Appeals for the Eighth Circuit. Mr. Kim's appeal sought reinstatement of the
jury verdict and the Company's appeal sought judgment as a matter of law or
further reduction of the damage award; both parties sought a new trial in the
alternative. In August 1997, the Court of Appeals issued its ruling,
affirming the District Court's Amended Judgment in all material respects. In
November 1997, Mr. Kim and the Company entered into a Settlement Agreement
pursuant to which the Company has paid sums and interest as required by the
Amended Judgment, and in which Mr. Kim has agreed that all disputes between
the parties relating to this matter are now resolved. The total amounts paid
had been substantially reserved by the Company at the end of fiscal 1996.
On April 2, 1996 an individual engaged in growing citrus crops in Fresno
County commenced an action entitled EMILIANO MORENO V. NASH-DECAMP COMPANY,
ET AL, against Nash-DeCamp and others, including three of its officers and
directors, in the United States District Court for the Eastern District of
California. Nash-DeCamp provided services to the plaintiff relating to the
packing, marketing and distribution of produce grown by the plaintiff, and
advanced financing to assist the plaintiff in growing and harvesting his
crops. Plaintiff's complaint alleged that the defendants engaged in various
acts of misconduct relating to the handling, packaging and pricing of such
produce in violation of various federal and state laws, resulting in
unspecified damages to the plaintiff. In his complaint, plaintiff sought
unspecified compensatory damages, punitive and exemplary damages, treble
damages, attorneys' fees and costs of suit, as well as injunctive relief.
The defendants filed an answer raising various defenses to and denying the
allegations set forth in the complaint. In addition, Nash-DeCamp filed a
counterclaim to recover monies owed to it by plaintiff, costs of suit,
attorneys' fees, all
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proceeds from any disposition of the 1995-1996 citrus crops, and other
damages and interest. In August 1997, while still in the pre-trial phase of
this action, the parties entered into a Settlement Agreement and Mutual
Release of All Claims, pursuant to which the referenced action was dismissed
with prejudice as to all claims. The reserves established by Nash-DeCamp at
the end of fiscal 1996 were sufficient to cover the terms of the settlement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company, their ages, the year first elected
or appointed as an executive officer and the offices held as of March 31, 1998
are as follows:
<TABLE>
<CAPTION>
Year First Elected or
Appointed as an
Name Age Executive Officer Title
- ---- --- ------------------ -----
<S> <C> <C> <C>
Alfred N. Flaten 63 1991 President and Chief Executive Officer
William E. May, Jr. 49 1996 Executive Vice President and Chief Operating
Officer
David J. Richards 49 1996 Vice President, Corporate Retail Stores
Norman R. Soland 57 1986 Vice President, Secretary and General Counsel
Charles F. Ramsbacher 55 1991 Vice President, Marketing
Clarence T. Walters 61 1988 Vice President, Management Information
Systems
Steven L. Lumsden 52 1992 Vice President, Warehouse and Transportation
Gerald D. Maurice 64 1993 Vice President, Store Development
Charles M. Seiler 50 1995 Vice President, Corporate Retail Operations
John R. Scherer 47 1994 Vice President and Chief Financial Officer
Edgar F. Timberlake 50 1995 Vice President, Human Resources
John M. McCurry 49 1996 Vice President, Independent Store Operations
Thomas W. Struck 47 1998 Vice President, Supply Chain Management
Lawrence A. Wojtasiak 52 1990 Controller
Suzanne S. Allen 33 1996 Treasurer
</TABLE>
There are no family relationships between or among any of the executive
officers or directors of the Company. Executive officers of the Company are
elected by the Board of Directors for one-year terms, commencing with their
election at the first meeting of the Board of Directors immediately following
the annual meeting of stockholders and continuing until the next such meeting of
the Board of Directors.
Mr. Flaten was elected President in 1991 and Chief Executive Officer in
November 1994. He also served as Chief Operating Officer from November 1991 to
January 1998. Previously, he served as Executive Vice President, Sales and
Operations from February 1991 to November 1991.
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Mr. May's election as Executive Vice President and Chief Operating Officer
was effective in January 1998. He previously served as Vice President,
Strategic Technology Programs and Marketing Services from July 1996 to January
1998, after joining the Company in June 1996. He was previously employed by
Spartan Stores, Inc., a wholesale food distribution company, serving in various
executive and officer capacities from July 1988 to June 1996.
Mr. Richards was elected as Vice President, Corporate Retail Stores in July
1996. He previously served as operating Vice President, Southeast Division from
December 1994 to June 1996. Prior to joining the Company, he was employed by
Scrivner, Inc., a wholesale and retail food distribution company, serving as its
Senior Vice President, Store Development from July 1993 to August 1994 and its
Executive Vice President, Corporate Stores from January 1992 to July 1993.
Mr. Soland has served as Vice President, Secretary and General Counsel
since May 1988, and as Secretary and General Counsel since January 1986.
Mr. Ramsbacher has served as Vice President, Marketing since May 1991.
Mr. Walters has served as Vice President, Management Information Systems
since May 1988.
Mr. Lumsden has served as Vice President, Warehouse and Transportation
since May 1992.
Mr. Maurice was elected Vice President, Store Development in May 1993. He
previously served as operating Vice President, Central Division for more than
five years.
Mr. Seiler was elected as Vice President, Corporate Retail Operations
effective as of October 1994. He previously served as operating Vice President,
Iowa Division from May 1993 to October 1994 and Iowa Division Manager from June
1991 to May 1993.
Mr. Scherer was appointed as Chief Financial Officer in November 1995. His
election as Vice President was effective in December 1994, and he served as Vice
President, Planning and Financial Services from December 1994 to November 1995.
He previously served as Director of Strategic Planning and Financial Services
from April 1994 to December 1994, and Director of Planning and Budgets from
January 1988 through April 1994.
Mr. Timberlake was elected as Vice President, Human Resources in November
1995. He previously served as Director of Human Resources from January 1993 to
November 1995.
Mr. McCurry was elected as Vice President, Independent Store Operations in
May 1996. He previously served as Director of Independent Store Operations from
August 1993 to May 1996 and as Distribution Center Manager, Sioux Falls, South
Dakota, from January 1991 to August 1993.
Mr. Struck was elected as Vice President, Supply Chain Management effective
as of January 1998. He previously served as Director, Future Business Systems
in the Company's HORIZONS project from March 1997 to January 1998, and as
Distribution Center Manager, Cedar Rapids, Iowa from August 1988 to March 1997.
Mr. Wojtasiak has served as Controller since May 1990.
10
<PAGE>
Ms. Allen was elected as Treasurer effective as of January 1996. She
previously served as Assistant Treasurer from May 1995 to January 1996, Treasury
Manager from January 1993 to May 1995.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under the caption "Price Range of Common Stock and
Dividends" on page 16 of the Company's 1997 Annual Report is incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA
The financial information under the caption "Consolidated Summary of
Operations" on pages 30 and 31 of the Company's 1997 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 14-16 of the Company's
1997 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements and the report of its
independent auditors on pages 17-29 of the Company's 1997 Annual Report are
incorporated herein by reference, as is the unaudited information set forth
under the caption "Quarterly Financial Information" on page 29.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
A. DIRECTORS OF THE REGISTRANT.
The information under the captions "Election of Directors--Information
About Directors and Nominees" and "Election of Directors--Other Information
About Directors and Nominees" in the Company's 1998 Proxy Statement is
incorporated herein by reference.
B. EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning executive officers of the Company is included in
this Report under Item 4A, "Executive Officers of the Registrant."
11
<PAGE>
C. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934.
Information under the caption "Compliance with the Securities Exchange
Act of 1934, Section 16(a)" in the Company's 1998 Proxy Statement is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Election of Directors--Compensation of
Directors" and "Executive Compensation and Other Benefits" in the Company's 1998
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in the Company's
1998 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Election of Directors--Other Information
About Directors and Nominees" in the Company's 1998 Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS.
The following Financial Statements are incorporated herein by reference
from the pages indicated in the Company's 1997 Annual Report:
Independent Auditors' Report -- page 17
Consolidated Statements of Earnings/Loss for the fiscal years ended
January 3, 1998, December 28, 1996 and December 30, 1995 -- page 17
Consolidated Balance Sheets as of January 3, 1998 and December 28,
1996 -- pages 18 and 19
Consolidated Statements of Cash Flows for the fiscal years ended
January 3, 1998, December 28, 1996 and December 30, 1995 -- page 20
Consolidated Statements of Stockholders' Equity for the fiscal years
ended January 3, 1998, December 28, 1996 and December 30, 1995 -- page
21
Notes to Consolidated Financial Statements -- pages 22-29
12
<PAGE>
B. FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedules are included herein and should
be read in conjunction with the consolidated financial statements referred to
above (page numbers refer to pages in this Report):
PAGE
(a) Valuation and Qualifying Accounts 15
(b) Other Schedules. Other schedules are omitted as the required
information is inapplicable or the information is presented in
the consolidated financial statements or related notes.
C. EXHIBITS.
The exhibits to this Report are listed in the Exhibit Index on pages E-1 to
E-7 herein.
A copy of any of these exhibits will be furnished at a reasonable cost to
any person who was a stockholder of the Company as of March 23, 1998, upon
receipt from any such person of a written request for any such exhibit. Such
request should be sent to Nash Finch Company, 7600 France Avenue South, P.O. Box
355, Minneapolis, Minnesota, 55440-0355, Attention: Secretary.
The following is a list of each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Annual Report on Form
10-K pursuant to Item 14(c):
1. Nash Finch Profit Sharing Plan - 1994 Revision and Nash Finch
Profit Sharing Trust Agreement (as restated effective January 1,
1994) (incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended January 1,
1994 (File No. 0-785)).
2. Nash Finch Profit Sharing Plan - 1994 Revision - First
Declaration of Amendment (incorporated by reference to Exhibit
10.7 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (File No. 0-785)).
3. Nash Finch Profit Sharing Plan - 1994 Revision - Second
Declaration of Amendment (incorporated by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995 (File No. 0-785)).
4. Nash Finch Profit Sharing Plan - 1994 Revision - Third
Declaration of Amendment (filed herewith as Exhibit 10.22).
5. Nash Finch Profit Sharing Plan - 1994 Revision - Fourth
Declaration of Amendment (filed herewith as Exhibit 10.23).
6. Nash Finch Profit Sharing Plan - 1994 Revision - Fifth
Declaration of Amendment (filed herewith as Exhibit 10.24).
7. Nash Finch Executive Incentive Bonus and Deferred Compensation
Plan (as amended and restated effective December 31, 1993)
(incorporated by reference to
13
<PAGE>
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994 (File No. 0-785)).
8. Excerpts from minutes of the Board of Directors regarding Nash
Finch Pension Plan, as amended (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1987 (File No. 0-785)).
9. Excerpts from minutes of the Board of Directors regarding Nash
Finch Pension Plan, as amended (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 (File No. 0-785)).
10. Excerpts from minutes of the Board of Directors regarding
director compensation (incorporated by reference to Exhibit 10.22
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996 (File No. 0-785)).
11. Excerpts from minutes of the Board of Directors regarding
director compensation (incorporated by reference to Exhibit 10.23
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996 (File No. 0-785)).
12. Form of letter agreement specifying benefits in the event of
termination of employment following a change in control of Nash
Finch (incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 (File No. 0-785)).
13. Nash Finch Income Deferral Plan (incorporated by reference to
Exhibit 10.17 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994 (File No. 0-785)).
14. Nash Finch 1994 Stock Incentive Plan, as amended (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended June 14, 1997 (File No. 0-785)).
15. Nash Finch 1995 Director Stock Option Plan (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended June 17, 1995 (File No. 0-785)).
16. Nash Finch 1997 Non-Employee Director Stock Compensation Plan
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 14, 1997
(File No. 0-785)).
D. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended January 3, 1998.
14
<PAGE>
<TABLE>
<CAPTION>
Schedule II
NASH FINCH COMPANY and SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995
(In thousands)
Additions
---------------------------- Charged
Balance at Charged to (credited) Balance
beginning costs and Due to to other at end
Description of year expenses acquisitions accounts Deductions of year
- -------------------- ----------- ---------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
52 weeks ended December 30, 1995:
Allowance for doubtful receivables (d) $ 4,620 3,997 - 78(a) 3,815(b) 4,880
Provision for losses relating to
leases on closed locations 534 1,864 - (106)(c) 397 1,895
-------- ----- ------- -------- ------- --------
$ 5,154 5,861 - (28) 4,212 6,775
-------- ----- ------- -------- ------- --------
-------- ----- ------- -------- ------- --------
52 weeks ended December 28, 1996:
Allowance for doubtful receivables (d) $ 4,880 1,893 23,314 126 (a) 2,120(b) 28,093
Provision for losses relating to
leases on closed locations 1,895 195 - 21(c) 674 1,437
-------- ----- ------- -------- ------- --------
$ 6,775 2,088 23,314 147 2,794 29,530
-------- ----- ------- -------- ------- --------
-------- ----- ------- -------- ------- --------
53 weeks ended January 3, 1998:
Allowance for doubtful receivables (d) $ 28,093 5,055 - 67(a) 6,547(b) 26,668
Provision for losses relating to
leases on closed locations 1,437 5 - 30(c) 566 846
-------- ----- ------- -------- ------- --------
$ 29,530 5,060 - 97 7,113 27,514
-------- ----- ------- -------- ------- --------
-------- ----- ------- -------- ------- --------
</TABLE>
(a) Recoveries on accounts previously charged off.
(b) Accounts charged off.
(c) Change in current portion shown as current liability.
(d) Includes current and non-current receivables.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 3, 1998 NASH-FINCH COMPANY
By/s/ Alfred N. Flaten
-------------------------------------------
Alfred N. Flaten
President, Chief Executive Officer,
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on April 3, 1998 by the following persons on
behalf of the Registrant and in the capacities indicated.
<TABLE>
<S> <C>
/S/ Alfred N. Flaten /s/ Lawrence A. Wojtasiak
- --------------------------------------------- ---------------------------------------------
Alfred N. Flaten, President, Lawrence A. Wojtasiak, Controller (Principal
Chief Executive Officer (Principal Executive Accounting Officer)
Officer) and Director
/s/ John R. Scherer /s/ Carole F. Bitter
- --------------------------------------------- ---------------------------------------------
John R. Scherer, Vice President and Chief Carole F. Bitter, Director
Financial Officer (Principal Financial Officer)
/s/ Richard A. Fisher /s/ Jerry L. Ford
- --------------------------------------------- ---------------------------------------------
Richard A. Fisher, Director Jerry L. Ford, Director
/s/ Allister P. Graham /s/ John H. Grunewald
- --------------------------------------------- ---------------------------------------------
Allister P. Graham, Director John H. Grunewald, Director
/s/ Richard G. Lareau /s/ Don E. Marsh
- --------------------------------------------- ---------------------------------------------
Richard G. Lareau, Director Don E. Marsh, Director
/s/ Donald R. Miller /s/ Robert F. Nash
- --------------------------------------------- ---------------------------------------------
Donald R. Miller, Director Robert F. Nash, Director
/s/ Jerome O. Rodysill
- ---------------------------------------------
Jerome O. Rodysill, Director
</TABLE>
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
For Fiscal Year Ended January 3, 1998
<TABLE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
2.1 Agreement and Plan of
Merger dated as of October 8,
1996 among the Company,
NFC Acquisition Corporation,
and Super Food Services, Inc. Incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form
8-K dated November 22, 1996 (File No.
0-785).
3.1 Restated Certificate of
Incorporation of the
Company Incorporated by reference to Exhibit 3.1
to the Company's Annual Report on Form
10-K for the fiscal year ended December
28, 1985 (File No. 0-785).
3.2 Amendment to Restated
Certificate of Incorporation
of the Company, effective
May 29, 1986 Incorporated by reference to Exhibit
19.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
October 4, 1986 (File No. 0-785).
3.3 Amendment to Restated
Certificate of Incorporation
of the Company, effective
May 15, 1987 Incorporated by reference to Exhibit 4.5
to the Company's Registration Statement
on Form S-3 (File No. 33-14871).
3.4 Bylaws of the Company
as amended, effective
November 21, 1995 Incorporated by reference to Exhibit 3.4
to the Company's Annual Report on Form
10-K for the fiscal year ended December
30, 1995 (File No. 0-785).
E-1
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
4.1 Stockholder Rights
Agreement, dated
February 13, 1996, between
the Company and Norwest
Bank Minnesota,
National Association Incorporated by reference to Exhibit 4
to the Company's Current Report on Form
8-K dated February 13, 1996 (File No.
0-785).
10.1 Note Agreements, dated
September 15, 1987, between
the Company and IDS Life
Insurance Company, and
between the Company and IDS
Life Insurance Company of
New York
("1987 Note Agreements") Incorporated by reference to Exhibit
19.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
October 10, 1987 (File No. 0-785).
10.2 Note Agreements, dated
September 29, 1989,
between the Company
and Nationwide Life Insurance
Company, and between the
Company and West Coast Life
Insurance Company
("1989 Note Agreements") Incorporated by reference to Exhibit
19.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
October 7, 1989 (File No. 0-785).
10.3 Note Agreements dated
March 22, 1991, between the
Company and The Minnesota
Mutual Life Insurance
Company, and between the
Company and The Minnesota
Mutual Life Insurance Company
- Separate Account F
("1991 Note Agreements") Incorporated by reference to Exhibit
19.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March
23, 1991 (File No. 0-785).
E-2
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
10.4 Note Agreements, dated as of
February 15, 1993, between
the Company and Principal
Mutual Life Insurance Company,
and between the Company and
Aid Association for Lutherans
("1993 Note Agreements") Incorporated by reference to Exhibit
19.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
March 27, 1993 (File No. 0-785).
10.5 Note Agreement, dated March 22,
1996, between the Company and
The Variable Annuity Life
Insurance Company, Independent
Life and Accident Insurance
Company, Northern Life
Insurance Company, and
Northwestern National Life
Insurance Company
("1996 Note Agreements") Incorporated by reference to Exhibit
10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 30, 1995 (File No. 0-785).
10.6 First Amendment to the
1987 Note Agreements, 1989
Note Agreements, 1991 Note
Agreements, 1993 Note
Agreements, and 1996 Note
Agreements dated
as of November 15, 1996 Incorporated by reference to Exhibit
10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.7 Second Amendment to the
1987 Note Agreements, 1989
Note Agreements, 1991 Note
Agreements, 1993 Note
Agreements, and 1996 Note
Agreements dated
as of November 15, 1996 Incorporated by reference to Exhibit
10.7 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.8 Third Amendment to the
1987 Note Agreements dated
as of January 15, 1997 Incorporated by reference to Exhibit
10.8 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
E-3
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
10.9 Third Amendment to the
1989 Note Agreements dated
as of January 15, 1997 Incorporated by reference to Exhibit
10.9 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.10 Third Amendment to the
1991 Note Agreements dated
as of January 15, 1997 Incorporated by reference to Exhibit
10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.11 Third Amendment to the
1993 Note Agreements dated
as of January 15, 1997 Incorporated by reference to Exhibit
10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.12 Third Amendment to the
1996 Note Agreements dated
as of January 15, 1997 Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.13 Note Agreements dated
November 1, 1989, between
Super Food Services, Inc. and
Nationwide Life Insurance Co.,
. Employers Life Insurance
Company of Wausau, and
West Coast Life Insurance
Company ("SFS 1989 Note
Agreements") Incorporated by reference to Exhibit
10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.14 Credit Agreement dated as of
October 8, 1996 among the
Company, NFC Acquisition
Corp., Harris Trust and Savings
Bank, as Administrative Agent,
and Bank of Montreal and PNC
Bank, N.A., as Co-Syndication
Agents ("Credit Agreement") Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
October 5, 1996 (File No. 0-785).
E-4
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
10.15 First Amendment to Credit
Agreement dated as of
December 18, 1996 Incorporated by reference to Exhibit
10.15 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.16 Second Amendment to Credit
Agreement dated as of
November 10, 1997 Filed herewith.
10.17 Fourth Amendment to the
1996 Note Agreements dated
as of December 1, 1997 Filed herewith.
10.18 Assumption Agreement and
Amended and Restated Note
Agreement dated as of
January 31, 1997, between the
Company, Nationwide Life
Insurance Company, Employers
Life Insurance Company of
Wausau, and West Coast Life
Insurance Company (amending
and restating the SFS 1989
Note Agreements) Filed herewith.
10.19 Nash Finch Profit Sharing
Plan--1994 Revision and
Nash Finch Profit Sharing
Trust Agreement (as restated
effective January 1, 1994) Incorporated by reference to Exhibit
10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended
January 1, 1994 (File No. 0-785).
10.20 Nash Finch Profit Sharing
Plan -- 1994 Revision --
First Declaration of
Amendment Incorporated by reference to Exhibit
10.7 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1994 (File No. 0-785).
10.21 Nash Finch Profit Sharing
Plan -- 1994 Revision --
Second Declaration of
Amendment Incorporated by reference to Exhibit
10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 30, 1995 (File No. 0-785).
E-5
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
10.22 Nash Finch Profit Sharing
Plan -- 1994 Revision --
Third Declaration of
Amendment Filed herewith.
10.23 Nash Finch Profit Sharing
Plan -- 1994 Revision --
Fourth Declaration of
Amendment Filed herewith.
10.24 Nash Finch Profit Sharing
Plan -- 1994 Revision --
Fifth Declaration of
Amendment Filed herewith.
10.25 Nash Finch Executive
Incentive Bonus and
Deferred Compensation Plan
(as amended and restated
effective December 31, 1993) Incorporated by reference to Exhibit
10.7 to the Company's Annual Report on
Form 10-K for the fiscal year ended
January 1, 1994 (File No. 0-785).
10.26 Excerpts from minutes of
Board of Directors
regarding Nash Finch
Pension Plan, as amended
effective January 2, 1966 Incorporated by reference to Exhibit
10.9 to the Company's Annual Report on
Form 10-K for the fiscal year ended
January 3, 1987 ( File No. 0-785).
10.27 Excerpts from minutes of
the Board of Directors
regarding Nash Finch Pension
Plan, as amended Incorporated by reference to Exhibit
10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 30, 1995 (File No. 0-785).
10.28 Excerpts from minutes of the
Board of Directors regarding
director compensation Incorporated by reference to Exhibit
10.22 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
E-6
<PAGE>
<CAPTION>
Item
No. Item Method of Filing
- ---- ---- -----------------
<S> <C> <C>
10.29 Excerpts from minutes of the
Board of Directors regarding
director compensation Incorporated by reference to Exhibit
10.23 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-785).
10.30 Form of Letter Agreement
Specifying Benefits in the
Event of Termination of
Employment Following a
Change in Control of
Nash Finch Incorporated by reference to Exhibit
10.20 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 29, 1990 (File No. 0-785).
10.31 Nash Finch Income
Deferral Plan Incorporated by reference to Exhibit
10.17 to the Company's Annual Report on
Form 10-K for the fiscal year ended
January 1, 1994 (File No. 0-785).
10.32 Nash Finch 1994
Stock Incentive Plan, as
amended Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report
on Form 10-Q for the period ended June
14, 1997 (File No. 0-785).
10.33 Nash Finch 1995 Director
Stock Option Plan Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report
on Form 10-Q for the period ended June
17, 1995 (File No. 0-785).
10.34 Nash Finch 1997 Non-Employee
Director Stock Compensation
Plan Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report
on Form 10-Q for the period ended June
14, 1997 (File No. 0-785).
13.1 1997 Annual Report to
Stockholders (selected portions
of pages 14-31) Filed herewith.
21.1 Subsidiaries of the Company Filed herewith.
23.1 Consent of Ernst & Young LLP Filed herewith.
27.1 Financial Data Schedule Filed herewith.
</TABLE>
E-7
<PAGE>
NASH-FINCH COMPANY
SECOND AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank, PNC Bank, National Association,
as Administrative Agent Chicago, Illinois
Chicago, Illinois
Other Banks party to the
Credit Agreement
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of October 8, 1996 (such Credit
Agreement, as heretofore amended and as may be amended from time to time,
being hereinafter referred to as the "CREDIT AGREEMENT") and currently in
effect between you and us. Capitalized terms used without definition below
shall have the same meanings herein as they have in the Credit Agreement.
The Borrower has requested that the Banks make certain modifications to
the borrowing arrangements provided for in the Credit Agreement and the Banks
have agreed to accommodate such request by the Borrower on the terms and
conditions herein set forth.
1. AMENDMENTS
Upon satisfaction of the conditions precedent to effectiveness set forth
below, the Credit Agreement shall be amended as follows:
SECTION 1.01. LEVERAGE RATIO. The definition of the term "LEVERAGE
RATIO" in Section 6.1 of the Credit Agreement shall be amended by inserting
the following immediately at the end thereof:
"The foregoing to the contrary notwithstanding, for
purposes of determining the Leverage Ratio for each
period which includes the third fiscal quarter of the
Borrower for its 1997 fiscal year, EBITDA for such fiscal
quarter shall be computed so as not to give effect to the
special charge (not to exceed $35,000,000 in the
aggregate) recorded by the Borrower (the "THIRD QUARTER
1997 CHARGE") in accordance with GAAP against its
earnings for such fiscal quarter representing (i)
closing, downsizing and consolidation of warehouse
facilities (such charge expected by the Borrower to range
between $1O,OOO,OOO and $15,00O,000), (ii) closing of
certain retail locations (such charge expected by the
Borrower to range between $4,00O,OOO and $6,OOO,000) and
(iii) write-down to market value of certain warehouse and
retail
<PAGE>
store locations, certain assets owned by the Nash DeCamp
subsidiary, the so-called Alfa investment, the so-called
Legacy computer systems and other certain assets (such
charge expected by the Borrower to range between
$11,000,000 and $14,000,000)."
SECTION 1.02. INTEREST COVERAGE RATIO. The definition of the term
"INTEREST COVERAGE RATIO" in Section 6.1 of the Credit Agreement shall be
amended by inserting the following immediately at the end thereof:
"The foregoing to the contrary notwithstanding, for
purposes of determining the Interest Coverage Ratio for
each period which includes the third fiscal quarter of
the Borrower for its 1997 fiscal year, EBIT shall be
computed so as not to give effect to the Third Quarter
1997 Charge."
SECTION 1.03. NO CONSOLIDATING FINANCIAL STATEMENTS. Section 9.5 of the
Credit Agreement shall be amended by inserting the following immediately at
the end thereof:
"Notwithstanding anything in this Section 9.5 to the
contrary, the Borrower shall not be required to furnish
consolidating financial statements to the Agents, any
Bank or any other party unless and to the extent
reasonably requested by the Administrative Agent."
SECTION 1.04. NEW LEVERAGE RATIO LEVELS. Section 9.9 shall be amended and
as so amended shall be restated in its entirety to read as follows:
"SECTION 9.9. LEVERAGE RATIO. The Borrower shall not, as
of the close of any fiscal quarter of the Borrower set forth
below, permit the Leverage Ratio to be more than the amount set
forth to the right of such quarter:
As of Close of each Fiscal Quarter:
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Leverage Ratio Shall
From and Including To and Including Not be More Than:
------------------ ---------------- ----------------
1st fiscal quarter of 3rd fiscal quarter of 4.00 to 1
fiscal year 1997 fiscal year 1997
4th fiscal quarter of 4th fiscal quarter of 4.00 to 1
fiscal year 1997 fiscal year 1998
1st fiscal quarter 1st fiscal quarter of 3.50 to 1
of fiscal year 1999 fiscal year 1999
2nd fiscal quarter of 1st fiscal quarter of 3.25 to 1
fiscal year 1999 2000 fiscal year
2d fiscal quarter of each fiscal quarter 3.00 to 1
fiscal year 2000 thereafter
</TABLE>
4. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) The Borrower and the Required Banks shall have executed this
Amendment.
(b) Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Banks and their counsel.
5. REPRESENTATIONS REAFFIRMED.
In order to induce the Banks to execute and deliver this Agreement, the
Borrower hereby represents to the Banks that as of the date hereof and as of
the time that this Amendment becomes effective, each of the representations
and warranties set forth in Section 7 of the Credit Agreement, after giving
effect to the amendments made hereby, are and shall be true and correct
(except that the representations contained in Section 7.4 shall be deemed to
refer to the most recent financial statements of the Borrower delivered to
the Banks).
6. MISCELLANEOUS.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed shall be an original but all of which shall constitute one and the
same instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement shall stand and
-3-
<PAGE>
remain unchanged and in full force and effect. No reference to this Amendment
need be made in any note, instrument or other document making reference to
the Credit Agreement, any reference to the Credit Agreement in any such note,
instrument or other document to be deemed to be a reference to the Credit
Agreement as amended hereby. The Borrower confirms its agreement to pay the
reasonable fees and disbursements of Messrs. Chapman and Cutler, counsel to
the Administrative Agent, in connection with the preparation, execution and
delivery of this Amendment and the transactions and documents contemplated
hereby. This instrument shall be construed and governed by and in accordance
with the laws of the State of Illinois (without regard to principles of
conflicts of laws).
-4-
<PAGE>
Dated as of this 10 day of November, 1997.
NASH-FINCH COMPANY
By /s/ JOHN R. SCHERER
------------------------------------
Name: John R. Scherer
Title: Vice President and CFO
Accepted and agreed to as of the date last above written.
HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Bank and as
Administrative Agent
By /s/ MARY L. BURKE
------------------------------------
Its Vice President
--------------------------------
PNC BANK, NATIONAL ASSOCIATION
By
------------------------------------
Its
--------------------------------
ABN AMRO BANK N.V.
By
------------------------------------
Its
--------------------------------
By
------------------------------------
Its
--------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By
------------------------------------
Its
--------------------------------
-5-
<PAGE>
CIBC Inc.
By /s/ [illegible]
------------------------------------
Its Director, CIBC Oppenheimer
Corp., AS AGENT
ISTITUTO BANCARIO SANPAOLO DI
TORINO SPA
By
------------------------------------
Its
--------------------------------
KEYBANK, N.A.
By
------------------------------------
Its
--------------------------------
COMMERZBANK AKTIENGESELLSCHAFT
CHICAGO BRANCH
By
------------------------------------
Its
--------------------------------
By
------------------------------------
Its
--------------------------------
CREDIT LYONNAIS, CHICAGO BRANCH
By
------------------------------------
Its
--------------------------------
THE FUJI BANK, LIMITED
By
------------------------------------
Its
--------------------------------
-6-
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE
By
------------------------------------
Its
--------------------------------
FIRST BANK NATIONAL ASSOCIATION
By /s/ [illegible]
------------------------------------
Its Vice President
MELLON BANK, N.A.
By
------------------------------------
Its
--------------------------------
THE SAKURA BANK, LIMITED
By
------------------------------------
Its
--------------------------------
SUNTRUST BANK, ATLANTA
By
------------------------------------
Its
--------------------------------
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
------------------------------------
Its
--------------------------------
NATIONAL CITY BANK OF COLUMBUS
By
------------------------------------
Its
--------------------------------
-7-
<PAGE>
THE SANWA BANK, LIMITED
By /s/ Gordon R. Holtley
------------------------------------
Its Vice President & Manager
THE SUMITOMO BANK, LIMITED
By
------------------------------------
Its
--------------------------------
YASUDA TRUST & BANKING CO., LTD.
By
------------------------------------
Its
--------------------------------
THE BANK OF NEW YORK
By
------------------------------------
Its
--------------------------------
MITSUI TRUST AND BANKING COMPANY,
LIMITED
By
------------------------------------
Its
--------------------------------
-8-
<PAGE>
NASH-FINCH COMPANY
--------------------------
FOURTH AMENDMENT AGREEMENT
--------------------------
RE:
NOTE AGREEMENTS DATED AS OF MARCH 22,1996
AND
$30,000,000
FIRST AMENDED AND RESTATED 8.13% SENIOR NOTES DUE OCTOBER 1,2006
DATED AS OF DECEMBER 1, 1997
$30,000,000
SECOND AMENDED AND RESTATED 8.38% SENIOR NOTES DUE OCTOBER 1, 2006
<PAGE>
NASH-FINCH COMPANY
7600 France Avenue South
Minneapolis, Minnesota 55440-0355
FOURTH AMENDMENT AGREEMENT
RE:
NOTE AGREEMENTS DATED AS OF MARCH 22, 1996
AND
$30,000,000
FIRST AMENDED AND RESTATED 8.13% SENIOR NOTES DUE OCTOBER 1, 2006
$30,000,000
SECOND AMENDED AND RESTATED 8.38% SENIOR NOTES DUE OCTOBER 1, 2006
Dated as of December 1, 1997
To the Institutional Investors
listed on Annex 1 hereto which
are signatories to this Agreement
Ladies and Gentlemen:
Reference is made to the separate Note Agreements (collectively, the
"ORIGINAL NOTE AGREEMENT"), each dated as of March 22, 1996, between
Nash-Finch Company, a Delaware corporation (the "COMPANY"), and each of the
institutions named in Schedule I thereto (the "ORIGINAL HOLDERS"), under and
pursuant to which Thirty Million Dollars ($30,000,000) aggregate principal
amount of the Company's 7.13% Senior Notes due October 1, 2006 (the "ORIGINAL
NOTES") were originally issued to the Original Holders. The Original Note
Agreement, as amended by that certain First Amendment dated as of November 15,
1996, that certain Second Amendment dated as of November 15, 1996 and
that certain Third Amendment Agreement (the "THIRD AMENDMENT") dated as of
January 15, 1997, is herein referred to as the "EXISTING NOTE AGREEMENT". The
Original Notes, as amended and restated pursuant to the Third Amendment, are
herein referred to, individually, as an "EXISTING NOTE", and collectively, as
the "EXISTING NOTES". Each of the institutions named in Annex 1 hereto are
herein referred to, individually, as a "HOLDER", and collectively, as the
"HOLDERS".
The Company desires to enter into this Fourth Amendment Agreement (this
"AGREEMENT") to, among other things, amend the Existing Note Agreement to
modify certain financial covenants, and amend the Existing Notes to increase
the interest rate applicable thereto, all as more particularly described
herein.
As of the Effective Date (as defined in Section 3), the Holders hold,
beneficially or of record, one hundred percent (100%) of the outstanding
Existing Notes.
1
<PAGE>
In consideration of the foregoing and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the Company and, subject to satisfaction of the conditions set forth in
Section 3, the Holders, hereby agree to the amendments set forth below.
SECTION 1. DEFINED TERMS.
All capitalized terms used but not specifically defined in this
Agreement have the respective meanings assigned to them in, or pursuant to
the provisions of, the Existing Note Agreement as amended by this Agreement
(the Existing Note Agreement as so amended is herein referred to as the
"AMENDED NOTE AGREEMENT").
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to EACH HOLDER THAT AS OF the date
of this Agreement and as of the Effective Date:
2.1 ORGANIZATION AND AUTHORITY; SUBSIDIARIES. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all corporate power and authority
necessary to carry on its business as now conducted, has duly qualified or
has been duly licensed, and is authorized to do business as a foreign
corporation, in each jurisdiction where the failure to be so qualified or
licensed and authorized, in the aggregate for all such failures, could
reasonably be expected to have a material adverse effect on the business,
prospects, profits, Properties or condition (financial or otherwise) of the
Company, and has full right and authority to enter into this Agreement, and
to perform each and all of the matters and things provided for in this
Agreement, the Amended Note Agreement and the Amended Notes (defined below).
2.2 PENDING LITIGATION. There are no proceedings, actions or
investigations pending, or to the knowledge of the Company, threatened,
against the Company or any Subsidiary in any court or before any governmental
authority or arbitration board or tribunal that, in the aggregate for all
such proceedings, actions or investigations has had or could reasonably be
expected to have a material adverse effect on the business, prospects,
profits, Properties or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole, or the ability of the Company to perform
its obligations set forth in this Agreement, the Amended Note Agreement or
the Amended Notes.
2.3 NO DEFAULTS. No event has occurred and is continuing and no
condition exists which, upon execution and delivery of this Agreement, would
constitute a Default or Event of Default. The Company is not in default in
the payment of principal or interest on any Debt the aggregate outstanding
balance of which is equal to or in excess of One Million Dollars ($1,000,000)
and is not in default under any instrument or instruments or agreements under
and subject to which any such Debt has been issued and no event has occurred
and is continuing under the provisions of any such instrument or agreement
which with the lapse of time or the giving of notice, or both, would
constitute a default or an event of default thereunder.
2.4 FULL DISCLOSURE. None of the written statements, documents or
other written materials furnished by, or on behalf of, the Company to the
Holders in connection with the
2
<PAGE>
negotiation, execution and delivery of this Agreement contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances in which they were made. There is no fact which the Company has
not disclosed to the Holders which materially affects adversely or, so far as
the Company can now foresee, will materially affect adversely the business,
prospects, profits, Properties or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or the ability of the Company
to perform its obligations set forth in this Agreement, the Amended Note
Agreement or the Amended Notes.
2.5 TRANSACTION IS LEGAL AND AUTHORIZED. The execution and delivery by
the Company of this Agreement, the consummation of each of the transactions
contemplated by this Agreement and the compliance by the Company with all the
provisions of this Agreement, the Amended Note Agreement and the Amended
Notes: (i) are within the corporate powers of the Company; and (ii) are legal
and do not conflict with, result in any breach in any of the provisions of,
or constitute a default (or require any consent other than the consents
heretofore obtained) under, or result in the creation of any Lien upon any
Property of the Company or any Subsidiary under the provisions of, the
certificate of incorporation or by-laws of the Company or any Subsidiary or
any agreement or instrument to which the Company or any Subsidiary is a party
or by which it or any of its Property may be bound.
2.6 GOVERNMENTAL CONSENT. Neither the nature of the Company or any
Subsidiary, or of any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor
any circumstance in connection with the execution and delivery of this
Agreement and the Amended Notes, is such as to require an order, consent,
approval, license, authorization or validation of, or filing, recording,
registration or qualification with, any court or administrative or
governmental authority on the part of the Company as a condition to (a) the
execution, delivery or performance of this Agreement, the Amended Note
Agreement or the Amended Notes, or (b) the legality, validity, binding effect
or enforceability of this Agreement, the Amended Note Agreement or the
Amended Notes.
2.7 OBLIGATIONS ARE ENFORCEABLE. The obligations of the Company set
forth in this Agreement, the Amended Note Agreement and the Amended Notes are
valid, binding and enforceable in accordance with their respective terms,
except as such enforceability may be: (i) limited by applicable bankruptcy,
reorganization, arrangement, insolvency, moratorium, or other similar laws
affecting the enforceability of creditors' rights generally; and (ii) subject
to the availability of equitable remedies.
2.8 COMPLIANCE WITH LAW. The Company and each Subsidiary is in
compliance with all laws, ordinances, governmental rules or regulations to
which it is subject, the violation of which could have a material adverse
effect on the business, prospects, profits, Properties or condition Financial
or otherwise) of the Company and its Subsidiaries, taken as a whole, or the
ability of the Company or any Subsidiary to perform its respective
obligations set forth in this Agreement, the Amended Note Agreement or the
Amended Notes.
3
<PAGE>
SECTION 3. CONDITIONS PRECEDENT
The amendments to the Existing Note Agreement and the Existing Notes
shall become effective on the date (the "EFFECTIVE DATE") upon which all of
the following conditions precedent have been satisfied:
3.1 CONSENT OF ALL HOLDERS. The Company and all of Holders shall have
executed and delivered this Agreement.
3.2 OPINION OF COUNSEL. You shall have received from Norman R. Soland,
Esq., General Counsel to the Company, a closing opinion, dated the Effective
Date, substantially in the form set forth in Exhibit B attached hereto, and
as to such other matters as you may reasonably request. This Section 3.2
shall constitute direction by the Company to Messr. Soland to deliver such
closing opinion to you.
3.3 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE WITH AGREEMENT.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true on the Effective
Date with the same effect as though made on and as of that date.
(b) COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
and complied with all agreements and conditions contained herein that are
required to be performed or complied with by the Company on or prior to
the Effective Date, and such performance and compliance shall remain in
effect on the Effective Date.
3.4 OFFICER'S CERTIFICATES. You shall have received:
(a) a certificate dated the Effective Date and signed by a senior
officer of the Company, substantially in the form of Exhibit C attached
hereto; and
(b) a certificate dated the Effective Date and signed by the
Secretary or an Assistant Secretary of the Company, substantially in the
form of Exhibit D attached hereto.
3.5 DELIVERY AND EXCHANGE OF NOTES. On the Effective Date, the Company
shall execute and deliver to each Holder, in exchange for the Existing Notes
held by such Holder, Amended Notes, dated the date of the last interest
payment on the Existing Notes, with the registration numbers and in the
principal amounts set forth on Annex 1 hereto and in the form of Exhibit A
attached hereto.
3.6 PRIVATE PLACEMENT NUMBER. The Company shall have obtained or caused
to be obtained a private placement number for the Amended Notes from the
CUSIP Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc.,
and you shall have been informed of such private placement number.
3.7 EXPENSES. All fees and disbursements required to be paid pursuant
to Section 5.3 shall have been paid in full.
4
<PAGE>
3.8 PROCEEDINGS SATISFACTORY. All proceedings taken in connection with
the execution and delivery of this Agreement and the transactions
contemplated hereby shall be satisfactory to the Holders and their special
counsel; and the Holders and their special counsel shall have received copies
of such documents and papers as they may reasonably request in connection
therewith.
SECTION 4. AMENDMENTS TO EXISTING NOTE AGREEMENT AND EXISTING NOTES.
4.1 AMENDMENT TO SECTION 1.1 OF THE EXISTING NOTE AGREEMENT. Section
1.1 of the Existing Note Agreement is hereby amended to read in its entirety
as follows:
1.1 DESCRIPTION OF NOTES.
(a) On March 22, 1996, the Company authorized issue and sale of its
7.13% Senior Notes due October 1, 2011 in the aggregate principal amount
of $30,000,000 (the "ORIGINAL NOTES"), dated the date of issue, bearing
interest from such date at the rate of 7.13% PER ANNUM on the principal
amount from time to time outstanding, such interest to be payable
semi-annually on the first day of April and October in each year
(commencing on October 1, 1996) and at maturity and bearing interest on
overdue principal (including any overdue required or optional prepayment
of principal) and premium, if any, and (to the extent legally
enforceable) overdue installments of interest at the rate of 8.13% PER
ANNUM from and after the maturity thereof, whether by acceleration or
otherwise, until paid, such Original Notes to mature on October 1, 2011
and be substantially in the form of Exhibit A to this Agreement, as in
effect on the Closing Date.
(b) Pursuant to the Third Amendment Agreement, the Company and the
holders of the Original Notes agreed to amend and restate in full the
Original Notes substantially in the form attached to the Third Amendment
Agreement as Exhibit A (the "FIRST AMENDED AND RESTATED NOTES"), such
First Amended and Restated Notes to be designated "First Amended and
Restated 8.13% Senior Notes Due October 1, 2006"; dated October 1, 1996;
bear interest on the principal amount from time to time outstanding
at the rate of 7.13% PER ANNUM from and including October 1, 1996
through and including January 14, 1997, and at the rate of 8.13% from
and after January 15, 1997, such interest to be payable semi-annually
on the first day of April and October in each year (commencing on April
1, 1997) and at maturity; bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium,
if any, and (to the extent legally enforceable) overdue installments of
interest, at the rate of 9.13% PER ANNUM from and after the maturity
thereof, whether by acceleration or otherwise, until paid; and mature on
October 1, 2006. The First Amended and Restated Notes bore additional
interest at the rate of 0.50% per ANNUM during any Interest Rate Event
Period.
(c) Pursuant to the Fourth Amendment Agreement, the Company and the
holders of the First Amended and Restated Notes
5
<PAGE>
agreed to amend and restate in full the First Amended and Restated Notes
substantially in the form attached to the Fourth Amendment Agreement as
Exhibit A (the "SECOND AMENDED AND RESTATED NOTES"), such Second Amended
and Restated Notes to be designated "Second Amended and Restated 8.38%
Senior Notes Due October 1, 2006"; dated October 1, 1997; bear interest
on the principal amount from time to time outstanding at the rate of
8.13% PER ANNUM from (and including) October 1, 1997 until (but NOT
including) October 16, 1997, and at the rate of 8.38% from (and
including) October 16, 1997 to (and including) the date of maturity
thereof, such interest to be payable semi-annually on the first day of
April and October in each year and at maturity; bear interest (payable
on demand) on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) overdue installments of interest at the rate
of 9.38% PER ANNUM from and after the maturity thereof, whether by
acceleration or otherwise, until paid; and mature on October 1, 2006.
Notwithstanding anything contained herein to the contrary, in addition
to the stated interest rate applicable to the Second Amended and
Restated Notes (including, without limitation, the interest rate
applicable to overdue payments in respect of the Second Amended and
Restated Notes), the Second Amended and Restated Notes shall bear
additional interest at the rate of 0.50% PER ANNUM during any Interest
Rate Event Period.
(d) The term "NOTES" as used herein shall include each Note
delivered pursuant to this Agreement and the separate agreements with
the other purchasers named in Schedule I hereto, and shall be deemed (i)
when reference is made to a date prior to the Third Amendment Effective
Date, to be a reference to the Original Notes, (ii) when reference is
made to a date on or after the Third Amendment Effective Date but prior
to the Fourth Amendment Effective Date, to be a reference to the First
Amended and Restated Notes, and (iii) when reference is made to a date
on or after the Fourth Amendment Effective Date, to be a reference to
the Second Amended and Restated Notes.
(e) Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months. You and the other purchasers named
in Schedule I hereto are hereinafter sometimes referred to as the
"PURCHASERS". The Notes are not subject to prepayment or redemption at
the option of the Company prior to their expressed maturity dates except
on the terms and conditions and in the amounts and with the premium, if
any, set forth in Section 2 of this Agreement. The terms which are
capitalized herein shall have the meanings specified in Section 5 unless
the context shall otherwise require.
4.2 AMENDMENT TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT. Section
5.1 of the Existing Note Agreement is hereby amended to modify in their
entirety or add, each in their proper alphabetical order, the following
defined terms:
6
<PAGE>
"ADJUSTED SPECIAL CHARGE" shall mean an amount, limited (for
purposes of this Agreement) to $28,749,000, taken as part of a special
charge to income by the Company for its fiscal quarter ended October 4,
1997.
"AGREEMENT, THIS" shall mean this Note Agreement dated as of March
22, 1996, as amended, restated or otherwise modified from time to time.
"FIRST AMENDED AND RESTATED NOTES" IS defined in Section 1.1 hereof.
"FOURTH AMENDMENT AGREEMENT" shall mean that certain Fourth
Amendment Agreement, dated as of December 1,1997, among the Company and
the holders of the Notes, pursuant to which the Note Agreement and the
Notes have been amended in accordance with the terms thereof.
"FOURTH AMENDMENT EFFECTIVE DATE" shall mean "Effective Date" as
defined in the Fourth Amendment Agreement.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean
the sum of (i) Consolidated Net Income during such period, PLUS (ii) (to
the extent deducted in determining Consolidated Net Income) all
provisions for any federal, state or other income taxes paid by the
Company and its Subsidiaries during such period, PLUS (iii) Fixed
Charges of the Company and its Subsidiaries during such period, PLUS
(iv) with respect to each period of twelve consecutive months ending
October 4, 1997, January 3, 1998, March 28, 1998 or June 20, 1998, the
Adjusted Special Charge (but only to the extent the Adjusted Special
Charge was deducted in determining Consolidated Net Income for such
period).
"NOTE AGREEMENT" shall mean, collectively, this Agreement and the
similar agreements referred to in Section 1.3, in each case as amended,
restated or otherwise modified from time to time.
"ORIGINAL NOTES" is defined in Section 1.1 hereof.
"SECOND AMENDED AND RESTATED NOTES" is defined in Section 1.1
hereof.
"THIRD AMENDMENT AGREEMENT" shall mean that certain Third Amendment
Agreement, dated as of January 15, 1997, among the Company and the
holders of the Notes, pursuant to which the Note Agreement and the Notes
have been amended in accordance with the terms thereof.
"THIRD AMENDMENT EFFECTIVE DATE" shall mean "Effective Date" as
defined in the Third Amendment Agreement.
"TOTAL CAPITALIZATION" shall mean the sum of (a) Debt of the
Company and its Subsidiaries, (b) deferred income taxes of the Company
and its Subsidiaries, and (c) Stockholders' Equity.
7
<PAGE>
4.3 AMENDMENT TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT. Section
5.1 of the Existing Note Agreement is hereby further amended so that the
reference to "8.13%" contained in the definition of "Make Whole Premium"
shall instead read "8.38%".
4.4 AMENDMENT TO EXHIBIT A TO THE EXISTING NOTE AGREEMENT. The Company
and, subject to the satisfaction of the conditions set forth in Section 3,
each Holder, each hereby consents and agrees to the amendment and
restatement, in its entirety, of the form of Note set forth as Exhibit A to
the Existing Note Agreement, to be in the form of Exhibit A attached to this
Agreement. All references to "Exhibit A" in the Amended Note Agreement shall,
if in reference to a date on or after the Effective Date, refer to the form
of Note as amended and restated hereby.
4.5 AMENDMENT TO EXISTING NOTES. The Company and, subject to the
satisfaction of the conditions set forth in Section 3, each Holder, hereby
consents and agrees that each outstanding Existing Note shall be deemed to be
amended and restated to conform with the form of Note attached hereto as
Exhibit A, without any further action on the part of the Company or any
Holder (each such Existing Note, as amended hereby, is herein referred to,
individually, as an "AMENDED NOTE", and collectively, as the "AMENDED
NOTES"). Upon surrender of any outstanding Existing Note, the Company shall
deliver to the registered holder thereof an Amended Note in the form attached
as Exhibit A hereto, dated the date of the last interest payment thereon, and
be in the outstanding principal amount of such Existing Note.
5. MISCELLANEOUS.
5.1 SUCCESSORS AND ASSIGNS; EFFECT OF AMENDMENT. This Agreement shall
be binding upon, and shall inure to the benefit of, the successors and
assigns of the parties hereto and the holders from time to time of the Notes.
Except as amended herein, the terms and provisions of the Existing Note
Agreement and the Existing Notes are hereby ratified, confirmed and approved
in all respects.
5.2 NO LEGEND REQUIRED. Any and all notices, requests, certificates
and other instruments, including, without limitation, the Notes, may refer to
the Note Agreement without making specific reference to this Fourth Amendment
Agreement, but nevertheless all such references shall be deemed to include
this Fourth Amendment Agreement unless the context shall otherwise require.
5.3 FEES AND EXPENSES. On the Effective Date, the Company shall pay
all reasonable costs and expenses of the Holders relating to this Agreement,
including, but not limited to, the statement for reasonable fees and
disbursements of the Holders' special counsel presented to the Company on or
prior to the Effective Date. The Company will also pay, upon receipt of any
statement thereof, each additional statement for reasonable fees and
disbursements of the Holders' special counsel rendered after the Effective
Date in connection with this Agreement. The obligations of the Company under
this Section 5.3 shall survive the termination of this Agreement.
5.4 SURVIVAL. All warranties, representations, certifications and
covenants made by the Company in this Agreement or in any certificate or
other instrument delivered by it or on its behalf under this Agreement shall
be considered to have been relied upon by the Holders and shall survive the
execution of this Agreement, regardless of any investigation made by or on
behalf of
8
<PAGE>
any Holder. All such statements made herein or in any such certificate or
other instrument shall constitute warranties and representations of the
Company under this Agreement and the Amended Note Agreement.
5.5 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, internal Minnesota law.
5.6 SECTION HEADINGS, ETC. The titles of the Sections hereof appear as
a matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular Section
or other subdivision. References to Sections are, unless otherwise specified,
references to Sections of this Agreement. References to Annexes and Exhibits
are, unless otherwise specified, references to Annexes and Exhibits attached
to this Agreement.
5.7 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART. Two or more
duplicate originals of this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party to this Agreement, and each set of counterparts
which, collectively, show execution by each such party to this Agreement
shall constitute one duplicate original.
[Remainder of Page Intentionally Blank. Next Page is signature page.]
9
<PAGE>
IN WITNESS WHEREOF, the Company and the Holders have executed this
Agreement as of the date first above written.
NASH-FINCH COMPANY
By /s/ SUZANNE S. ALLEN
--------------------------------
Name: Suzanne S. Allen
Title: Treasurer
Accepted:
HARTFORD LIFE INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By
--------------------------------
Name:
Title:
HARTFORD CASUALTY INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By
--------------------------------
Name:
Title:
RELIASTAR LIFE INSURANCE COMPANY
By
--------------------------------
Name:
Title:
NORTHERN LIFE INSURANCE COMPANY
By
--------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Holders have executed this
Agreement as of the date first above written.
NASH-FINCH COMPANY
By
--------------------------------
Name:
Title:
Accepted:
HARTFORD LIFE INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By /s/ Betsy Roberts
--------------------------------
Name: BETSY ROBERTS
Title: SENIOR VICE PRESIDENT
HARTFORD CASUALTY INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By /s/ Betsy Roberts
--------------------------------
Name: BETSY ROBERTS
Title: SENIOR VICE PRESIDENT
RELIASTAR LIFE INSURANCE COMPANY
By
--------------------------------
Name:
Title:
NORTHERN LIFE INSURANCE COMPANY
By
--------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Holders have executed this
Agreement as of the date first above written.
NASH-FINCH COMPANY
By
--------------------------------
Name:
Title:
Accepted:
HARTFORD LIFE INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By
--------------------------------
Name:
Title:
HARTFORD CASUALTY INSURANCE COMPANY
By The Hartford Investment Management Company
and by Hartford Investment Services, Inc.,
its Agents and Attorneys-in-Fact
By
--------------------------------
Name:
Title:
RELIASTAR LIFE INSURANCE COMPANY
By /s/ James V. Wittich
--------------------------------
Name: James V. Wittich
Title: Authorized Representative
NORTHERN LIFE INSURANCE COMPANY
By /s/ James V. Wittich
--------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
<PAGE>
ANNEX 1
(TO FOURTH AMENDMENT AGREEMENT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Names and Addresses of Registration Number and Registration Number and
of Principal Amount of Principal Amount of
Registered Holders Existing Notes Amended Notes
- ------------------------------------------------------------------------------------
<S> <C> <C>
HARTFORD LIFE INSURANCE COMPANY R-5; $15,000,000 R-1; $15,000,000
c/o Hartford Investment Management
Company
P.O. Box 1744
Hartford, Connecticut 06114-1744
- ------------------------------------------------------------------------------------
HARTFORD CASUALTY INSURANCE COMPANY R-6; $ 5,000,000 R-2; $ 5,000,000
c/o Hartford Investment Management
Company
P.O. Box 1744
Hartford, Connecticut 06114-1744
- ------------------------------------------------------------------------------------
RELIASTAR LIFE INSURANCE COMPANY R-3; $ 4,000,000 R-3; $ 4,000,000
c/o ReliaStar Investment Research
100 Washington Avenue South
Suite 800
Minneapolis, MN 55401-2147
- ------------------------------------------------------------------------------------
NORTHERN LIFE INSURANCE COMPANY R-4; $ 6,000,000 R-4; $ 6,000,000
ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2147
- ------------------------------------------------------------------------------------
</TABLE>
Annex 1-1
<PAGE>
EXHIBIT A
(TO FOURTH AMENDMENT AGREEMENT)
[FORM OF NOTE]
NASH-FINCH COMPANY
SECOND AMENDED AND RESTATED 8.38% SENIOR NOTE DUE OCTOBER 1, 2006
PPN: 631158 G* 7
No. R- [Date]
--------
$
----------
NASH-FINCH COMPANY, a Delaware corporation (the "COMPANY'), for value
received hereby promises to pay to
or registered assigns the principal amount of
DOLLARS ($ )
on October 1, 2006, together with interest (computed on the basis of a
360-day year of twelve consecutive 30-day months) on the principal amount
from time to time remaining unpaid hereon (i) at the rate of 8.13% PER ANNUM
from the date hereof until (but NOT including) October 16, 1997, and (ii) at
the rate of 8.38% PER ANNUM from (and including) October 16, 1997, until (and
including) the date of maturity hereof, in each case, in installments payable
on the first (1st) day of April and October in each year, commencing on the
later of April 1, 1998 or the payment date next succeeding the date hereof.
The Company further promises to pay on demand interest on each overdue
installment of principal, premium, if any, and (to the extent legally
enforceable) on each overdue installment of interest, at the rate of 9.38%
PER ANNUM, in each case from and after the maturity of each such installment,
whether by acceleration or otherwise, until paid. Subject to Section 2.5 of
the Note Agreements hereinafter referred to, the principal hereof, premium,
if any, and interest hereon are payable at the principal office of the
Company in Minneapolis, Minnesota, in coin or currency of the United States
of America which at the time of payment shall be legal tender for payment of
public and private debts. Notwithstanding anything contained herein to the
contrary, in addition to the stated interest rate applicable to the Notes
(including, without limitation, the interest rate applicable to overdue
payments in respect of the Notes), the Notes shall bear additional interest
at the rate of 0.50% PER ANNUM during any Interest Rate Event Period.
This Note is one of the Second Amended and Restated 8.38% Senior Notes
due October 1, 2006 of the Company in the aggregate principal amount of
$30,000,000 (the "NOTES") issued or to be issued under and pursuant to the
terms and provisions of separate and several Note Agreements each dated as of
March 22, 1996 (collectively, as amended from time to time, the "NOTE
AGREEMENTS") entered into by the Company with the institutional investors
named in Schedule I thereto, as amended by that certain First Amendment dated
as of November 15, 1996, that certain Second Amendment dated as of November 15,
1996, that certain Third Amendment
Exhibit A-1
<PAGE>
Agreement dated as of January 15, 1997 and that certain Fourth Amendment
Agreement dated as of December 1, 1997. This Note and the holder hereof are
entitled equally and ratably with the holders of all other Notes outstanding
under the Note Agreements to all the benefits provided for thereby or
referred to therein, to which Note Agreements reference is hereby made for
the statement thereof. Capitalized terms used in this Note and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Note Agreements.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity date, all in the events, on
the terms and in the manner and amounts as provided in the Note Agreements.
The Company promises to make required prepayments of principal (in
certain cases together with any applicable premium) on the dates and in the
amounts specified in the Note Agreements. The Notes are not subject to
prepayment or redemption at the option of the Company prior to their
expressed maturity dates except on the terms and conditions and in the
amounts and with the premium, if any, set forth in the Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly
endorsed or accompanied by a written statement of transfer duly executed by
the registered holder of this Note or his attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
The Notes amend and restate, and have been delivered in substitution for
and replacement of, $30,000,000 in aggregate principal amount of the
Company's First Amended and Restated 8.13% Senior Notes due October 1, 2006
(the "FIRST AMENDED AND RESTATED NOTES"), formerly executed by the Company
and payable to the original holders of the Notes. The obligations formerly
evidenced by the First Amended and Restated Notes are continuing obligations
and nothing contained in the Notes shall be deemed to constitute payment,
settlement or a novation of the First Amended and Restated Notes.
NASH-FINCH COMPANY
By
------------------------------
Name:
Title:
Exhibit A-2
<PAGE>
EXHIBIT B
(TO FOURTH AMENDMENT AGREEMENT)
[FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY]
[LETTERHEAD OF NORMAN R. SOLAND, ESQ.]
[Effective Date]
To the Institutional Investors
listed on Annex 1 hereto
Ladies and Gentlemen:
Reference is made to the Fourth Amendment Agreement (the "FOURTH
AMENDMENT AGREEMENT"), dated as of December 1, 1997, among Nash-Finch
Company, a Delaware corporation (the "COMPANY") and the institutional
investors parties thereto (the "HOLDERS"), in respect of the Company's
separate Note Agreements dated as of March 22, 1996 (collectively, as amended
by that certain First Amendment dated as of November 15, 1996, that certain
Second Amendment dated as of November 15, 1996 and that certain Third
Amendment Agreement dated as of January 15, 1997, the "EXISTING NOTE
AGREEMENT", and as further amended by the Fourth Amendment Agreement, the
"AMENDED NOTE AGREEMENT"). Capitalized terms used herein and not otherwise
defined herein have the respective meanings ascribed thereto in the Amended
Note Agreement.
I am General Counsel of the Company, and have acted in such capacity in
connection with the transactions contemplated by the Fourth Amendment
Agreement. This opinion is delivered to you pursuant to Section 3.2 of the
Fourth Amendment Agreement. In acting as such capacity, I have examined:
(a) the Fourth Amendment Agreement;
(b) the Existing Note Agreement;
(c) the Company's Second Amended and Restated 8.38% Senior Notes
Due October 1, 2006, substantially in the form of Exhibit A to the
Fourth Amendment Agreement and dated October 1, 1997, in the respective
principal amounts, bearing the registration numbers and payable to the
Holders specified on Annex 1 to the Fourth Amendment Agreement (the
"AMENDED NOTES"), which Amended Notes are in the aggregate principal
amount of $30,000,000 and have been issued in substitution and
replacement of an equal aggregate principal amount of the Company's
First Amended and Restated 8.13% Senior Notes Due October 1, 2006 (the
"EXISTING NOTES");
(d) all other documents executed and delivered by the Company in
connection with the transactions contemplated by the Fourth Amendment
Agreement; and
Exhibit B-1
<PAGE>
(e) a copy of the Restated Certificate of Incorporation of the
Company, as amended (the "RESTATED CERTIFICATE OF INCORPORATION"), and
as certified on a recent date by the Secretary of the State of Delaware
as being true, complete and in effect as of the date thereof;
(f) a copy of the bylaws of the Company, as certified by an
officer thereof as being true, complete and in effect;
(g) resolutions of the Board of Directors of the Company dated
[ ], 1997, pursuant to which the Company is authorized,
among other things, to enter into the Fourth Amendment Agreement and
execute and deliver the Amended Notes, as certified by an officer
thereof as being true, complete and in effect;
(h) a Good Standing Certificate for the Company, of recent date,
issued by the Office of the Secretary of State of Delaware; and
(i) originals, or copies certified or otherwise identified to my
satisfaction, of such other documents, records, instruments and
certificates of public officials as I have deemed necessary or
appropriate to enable me to render this opinion.
In rendering this opinion, I have relied, to the extent I deem necessary
and proper, on warranties and representations as to certain factual matters
contained in the Fourth Amendment Agreement and the certificates of officers of
the Company executed in connection therewith. I have no actual knowledge of any
material inaccuracies in any of such representations and warranties contained
therein.
In rendering this opinion, I have assumed the following:
(A) the authenticity of all documents submitted to me as originals;
(B) the conformity of any documents submitted to me as certified
or photostatic copies to their respective originals;
(C) the authenticity of all signatures (other than those of
officers and directors of the Company);
(D) the legal capacity of all natural persons;
(E) the accuracy of all reports and certificates received from
public officials; and
(F) as to Persons other than the Company and individuals acting on
behalf of the Company, the corporate power, authority and legal right to
execute and deliver, the due execution and delivery of, and the
enforceability against such Persons of, the Existing Note Agreement, the
Fourth Amendment Agreement and the Amended Note Agreement, and all
documents, instruments and agreements contemplated thereby.
Exhibit B-2
<PAGE>
To the extent that the obligations of the Company may be dependent upon
such matters, I assume that each Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, that
each has all requisite governmental certificates of authority, licenses,
permits, consents and qualifications to engage in the transactions covered by
this opinion and that the Fourth Amendment Agreement has been duly executed
by an officer or officers of each Holder and that such agreement is a legal,
valid, binding and enforceable obligation of each Holder.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has the
corporate power and corporate authority to issue the Amended Notes, to
execute and deliver the Fourth Amendment Agreement and the Amended Notes, and
to perform its respective obligations under the Fourth Amendment Agreement,
the Amended Note Agreement and the Amended Notes.
2. The Company has full corporate power and corporate authority to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign corporation in each
jurisdiction in which the character of the Properties owned or leased by it
or the nature of the business transacted by it makes such licensing or
qualification necessary and where the failure to be so qualified or licensed,
in the aggregate for all such failures, could reasonably be expected to have
a material adverse effect on the business, prospects, profits, Properties or
condition (financial or otherwise) of the Company.
3. Each of the Fourth Amendment Agreement and the Amended Notes has
been duly authorized by all necessary corporate action on the part of the
Company, and has been duly executed and delivered by the Company.
4. Each of the Fourth Amendment Agreement, the Amended Note Agreement
and the Amended Notes constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal,
state or local, is necessary in connection with the lawful execution,
delivery and performance of the Fourth Amendment Agreement, the Amended Note
Agreement or the Amended Notes;
6. Neither the issuance of the Amended Notes in substitution and
exchange for the Existing Notes, nor the execution, delivery and performance
by the Company of the Fourth Amendment Agreement and Amended Note Agreement,
as the case may be, conflicts with applicable laws, rules or regulations or
results in any breach of the provisions of or constitutes a default under or
results in the creation or imposition of any Lien or encumbrance upon any of
the Property of the Company pursuant to the provisions of the Restated
Certificate of Incorporation or By-laws of the Company or any agreement or
other instrument known to me to which the Company is a party or by which the
Company may be bound.
Exhibit B-3
<PAGE>
7. The issuance, execution and delivery of the Amended Notes under the
circumstances contemplated by the Fourth Amendment Agreement do not, under
existing law, require the registration of the Amended Notes under the
Securities Act of 1933, as amended, or the qualification of an indenture in
respect thereof under the Trust Indenture Act of 1939 as amended.
8. Neither the issuance of the Amended Notes in substitution and
exchange for the Existing Notes, or the application of the proceeds of the
Original Notes, has violated or will result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G. T and X of
the Board of Governors of the Federal Reserve System.
I am an attorney admitted to practice in the State of Minnesota and I
express no opinion as to any laws other than federal laws of the United
States of America and the General Corporation Law of the State of Delaware.
I acknowledge that this opinion is being issued at the request of the
Company pursuant to Section 3.2 of the Fourth Amendment Agreement and I agree
that the parties listed on Annex 1 hereto may rely and are relying hereon in
connection with the consummation of the transactions contemplated by the
Fourth Amendment Agreement. This opinion is not to be used, circulated,
quoted or otherwise referred to for any other purpose, except that copies of
this opinion may be supplied to regulatory authorities having jurisdiction
over the affairs of any Holder or subsequent holder of an Amended Note.
Notwithstanding the foregoing, subsequent holders of the Notes may rely on
this opinion as if it were addressed to them; provided, however, that this
opinion speaks only as of the date above written, and I hereby expressly
disclaim any duty to update any of the statements made herein.
Very truly yours,
Exhibit B-4
<PAGE>
ANNEX 1
ADDRESSEES
HARTFORD LIFE INSURANCE COMPANY
c/o Hartford Investment Management Company
P.O. Box 1744
Hartford, Connecticut 06114-1744
HARTFORD CASUALTY INSURANCE COMPANY
c/o Hartford Investment Management Company
P.O. Box 1744
Hartford, Connecticut 06114-1744
RELIASTAR LIFE INSURANCE COMPANY
c/o ReliaStar Investment Research
100 Washington Avenue South
Suite 800
Minneapolis, MN 55401-2147
NORTHERN LIFE INSURANCE COMPANY
ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2147
Exhibit B-5
<PAGE>
EXHIBIT C
(TO FOURTH AMENDMENT AGREEMENT)
[FORM OF OFFICER'S CERTIFICATE]
NASH-FINCH COMPANY
CERTIFICATE OF OFFICER
I, [ ], hereby certify that I am the [ ]
of NASH-FINCH COMPANY, a Delaware corporation (the "Company"), and that, as
such, I have access to its corporate records and am familiar with the matters
herein certified, and I am authorized to execute and deliver this Certificate
in the name and on behalf of the Company, and that:
1. This Certificate is being delivered pursuant to Section 3.4(a) of
the Fourth Amendment Agreement (the "Fourth Amendment Agreement"), dated as
of December 1, 1997, among the Company and the Holders (as defined therein),
in respect of the Company's separate Note Agreements dated as of March 22,
1996 (collectively, as amended by that certain First Amendment dated as of
November 15, 1996, that certain Second Amendment dated as of November 15,
1996, that certain Third Amendment Agreement dated as of January 15, 1997 and
the Fourth Amendment Agreement, the "Note Agreement"). The terms used in this
Certificate and not defined herein have the respective meanings specified in
the Note Agreement.
2. The warranties and representations contained in Section 2 of the
Fourth Amendment Agreement are true on the date hereof with the same effect
as though made on and as of the date hereof.
3. The Company has performed and complied with all agreements and
conditions contained in the Fourth Amendment Agreement that are required to
be performed or complied with by the Company before or at the date hereof.
4. [ ], from [ ], 1997
[DATE OF RESOLUTIONS] to the date hereof, inclusive, has been and is the duly
elected, qualified and acting Secretary of the Company, and the signature
appearing on the Certificate of Secretary dated the date hereof and delivered
to the Purchasers and the Holders contemporaneously herewith is his genuine
signature.
IN WITNESS WHEREOF, I have executed this Certificate in the name and on
behalf of the Company on December [ ], 1997. [EFFECTIVE DATE]
NASH-FINCH COMPANY
By:
---------------------------------
Name:
Exhibit C-1
<PAGE>
EXHIBIT D
(TO FOURTH AMENDMENT AGREEMENT)
[FORM OF SECRETARY'S CERTIFICATE]
NASH-FINCH COMPANY
CERTIFICATE OF SECRETARY]
I, [ ], hereby certify that I am the duly elected, qualified and
acting Secretary of NASH-FINCH COMPANY, a Delaware corporation (the
"Company"), and that, as such, I have access to its corporate records and am
familiar with the matters herein certified, and I am authorized to execute
and deliver this Certificate in the name and on behalf of the Company, and
that:
1. This certificate is being delivered pursuant to Section 3.4(b) of
the Fourth Amendment Agreement (the "Fourth Amendment Agreement"), dated as
of December 1, 1997, among the Company and the Holders (as defined therein),
in respect of the Company's separate Note Agreements dated as of March 22,
1996 (collectively, as amended by that certain First Amendment dated as of
November 15, 1996, that certain Second Amendment dated as of November 15,
1996, that certain Third Amendment Agreement dated as of January 15, 1997 and
the Fourth Amendment Agreement, the "Note Agreement"). The terms used in this
Certificate and not defined herein have the respective meanings specified in
the Note Agreement.
2. Attached hereto as Attachment A is a true and correct copy of
resolutions, and the preamble thereto, adopted by the board of directors of
the Company (the "Board of Directors") on [ _ ], 1997, and such resolutions
and preamble set forth in Attachment A hereto were duly adopted by the Board
of Directors and are in full force and effect on and as of the date hereof,
not having been amended, altered or repealed, and such resolutions are filed
with the records of the Board of Directors.
3. The documents listed below were executed and delivered by the
Company pursuant to and in accordance with the resolutions set forth in
Attachment A hereto and said documents as executed are substantially in the
form submitted to and approved by the Board of Directors as aforementioned:
(a) the Fourth Amendment Agreement; and
(b) the Second Amended and Restated Notes, in the principal
amounts, bearing the registration numbers and payable to the Holders
specified on Annex 1 to the Fourth Amendment Agreement.
4. Attached hereto as Attachment B is a true, correct and complete copy of
the bylaws of the Company as in full force and effect on and as of the date
hereof, which bylaws were last amended by the Board of Directors on May 9, 1995,
and have been in full effect in said form at all times from such date to the
date hereof, inclusive, without modification or amendment in any respect.
Exhibit D-1
<PAGE>
5. Each of the following named persons is and has been a duly elected,
qualified and acting officer of the Company holding the office or offices set
forth below opposite his name from [ ], 1997 [DATE OF RESOLUTIONS]
to the date hereof, inclusive:
[List Only Officers Executing Documents]
<TABLE>
<CAPTION>
Name Office Signature
<S> <C> <C>
[Chairman of the-Board] /s/
-------------------
[President] /s/
-------------------
[Vice President, Finance] /s/
-------------------
[Secretary] /s/
-------------------
[Assistant Secretary] /s/
-------------------
[Treasurer] /s/
-------------------
[Comptroller] /s/
-------------------
</TABLE>
6. The signature appearing opposite the name of each such person set
forth above is his or her genuine signature.
7. Attached hereto as Attachment C is a true, correct and complete copy
of the Company's Certificate of Incorporation (including all amendments
thereto), as in full force and effect on and as of the date hereof, which
have been in full effect in said form at all times from [ ], 1997
[DATE OF RESOLUTIONS] to the date hereof, inclusive, without modification or
amendment in any respect.
IN WITNESS WHEREOF, I have hereunto set my hand on December [ ], 1997.
[EFFECTIVE DATE]
NASH-FINCH COMPANY
--------------------------------
Secretary
Exhibit D-2
<PAGE>
ATTACHMENT A
BOARD OF DIRECTORS
NASH-FINCH COMPANY
RESOLUTIONS ADOPTED
WHEREAS, there has been submitted to this Board a draft of the form of
Fourth Amendment Agreement (together with all annexes and exhibits thereto,
the "Fourth Amendment Agreement"), to be entered into by the Company and the
holders of the Company's First Amended and Restated 8.13% Senior Notes Due
October 1, 2006 (the "Holders"), in respect of the Company's separate Note
Agreements dated as of March 22, 1996 (collectively, as amended by that
certain First Amendment dated as of November 15, 1996, that certain Second
Amendment dated as of November 15, 1996, that certain Third Amendment
Agreement dated as of January 15, 1997 and the Fourth Amendment Agreement,
the "Note Agreement"); and
WHEREAS, this Board has reviewed in detail and discussed the terms and
provisions of the Fourth Amendment Agreement (including the form of the
Second Amended and Restated 8.38% Senior Notes Due October 1, 2006 specified
therein); and
WHEREAS, on the basis of its review of the Fourth Amendment Agreement
and of the principal terms and provisions of the transactions provided for
therein, this Board deems it advisable and in the best interest of the
Company that the transactions provided in the Fourth Amendment Agreement be
consummated substantially in accordance with the provisions of the Fourth
Amendment Agreement; and
WHEREAS, terms used in these preambles and resolutions and not herein
defined shall have the respective meanings ascribed to them in the Note
Agreement;
NOW THEREFORE, BE IT RESOLVED, that the form of, and each of the terms
and provisions contained in, the Fourth Amendment Agreement are hereby
authorized and approved in each and every respect; and each and every
transaction effected or to be effected pursuant to and substantially in
accordance with the terms of the Fourth Amendment Agreement and the Note
Agreement, including, but not limited to, each specific transaction that is
described, authorized and approved in these resolutions, is hereby authorized
and approved in each and every respect; and
RESOLVED, that the Company enter into the Second Amendment Agreement
with the Holders; and that each of the Chairman of the Board, the President,
any Vice President, the Treasurer and each other officer of the Company (each
an "Authorized Officer") is hereby severally authorized to execute and
deliver, in the name and on behalf of the Company, the Fourth Amendment
Agreement, substantially in the form thereof presented to this Board and
heretofore approved, with such changes therein as shall be approved by the
officer executing and delivering the same, such approval to be evidenced
conclusively by such execution and delivery; and
RESOLVED, that the Company amend and restate the First Amended and
Restated Notes in the form of the Second Amended and Restated Note set forth
as Exhibit A to the Fourth
Exhibit D-3
<PAGE>
Amendment Agreement to, among other things, increase the interest rate
applicable to the Notes from 8.13% PER ANNUM to 8.38% PER ANNUM as provided
in the Fourth Amendment Agreement, and that each Authorized Officer is hereby
severally authorized to execute and deliver the Second Amended and Restated
Notes in the name of the Company, substantially in the form attached to the
Fourth Amendment Agreement and presented to the Board and heretofore
approved, with such changes therein as shall be approved by the officer or
officers executing and delivering the same, such approval to be evidenced
conclusively by such execution and delivery; and
RESOLVED, that this Board hereby authorizes each of the Authorized
Officers, severally, to execute and deliver for and on behalf of the Company
the certificates required by the Fourth Amendment Agreement; and
RESOLVED, that the Authorized Officers and any person or persons
designated and authorized so to act by any Authorized Officer are hereby each
severally authorized to do and perform or cause to be done and performed, in
the name and on behalf of the Company, all other acts, to pay or cause to be
paid, on behalf of the Company, all related costs and expenses and to execute
and deliver or cause to be executed and delivered such other notices,
requests, demands, directions, consents, approvals, orders, applications,
agreements, instruments, certificates, undertakings, supplements, amendments,
further assurances or other communications of any kind, under the corporate
seal of the Company or otherwise and in the name of and on behalf of the
Company or otherwise, as he, she or they may deem necessary, advisable or
appropriate to effect the intent of the foregoing Resolutions or to comply
with the requirements of the instruments approved and authorized by the
foregoing Resolutions, including but not limited to the Fourth Amendment
Agreement and the Second Amended and Restated Notes; and
RESOLVED, that any acts of any Authorized Officer of the Company and of
any person or persons designated and authorized to act by any Authorized
Officer of the Company, which acts would have been authorized by the
foregoing Resolutions except that such acts were taken prior to the adoption
of such Resolutions, are hereby severally ratified, confirmed, approved and
adopted as the acts of the Company; and
RESOLVED, that each of the Secretary and each Assistant Secretary of the
Company is hereby severally authorized and empowered to certify to the
passage of the foregoing Resolutions and to execute and deliver for and on
behalf of the Company the certificates required by the Fourth Amendment
Agreement under the seal of this Company or otherwise.
Exhibit D-4
<PAGE>
Attachment B
Bylaws of the Company
[TO BE SUPPLIED BY COMPANY]
Exhibit D-5
<PAGE>
Attachment C
Certificate of Incorporation
of the Company
[TO BE SUPPLIED BY COMPANY]
Exhibit D-6
<PAGE>
- ------------------------------------------------------------------------------
NASH-FINCH COMPANY
ASSUMPTION AGREEMENT AND
AMENDED AND RESTATED NOTE AGREEMENT
Dated as of January 31, 1997
Re:
$25,000,000 9.20% Senior Notes
Due January 10, 2000
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. DESCRIPIION OF NOTES AND COMMITMENT................ 1
Section 1.1. Description of Notes............................... 1
Section 1.2. Commitment: Closing Date........................... 2
SECTION 2. PREPAYMENT OF NOTES................................ 2
Section 2.1. Optional Prepayments With Premium.................. 2
Section 2.2. Notice of Prepayments.............................. 2
Section 2.3. Allocation of Prepayments.......................... 3
Section 2.4. Method and Place of Payment of Principal
and Interest....................................... 3
Section 2.5. Prepayment at Option of Holders.................... 3
Section 2.6. Change in Control.................................. 4
SECTION 3. REPRESENTATIONS.................................... 6
Section 3.1. Representations of the Company..................... 6
Section 3.2. Representations of the Holders..................... 6
SECTION 4. CLOSING CONDITIONS................................. 6
Section 4.1. Closing Certificate................................ 6
Section 4.2. Legal Opinions..................................... 6
Section 4.3. Related Transactions............................... 7
Section 4.4. Consent of Holders of Other Securities............. 7
Section 4.5. Closing Fee........................................ 7
Section 4.6. Proceedings and Documents.......................... 7
SECTION 5. INTERPRETATION OF AGREEMENT........................ 7
Section 5.1. Definitions........................................ 7
Section 5.2. Accounting Principles.............................. 12
Section 5.3. Directly or Indirectly............................. 12
SECTION 6. COMPANY COVENANTS.................................. 12
Section 6.1. Corporate Existence, Etc........................... 12
Section 6.2. Insurance.......................................... 12
Section 6.3. Taxes, Claims for Labor and Materials,
Compliance with Laws............................... 12
Section 6.4. Maintenance, Etc................................... 13
Section 6.5. Nature of Business................................. 13
Section 6.6. Current Ratio...................................... 13
Section 6.7. Stockholders' Equity............................... 13
Section 6.8. Incurrence of Debt................................. 13
<PAGE>
Section 6.9. Liens and Encumbrances............................. 14
Section 6.10. Dividends, Stock Purchases......................... 16
Section 6.11. Mergers, Consolidations and Sales of Assets........ 17
Section 6.12. Reports and Rights of Inspection................... 18
Section 6.13. Repurchase of Notes................................ 20
Section 6.14. Termination of Pension Plans....................... 20
Section 6.15. Transactions with Affiliates....................... 20
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR............ 20
Section 7.2. Notice to Holders.................................. 21
Section 7.3. Default Remedies................................... 21
Section 7.4. Rescission of Acceleration......................... 22
SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS................... 22
Section 8.1. Amendments and Waivers............................. 22
Section 8.2. Binding Effect..................................... 23
SECTION 9. MISCELLANEOUS...................................... 23
Section 9.1. Registered Notes................................... 23
Section 9.2. Exchange for Different Denominations............... 23
Section 9.3. Loss, Theft, etc. of Notes......................... 24
Section 9.4. Expenses, Stamp Tax Indemnity...................... 24
Section 9.5. Powers and Rights Not Waived....................... 24
Section 9.6. Notices............................................ 24
Section 9.7. Successors and Assigns............................. 25
Section 9.8. Survival of Representations........................ 25
Section 9.9. Severability....................................... 25
Section 9.10. Governing Law...................................... 25
Section 9.11. Captions........................................... 25
Signature.............................................................. 26
</TABLE>
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ATTACHMENTS TO NOTE AGREEMENT
Schedule I -- Names and Addresses of Holders
Exhibit A -- Form of 9.20% Senior Note
Exhibit B -- Closing Certificate
Exhibit C -- Description of Special Counsel's Closing Opinion
Exhibit D -- Description of Closing Opinion of Counsel to the Company
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NASH FINCH COMPANY
7600 France Avenue South
Minneapolis, Minnesota 55440
ASSUMPTION AGREEMENT AND
AMENDED AND RESTATED NOTE AGREEMENT
Re:
$25,000,000 9.20% Senior Notes
Due January 10, 2000
Dated as of
January 31, 1997
To the Holder named in Schedule I
hereto which is a
signatory to this Agreement
Gentlemen:
The undersigned, NASH-FINCH COMPANY, a Delaware corporation (the
"Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
SECTION 1.1. DESCRIPTION OF NOTES. Super Food Services, Inc. ("SUPER FOOD")
entered into separate Note Agreements each dated as of November 1, 1989 (the
"1989 NOTE AGREEMENTS") between Super Food and, respectively, each of the
Institutional Investors listed therein under and pursuant to which $25,000,000
9.20% Senior Notes due January 10, 2000 (the "1989 NOTES") were originally
issued and are presently outstanding. The Company, in consideration of its
acquisition of Super Food, and for good and valuable consideration, hereby
assumes all obligations of Super Food under the 1989 Note Agreements and the
1989 Notes (as amended and restated hereby) and desires to amend and restate in
their entirety the 1989 Note Agreements (as previously amended), and to provide
for the replacement of the 1989 Notes. In order to effectuate such amendment and
restatement, as well as the replacement of the 1989 Notes, the Company will
authorize the delivery of its 9.20% Senior Notes due January 10, 2000 (the
"NOTES") in an aggregate principal amount not exceeding $25,000,000 to be dated
April 1O, 1997, to bear interest from the date thereof until maturity at the
rate of 9.20% per annum on the principal amount from time to time outstanding,
such interest to be payable quarterly on the tenth day of January, April, July
and October in each year (commencing on July 10, 1997) (the "INTEREST PAYMENT
DATES"), until the principal amount thereof shall be due and payable, to mature
on January 10, 2000 and to be otherwise substantially in the form attached
hereto as Exhibit A. Overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the
<PAGE>
extent legally enforceable) overdue installments of interest shall bear interest
at the rate of 10.20% per annum from and after the maturity thereof, whether by
acceleration or otherwise, until paid. Interest on the Notes will be computed on
the basis of a 360-day year of twelve 30-day months. The term "NOTES" as used
herein shall include each Note delivered pursuant to this Agreement and the
separate agreements with the other institutions named in Schedule I hereto. You
and the other institutions named in Schedule I hereto are hereinafter sometimes
referred to as the "HOLDERS". The terms which are capitalized herein shall have
the meanings specified in Section 5 unless the context shall otherwise require.
Notwithstanding anything contained herein to the contrary, in addition to
the stated interest rate applicable to the Notes (including, without limitation,
the interest rate applicable to overdue payments in respect of the Notes), the
Notes shall bear additional interest at the rate of .50% per annum during any
Interest Rate Event Period.
The Company and the holders of the Notes from time to time acknowledge that
the Notes constitute a replacement of the 1989 Notes and this Agreement includes
an amendment and restatement of the 1989 Note Agreements.
SECTION 1.2. COMMITMENT: CLOSING DATE. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to deliver to you, Notes of the Company in the
principal amount thereof set forth opposite your name in Schedule I. The
delivery of the Notes shall take place on such date not later than April 30,
1997 as shall be mutually agreed upon by the Company and the Holders (the
"CLOSING DATE"). On the Closing Date, delivery of the Notes will be made against
delivery to the Company of $25,000,000 aggregate principal amount of the 1989
Notes held by you in full payment of the purchase price of the Notes. Upon
receipt of such 1989 Notes by the Company and delivery of the Notes to the
Holders, the 1989 Notes shall be deemed canceled and of no further force or
effect. Unless you notify the Company at least three days prior to the Closing
Date, the Notes delivered to you will be delivered to you in the form of a
single registered Note, registered in your name or in the name of such
nominee as you may specify
SECTION 2. PREPAYMENT OF NOTES.
SECTION 2.1. OPTIONAL PREPAYMENTS WITH PREMIUM. Upon compliance with
Section 2.2 and subject to the following limitations the Company shall have the
privilege, on any Interest Payment Date, of prepaying the outstanding Notes,
either in whole or in part (but if in part then in units of $100,000 or an
integral multiple of $10,000 in excess thereof) by payment of the principal
amount of the Notes, or portion thereof to be prepaid, and accrued interest
thereon to the date of such prepayment, together with a premium equal to the
Make Whole Premium calculated as of the date of such payment.
SECTION 2.2. NOTICE OF PREPAYMENTS. The Company will give notice of any
optional prepayment of the Notes to be made pursuant to Section 2.1 hereof to
each holder thereof not less than 30 days nor more than 60 days before the date
fixed for such optional prepayment specifying (a) such date, (b) the principal
amount of the holder's Notes to be
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prepaid on such date and (c) a description of the calculation of the premium, if
any, and accrued interest applicable to the prepayment. Notice of prepayment
having been so given, the aggregate principal amount of the Notes specified in
such notice, together with the premium, if any, and accrued interest shall
become due and payable on the prepayment date.
SECTION 2.3. ALLOCATION OF PREPAYMENTS. All partial prepayments shall be
applied on all outstanding Notes ratably in accordance with the unpaid principal
amounts thereof but only in units of $1,000, and to the extent that such ratable
application shall not result in an even multiple of $1,000, adjustment may be
made by the Company to the end that successive optional prepayments shall result
in substantially ratable payments.
SECTION 2.4. METHOD AND PLACE OF PAYMENT OF PRINCIPAL AND INTEREST.
Anything in the Notes or this Agreement to the contrary notwithstanding at
the time of any payment, the Company will promptly and punctually pay the
principal thereon, if any, and premium, if any, and interest due thereon,
without any presentment thereof, directly to the Holder or any subsequent
holder at the address of the Holder set forth in Schedule I or at such other
address as the Holder or such subsequent holder may from time to time
designate in writing to the Company or, if a bank account is designated for a
Holder on Schedule I hereto or in any written notice to the Company from the
Holder or any such subsequent holder, the Company will make such payments in
immediately available funds or in such manner indicated on Schedule I hereto
to such bank account before 12:00 noon, Minneapolis, Minnesota time, marked
for attention as indicated, or in such other manner or to such other account
of the Holder or such holder in any bank in the United States as the Holder
or any such subsequent holder may from time to time direct in writing. If you
shall sell or transfer any Note, you will notify the Company of such action
and of the name and address of the transferee of such Note and you will,
prior to the delivery of such Note, make a notation on such Note of the date
to which interest has been paid on such Note and, if not previously made, a
notation on such Note of the extent to which any payment has been made on
account of the principal of such Note.
SECTION 2.5. PREPAYMENT AT OPTION OF HOLDERS. At any time after
November 15, 1996 and prior to January 17, 1997, the holder of any Notes may
give the Company notice (the "NOTICE OF ELECTION") at its address set forth in
Section 9.6 hereof of the election of such holder to require the Company to
redeem all, but not less than all, of the outstanding Notes held by such holder
(an "ELECTING HOLDER"). The Company shall redeem the Notes of each Electing
Holder on the date which is five (5) business days after receipt of such
Notice of Election by payment of an amount equal to 100% of the principal
amount of such Notes, plus the Make Whole Premium determined for the date of
prepayment with respect to such principal amount, together with interest on
such Notes accrued to the date of such prepayment.
The Company will at all times maintain amounts permitted to be actually
borrowed under its Bank Facility equal to or greater than the amount necessary
to prepay all of the Notes pursuant to this Section.
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SECTION 2.6. CHANGE IN CONTROL.
(a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company will, within
3 days after any Change in Control or Control Event, give written notice of such
Change in Control or Control Event to each holder of Notes unless notice in
respect of such Change in Control (or the Change in Control contemplated by such
Control Event) shall have been given pursuant to subparagraph (b) of this
Section 2.6. If a Change in Control has occurred, such notice shall contain and
constitute an offer to prepay Notes as described in subparagraph (c) of this
Section 2.6, accompanied by the certificate described in subparagraph (g) of
this Section 2.6, and (ii) contemporaneously with such action, it prepays all
Notes required to be prepaid in accordance with this Section 2.6.
(b) CONDITION TO COMPANY ACTION. The Company will not take any action that
consummates or finalizes a Change in Control unless (i) at least 45 days prior
to such action it shall have given to each holder of Notes written notice
containing and constituting an offer to prepay Notes as described in
subparagraph (g) of this Section 2.6, and (ii) contemporaneously with such
action, it prepays all Notes required to be prepaid in accordance with this
Section 2.6.
(c) OTHER TO PREPAY NOTES. The offer to prepay Notes contemplated by
subparagraph (a) and (b) of this Section 2.6 shall be an offer to prepay, in
accordance with and subject to this Section 2.6, all, but not less than all, of
the Notes held by each holder (in this case only "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the "PROPOSED
PREPAYMENT DATE"). If such Proposed Prepayment Date is in connection with an
offer contemplated by subparagraph (a) of this Section 2.6, such date shall be
not less than 30 days and not more than 45 days after the date of such offer (if
the Proposed Prepayment Date shall not specified in such offer, the Proposed
Prepayment Date shall be the 45th day after the date of such offer).
(d) ACCEPTANCE. A holder of Notes may accept the offer to prepay made
pursuant to this Section 2.6 by causing a notice of such acceptance to be
delivered to the Company at least 5 days prior to the Proposed Prepayment Date.
A failure by a holder of Notes to respond to an offer to prepay made pursuant to
this Section 2.6 shall be deemed to constitute an acceptance of such offer by
such holder.
(e) PREPAYMENT. Prepayment of Notes to be prepaid pursuant to this Section
2.6 shall be at 100% of the principal amount of such Notes, plus the Make Whole
Premium determined for the date of prepayment with respect to such principal
amount, together with interest on such Notes accrued to the date of prepayment .
On the business day preceding the date of prepayment, the Company shall deliver
to each holder of Notes being prepaid a statement showing the Make Whole Premium
due in connection with such prepayment and setting forth the details of the
computation of such amount. The prepayment shall be made on the Proposed
Prepayment Date except as provided in subparagraph (f) of this Section 2.6.
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(f) DEFERRAL PENDING CHANGE IN CONTROL. The obligation of the Company to
prepay Notes pursuant to the offers required by subparagraph (b) and accepted
in accordance with subparagraph (d) of this Section 2.6 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control
does not occur on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until and shall be made on the date on which
such Change in Control occurs. The Company shall keep each holder of Notes
reasonably and timely informed of (i) any such deferral of the date of
prepayment, (ii) the date on which such Change in Control and the prepayment
are expect to occur, and (iii) any determination by the Company that efforts
to effect such Change in Control have ceased or been abandoned (in which case
the offers and acceptances made pursuant to this Section 2.6 in respect of
such Change in Control shall be deemed rescinded).
(g) OFFICERS CERTIFICATE. Each offer to prepay the Notes pursuant to this
Section 2.6 shall be accompanied by a certificate, executed by a senior
financial officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 2.6; (iii) the principal amount of each Note offered to be prepaid; (iv)
the estimated Make Whole Premium due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation; (v) the interest that would be
due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
(vi) that the conditions of this Section 2.6 have been fulfilled; and (vii) in
reasonable detail, the nature and date or proposed date of the Change in
Control.
(h) "CHANGE IN CONTROL" DEFINED. "CHANGE IN CONTROL" means any of the
following events or circumstances:
if any person (as such term is used in section 13(d) and section 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
or related persons constituting a group (as such term is used in
Rule 13-5 under the Exchange Act), become the "beneficial owners" (as
such term is used in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of all classes
then outstanding of the Company's voting stock.
(i) "CONTROL EVENT" DEFINED. "CONTROL EVENT" means:
(i) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events which,
individually or in the aggregate, may reasonably be expected to result
in a Change in Control,
(ii) the execution of any written agreement which, when fully performed
by the parties thereto, would result in a Change in Control, or
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<PAGE>
(iii) the making of any written offer by any person (as such term is
defined in section 13(d) and section 14(d)(2) of the Exchange Act) or
related persons constituting a group (as such term is used in Rule 13d-5
under the Exchange Act) to the holders of the common stock of the Company,
which offer, if accepted by the requisite number of holders, would result
in a Change in Control.
SECTION 3. REPRESENTATIONS.
SECTION 3.1. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants that all representations set forth in the form of certificate annexed
hereto as Exhibit B are true and correct as of the date hereof and are hereby
incorporated herein by reference with the same force and effect as though herein
set forth in full.
SECTION 3.2. REPRESENTATIONS OF THE HOLDERS. You represent, and in entering
into this Agreement the Company understands, that you are acquiring the Notes
for the purpose of investment and not with a view to the resale or distribution
thereof, and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes or any part thereof, but without prejudice,
however, to your right at all times and at your expense to sell or otherwise
dispose of all or any part of the Notes only if registered under the applicable
securities laws or if an exemption from such registration is available. You
further represent that you are acquiring the Notes for your own account and with
your general corporate assets and not with the assets of any separate account in
which any employee benefit plan has any interest. As used in this Section, the
terms "separate account" and "employee benefit plan" shall have the respective
meanings assigned to them in the Employee Retirement Income Security Act of
1974.
SECTION 4. CLOSING CONDITIONS.
The exchange of the 1989 Notes for the Notes to be delivered on the Closing
Date shall be subject to the performance by the Company of its agreements
hereunder which by the terms hereof are to be performed at or prior to the time
of delivery of the Notes and to the following conditions precedent:
SECTION 4.1. CLOSING CERTIFICATE. On the Closing Date you shall receive
from the Company a certificate dated such Closing Date, executed by the
Chairman of the Board, the President or a Vice President of the Company
substantially in the form attached hereto as Exhibit B. the truth and
accuracy of which shall be a condition to your obligation to accept and pay
for the Notes.
SECTION 4.2. LEGAL OPINIONS. On the Closing Date you shall receive from
Chapman and Cutler, who are acting as your special counsel in this transaction,
and from Jon J. Solberg, Esq., counsel for the Company, their respective
opinions, dated the Closing Date, in form and substance satisfactory to you and
covering substantially the matters set forth or provided in Exhibits C and D,
respectively, hereto.
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SECTION 4.3. RELATED TRANSACTIONS. Prior to or concurrently with the
issuance and sale of the Notes to you, the Company shall have consummated the
sale of the entire principal amount of the Notes scheduled to be sold on the
Closing Date pursuant to this Agreement and the other agreements referred to
in Section 1.3.
SECTION 4.4. CONSENT OF HOLDERS OF OTHER SECURITIES. On or prior to the
Closing Date, any consents or approvals required to be obtained from any holder
or holders of any outstanding Security of the Company and any amendments of
agreements pursuant to which any Securities may have been issued which shall be
necessary to permit the consummation of the transactions contemplated hereby
shall have been obtained and all such consents or amendments shall be
satisfactory in form and substance to you and your special counsel.
SECTION 4.5. CLOSING FEE. On or prior to the Closing Date, the Company
shall have paid a closing fee in the amount of $25,000 to be allocated to the
Holders on a pro rata basis based upon the aggregate principal amount of the
1989 Notes held by each such Holder immediately prior to the Closing Date.
SECTION 4.6. PROCEEDINGS AND DOCUMENTS. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to you and your special counsel and you and your special counsel shall
have received copies (executed or certified as may be appropriate) of all legal
documents or proceedings which you and they may reasonably request in connection
with consummation of said transactions.
SECTION 5. INTERPRETATION OF AGREEMENT.
SECTION 5.1. DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"AFFILIATE" shall mean any Person (other than a Subsidiary) (a) which,
directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 10% or more of any class of the Voting Stock of the
Company, or (c) 10% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of the Securities of such Person which
shall have any rights or interests similar to the Voting Stock of a corporation)
of which is beneficially owned or held by the Company or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
"BANK FACILITY" shall mean the Credit Agreement dated as of October 8, 1996
among Nash-Finch Company and the banks signatory thereto.
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"CONSOLIDATED NET INCOME" for any period shall mean net earnings after
income taxes of the Company and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles, but
excluding:
(a) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary;
(b) earnings of any Person, substantially all the assets of which have
been acquired in any manner by the Company or its Subsidiaries, realized
by such Person prior to the date of acquisition by the Company or its
Subsidiaries;
(c) net earnings of any Person (other than a Subsidiary) in which the
Company or any Subsidiary has an ownership interest unless such net
earnings shall have actually been received by the Company or such
Subsidiary in the form of cash distributions; and
(d) the earnings of any Person to which assets of the Company shall
have been sold, transferred or disposed of, or into which the Company
shall have merged, prior to the date of such transaction.
"CAPITALIZED LEASE" shall mean any lease which is required to be
capitalized on the consolidated balance sheet of the Company and its
Subsidiaries in accordance with generally accepted accounting principles.
"CAPITALIZED RENTALS" shall mean at any date as of which the amount thereof
is to be determined, the amount at which the aggregate rentals due under or to
become due under all Capitalized Leases under which the Company or any
Subsidiary is a lessee will be reflected as a liability on a consolidated
balance sheet of the Company and its Subsidiaries in accordance with generally
accepted accounting principles.
"CLOSING DATE" is defined in Section 1.2 hereof.
"CONSOLIDATED CURRENT ASSETS" and "CONSOLIDATED CURRENT LIABILITIES"
shall mean such assets and liabilities of the Company and its Subsidiaries on a
consolidated basis as shall be determined in accordance with generally accepted
accounting principles to constitute current assets and current liabilities,
respectively.
"DEBT" with respect to any Person shall mean, without duplication, the
sum of
(a) the obligations of such Person for borrowed money or which has
been incurred in connection with the acquisition of assets;
(b) liabilities secured by any Lien existing on Property owned by such
Person (whether or not such liabilities have been assumed);
(c) Capitalized Rentals under any Capitalized Lease; and
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(d) all Guarantees of Debt of others, whether or not reflected in the
balance sheet of such Person.
"DEFAULT" shall mean any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"EVENT OF DEFAULT" is defined in Section 7.1 hereof.
"FUNDED DEBT" with respect to any Person shall mean, without duplication,
the sum of:
(a) the obligations of such Person for borrowed money or which have
been incurred in connection with the acquisition of assets (including
obligations of such Person which are classified as long-term liabilities
in accordance with generally accepted accounting principles) in each case
having a final maturity of one or more than one year from the date of
origin thereof (or which, by the terms of the agreement creating the
obligation, is renewable or extendable at the option of the obligor for a
period or periods more than one year from the date of origin), including
all payments in respect thereof that are required to be made within one
year from the date of any determination of Funded Debt whether or not
included in Consolidated Current Liabilities;
(b) liabilities secured by any Lien existing on Property owned by
such Person (whether or not such liabilities have been assumed);
(c) Capitalized Rentals under any Capitalized Lease; and
(d) all Guarantees of Funded Debt of others, whether or not reflected
in the balance sheet of such Person.
"GUARANTY" shall mean for any Person all obligations of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or other
obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including obligations incurred through an agreement,
contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any Property or
assets constituting security therefor;
(b) to advance or supply funds:
(i) for the purchase or payment of such indebtedness or
obligation; or
(ii) to maintain working capital or other balance sheet condition
or any income statement condition or otherwise to advance or make
available funds for the purchase or payment of such indebtedness or
obligation;
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(c) to lease Property or to purchase Securities or other Property or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the primary obligor to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or obligation
of the primary obligor against loss in respect thereof.
For the purposes of all computations made under this Agreement, a Guaranty in
respect of any indebtedness for borrowed money shall be deemed to be an amount
of indebtedness equal to the portion of the principal amount of such
indebtedness for borrowed money which has been guaranteed, and a Guaranty in
respect of any other obligation or liability or any dividend shall be deemed to
be indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"HOLDERS" is defined in Section 1.1 hereof.
"INTEREST PAYMENT DATES" is defined in Section 1.1 hereof.
"INTEREST RATE EVENT PERIOD" shall mean any period during which the Company
fails to have outstanding unsecured long-term Indebtedness which has a then
current rating of BBB- or higher by Standard & Poor's Corporation.
"LIEN" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the pledge or deposit of Property, the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "LIEN" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this Agreement, the Company
or a Subsidiary shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes and such retention or
vesting shall be deemed to be a Lien.
"MAKE WHOLE PREMIUM" at any time with respect to any prepayment of the
Notes means to the extent that the Treasury Rate at such time is lower than the
original yield to maturity on the Notes, the excess of (a) the net present value
of the principal and interest payments on and in respect of the Notes being
prepaid that would otherwise become due and payable (without giving effect to
such prepayment) (including, without duplication, payment on final maturity)
discounted at a rate which is equal to the Treasury Rate over (b) the principal
amount of the Notes being prepaid at par. To the extent that the Treasury Rate
at the time of such payment is equal to or higher than 9.20%, the Make Whole
Premium is zero.
"NOTES" is defined in Section 1.1 hereof.
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"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"RESTRICTED PAYMENTS" is defined in Section 6.10 hereof.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"STOCKHOLDERS' EQUITY" shall mean the amount of the capital stock accounts
(less treasury stock) plus the surplus and retained earnings of the Company
determined in accordance with generally accepted accounting principles.
"SUBSIDIARY" shall mean any corporation of which more than 50% (by number
of votes) of the Voting Stock is owned and controlled by the Company and/or one
or more corporations which are Subsidiaries.
"TOTAL CAPITALIZATION" shall mean the sum of (a) Funded Debt of the Company
and its Subsidiaries, (b) deferred income taxes of the Company and its
Subsidiaries classified as long-term liabilities in accordance with generally
accepted accounting principles, and (c) Stockholders' Equity.
"TREASURY RATE" at any time with respect to any Notes being prepaid means
the sum of (i) .60%, plus (ii) the arithmetic mean of the yields to maturity of
United States Treasury obligations appearing under the respective headings "This
Week" and "Last Week" in the Statistical Release (as hereinafter defined) for
the week immediately preceding the date of the prepayment of the Notes with a
constant maturity (as compiled by and published in the most recently published
issue of the United States Federal Reserve Statistical Release designated
H.15(519) (the "STATISTICAL RELEASE") or its successor publication or, if such
statistical release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be designated by the
holders of 66-2/3% in aggregate principal amount of the Notes) most nearly equal
to the Weighted Average Life to Maturity of the Notes then being paid.
"VOTING STOCK" shall mean Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"WEIGHTED AVERAGE LIFE TO MATURITY" with respect to the Notes being prepaid
means, as at the time of determination, the number of years obtained by dividing
the then Remaining Dollar-years of the Notes being prepaid by the outstanding
principal amount of the Notes being prepaid. The term "Remaining Dollar-years"
of the Notes being prepaid means the
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product obtained by (a) multiplying (1) the amount of each then remaining
required principal repayment (including repayment at final maturity) of the
Notes being prepaid, by (2) the number of years (calculated to the nearest
one-twelfth) which will elapse between the time of determination and the date
such required repayment is due, and (b) rotating all the products obtained
in (a).
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary, all of the equity
Securities (except directors' qualifying shares) of which are owned by the
Company and/or the Company's other Wholly-Owned Subsidiaries.
SECTION 5.2. ACCOUNTING PRINCIPLES. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with generally
accepted accounting principles, to the extent applicable.
SECTION 5.3. DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 6. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
SECTION 6.1. CORPORATE EXISTENCE, ETC. The Company will preserve and
keep in force and effect its corporate existence and all licenses and permits
necessary to the proper conduct of its business, PROVIDED that the foregoing
shall not prevent any transaction permitted by Section 6.11.
SECTION 6.2. INSURANCE. The Company will maintain or cause to be
maintained insurance coverage by financially sound and reputable insurers in
such forms and amounts, including such deductibles and such provisions for
self-insurance, and against such risks as are customary for corporations of
established reputation engaged in the same or a similar business and owning
and operating similar properties.
SECTION 6.3. TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH
LAWS. The Company will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or
upon or in respect of all or any part of the Property or business of the
Company, all trade accounts payable in accordance with usual and customary
business terms, and all claims for work, labor or materials, which if unpaid
might become a Lien or charge upon any Property of the Company; PROVIDED the
Company shall not be required to pay any such tax, assessment, charge, levy,
account payable or claim if (a) the validity, applicability or amount thereof
is being contested in good faith by appropriate actions or proceedings which
will prevent the forfeiture or sale of any Property
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<PAGE>
of the Company or any material interference with the use thereof by the Company,
or (b) such nonpayment would not materially and adversely affect the properties,
business, prospects, profits or condition of the Company. The Company will
promptly comply with all laws, ordinances or governmental rules and regulations
to which it is subject, including without limitation, the Occupational Safety
and Health Act of 1970, the Employee Retirement Income Security Act of 1974 and
all laws, ordinances, governmental rules and regulations relating to
environmental protection in all applicable jurisdictions, the violation of any
of which would materially and adversely affect the properties, business,
prospects, profits or condition of the Company or would result in ANY LIEN OR
CHARGE UPON ANY Property of the Company.
SECTION 6.4. MAINTENANCE, ETC. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
Properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and
from time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
Section 6.5. Nature of Business. The Company will not engage in any
business if, as a result, the general nature of the business which would then
be engaged in by the Company would be substantially changed from the general
nature of the business engaged in by the Company on the date of this
Agreement.
SECTION 6.6. CURRENT RATIO. The Company will keep and maintain the ratio
of Consolidated Current Assets to Consolidated Current Liabilities at not
less than 1.10 to 1.0 at the end of each quarterly fiscal period of each
fiscal year of the Company.
SECTION 6.7. STOCKHOLDERS' EQUITY. The Company will not, at any time,
permit Stockholders' Equity to be less than the sum of (a) $170,000,000, plus
(b) an aggregate amount equal to 25% of its Consolidated Net Income (but, in
each case, only if a positive number) for each completed fiscal year
beginning with the fiscal year ended January 3, 1998.
SECTION 6.8. INCURRENCE OF DEBT. (a) Neither the Company nor any
Subsidiary will create, issue, assume, guarantee or otherwise incur or become
liable in respect of any Debt except:
(i) the Notes;
(ii) Debt of the Company and its Subsidiaries outstanding as of the
date of this Agreement and reflected on the consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 1996;
(iii) additional unsecured Debt of the Company; PROVIDED that at the
time of issuance thereof and after giving effect thereto and to the
application of the proceeds thereof Debt of the Company and its
Subsidiaries determined on a consolidated basis in
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<PAGE>
accordance with GAAP shall not, during any fiscal year set forth below,
exceed the percent of Total Capitalization set forth opposite such period:
<TABLE>
<CAPTION>
PERCENTAGE OF DEBT TO
FISCAL YEAR TOTAL CAPITALISATION
<S> <C>
1996 70%
1997 70%
1998 67.5%
1999 65%
2000 and thereafter 60%
</TABLE>
(iv) additional Debt of the Company and its Subsidiaries secured by
Liens permitted and incurred within the limitations of Section 6.9(a)(8) or
Section 6.9(a)(9); PROVIDED that at the time of issuance thereof and after
giving effect thereto and to m application of the proceeds thereof Debt of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP shall not, during any fiscal year set forth below,
exceed the percent of Total Capitalization set
forth opposite such period:
<TABLE>
<CAPTION>
PERCENTAGE OF DEBT TO
FISCAL YEAR TOTAL CAPITALIZATION
<S> <C>
1996 70%
1997 70%
1998 67.5%
1999 65%
2000 and thereafter 60%
</TABLE>
(v) Debt of a Subsidiary to the Company or to a Wholly-Owned
Subsidiary.
(b) Any corporation which becomes a Subsidiary after the date hereof
shall for all purposes of this Section 6.8 be deemed to have created, assumed
or incurred at the time it becomes a Subsidiary all Funded Debt of such
corporation existing immediately after it becomes a Subsidiary.
(c) The renewal, extension or refunding of any Funded Debt issued or
incurred in accordance with the limitations of Section 6.8(a) shall
constitute the issuance of additional Funded Debt, which is, in turn, subject
to the limitations of the applicable provisions of this Section 6.8.
SECTION 6.9. LIENS AND ENCUMBRANCES
(a) NEGATIVE PLEDGE. Neither the Company nor any Subsidiary will (i) cause
or permit, or (ii) agree or consent to cause or permit in the future (upon
the happening of a
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<PAGE>
contingency or otherwise), any of its Property, whether now owned or hereafter
acquired, to be subject to a Lien except:
(1) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, PROVIDED the payment
thereof is not at the time required by Section 6.3;
(2) Liens incurred or deposits made in the ordinary course of business
(i) in connection with workmen's compensation, unemployment insurance,
social security and other like laws, or (ii) to secure the performance of
letters of credit, bids, tenders, sales contracts, leases, statutory
obligations, surety, appeal and performance bonds and other similar
obligations not incurred in connection with the borrowing of money, the
obtaining of advances or the payment of the deferred purchase price of
Property;
(3) attachment, judgment and other similar Liens arising in connection
with court proceedings, PROVIDED the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings PROVIDED
FURTHER, the aggregate amount of all pledges or deposits made to stay the
execution or enforcement of such Liens of the Company and its Subsidiaries
does not exceed $1,000,000;
(4) Liens on Property of a Subsidiary, PROVIDED such Liens secure only
obligations owing to the Company or a Wholly-Owned Subsidiary;
(5) reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other similar title
exceptions or encumbrances affecting real Property, PROVIDED they do not
in the aggregate materially detract from the value of said Properties or
materially interfere with their use in the ordinary conduct of the owning
company's business;
(6) leases of Property other than Capitalized Leases;
(7) the Lien of mortgages, conditional sale contracts, security
interests or other arrangements for the retention of title (including
Capitalized Leases) existing as of the date of this Agreement, securing
Funded Debt of the Company or any Subsidiary outstanding on such date;
(8) the Lien of mortgages, conditional sale contracts, security
interests or other arrangements for the retention of title (including
Capitalized Leases) given to secure the payment of the purchase price or
the costs of construction or improvement of fixed assets useful and
intended to be used in carrying on the business of the Company or such
Subsidiary, as the case may be, including Liens existing on such fixed
assets at the time of acquisition thereof or at the time of acquisition
by the Company or a Subsidiary of any business entity then owning such
fixed assets, whether or not such existing Liens were given to secure the
payment of the purchase price of
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<PAGE>
the fixed assets to which they attach; PROVIDED that (A) the Lien or charge
shall attach solely to the fixed assets acquired, constructed or improved,
(B) at the time of acquisition, construction or improvement of such fixed
assets, the aggregate amount remaining unpaid on all indebtedness secured
by Liens on such fixed assets (whether or not assumed by the Company or
such Subsidiary), shall not be in excess (or 100% in the case of
Capitalized Leases) of the lesser of the total purchase price or fair
market value thereof at the time of acquisition, construction or
improvement of such fixed assets (as determined in good faith by the chief
financial officer of the Company), (C) the indebtedness secured by such
Liens is payable in equal monthly, quarterly, semi-annual or
annual installments and is not callable or subject to acceleration prior
to its stated maturity at the option of the lender for reasons unrelated
to the creditworthiness of the obligor or destruction of the collateral
thereof, and (D) the indebtedness secured by such liens shall have been
incurred within the applicable limitations of Section 6.8(a)(iv);
(9) Liens of mortgages, conditional sale contracts, security interests
or other arrangements for the retention of title (including Capitalized
Leases) in addition to the Liens permitted by preceding clauses (l) through
(8) hereof; PROVIDED that the indebtedness secured by such Liens permitted
by this Section 6.9(a)(9) at any one time outstanding shall not exceed 15%
of Total Capitalization; and
(10) any extension, renewal or replacement of any Lien permitted by the
foregoing clauses (7), (8) and (9) in respect of the same Property
theretofore subject to such Lien in connection with the extension, renewal
or refunding (without increases in principal amount) of the indebtedness
secured thereby which is permitted by the applicable provisions of
Section 6.8(a).
(b) Equal and Ratable Lien; Equitable Lien. In case any Property is
subjected to a Lien in violation of this Section 6.9, the Company will make or
cause to be made provision whereby the Notes will be secured equally and ratably
with all other obligations secured thereby and in any case the Notes shall have
the benefit, to the full extent that, and with such priority as, the holders may
be entitled thereto under applicable law, of an equitable Lien on such Property
so equally and ratably securing the Notes. Such violation of Section 6.9 shall
constitute an Event of Default hereunder, whether or not any such provision is
made pursuant to this Section 6.9(b).
SECTION 6.10. DIVIDENDS, STOCK PURCHASES. The Company will not except as
hereinafter provided:
(a) declare or pay any dividends, either in cash or Property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the Company); or
(b) directly or indirectly, or through any Subsidiary, purchase,
redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its
capital stock (other than in exchange for or out
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<PAGE>
of the net proceeds to the Company from the substantially concurrent issue
or sale of other shares of capital stock of the Company or warrants, rights
or options to purchase or acquire any shares of its capital stock); or
(c) make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options, and all such other
distributions being herein collectively called "Restricted Payments"), if after
giving effect thereto the aggregate amount of Restricted Payments made during
the period from and after June 17, 1989 to and including the date of the making
of the Restricted Payment in question, would exceed the sum of (i) $35,000,000,
(ii) 75% of Consolidated Net Income for such period, computed on a cumulative
basis for said entire period (or if such Consolidated Net Income is a deficit
figure, then minus 100% of such deficit), and (iii) the aggregate net cash
proceeds received by the Company from the issuance and sale of capital stock for
such period.
The Company will not declare any dividend which constitutes a Restricted
Payment payable more than 90 days after the date of declaration thereof.
For the purposes of this Section 6.10 the amount of any restricted payment
declared, paid or distributed in Property of the Company shall be deemed to be
the greater of the book value or fair market value (as determined in good faith
by the chief financial officer of the Company) of such Property at the time of
the making of the Restricted Payment in question.
SECTION 6.11. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Company will
not consolidate with, merge into, or sell, lease or otherwise dispose of its
properties as an entirety or substantially as an entirety to, any Person,
unless:
(a) the successor formed by or resulting from such consolidation or
merger or the transferee to which such sale, lease or other disposition
shall have been made shall be a solvent corporation organized under the
laws of the United States of America or a State thereof or the District of
Columbia, and after giving effect to such transaction, no Default or Event
of Default shall exist;
(b) such successor or transferee corporation shall expressly assume in
writing the due and punctual payment of the principal of and interest and
premium, if any, on the Notes, according to their tenor, and the due and
punctual performance and observance of all the terms, covenants, agreements
and conditions of the Notes and this Agreement and shall furnish the
holders of the Notes an opinion of counsel satisfactory to such holders to
the effect that the instrument has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in accordance with its
terms; and
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<PAGE>
(c) after giving effect to such consolidation or merger the Company
would be permitted to incur at least $1.00 of additional Funded Debt
under the provisions of Section 6.8(a)(iii).
SECTION 6.12. REPORTS AND RIGHTS OF INSPECTION. The Company will keep or
cause to be kept proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in relation to the
business and affairs of the Company in accordance with generally accepted
principles of accounting consistently applied and will furnish to you so long as
you are the holder of any Note and to each holder of 10% or more in aggregate
principal amount of then outstanding Notes (in duplicate if so requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any
event within 60 days after the end of each quarterly fiscal period
(except the last) of each fiscal year of the Company, copies of:
(i) a consolidated balance sheet of the Company and
its consolidated Subsidiaries as of the close of such period, and
(ii) consolidated statements of income and retained
earnings of the Company and its consolidated Subsidiaries for the
portion of the fiscal year ending with such period; in each case
setting forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail and certified by a chief financial officer of the Company as
complete and correct, subject to changes resulting from year-end
audit adjustments;
(b) ANNUAL STATEMENTS. As soon as available and in any event within
120 days after the close of each fiscal year of the Company, copies of:
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of income and retained earnings and
cash flows of the Company and its consolidated Subsidiaries for such
fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by a report
thereon by Ernst & Young L.L.P. or of other independent accountants of
recognized national standing selected by the Company to the effect that such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in which such accountants concur) and present fairly, in all material
respects, the financial condition of the Company and its Subsidiaries and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards and
accordingly, includes such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
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<PAGE>
(c) SEC AND OTHER REPORTS. Promptly upon their becoming
available, ONE copy of each regular financial statement or report, as
the Company shall send to its stockholders and of each regular and
periodic report, registration statement or prospectus filed by the
company with any securities exchange or the Securities and Exchange
Commission or any successor agency, it being understood that if and to
the extent that the Company's SEC Form 10Q and Form 10K or successor
forms are provided within the time periods prescribed by clauses (a) and
(b) above, the requirements of supplying the quarterly and annual
statements provided for in said clauses (a) and (b) shall be deemed to
have been met;
(d) NOTICE OF DEFAULT. Immediately upon becoming aware of the
existence of any condition or event which constitutes an event of
default, or event which with the lapse of time or giving of notice, or
both, would constitute an event of default, under this Agreement, a
written notice specifying the nature and period of existence thereof and
what action the Company is taking or proposes to take with respect
thereto;
(e) OFFICER'S CERTIFICATE. Within the period provided in
paragraph (b) above, a certificate of an authorized financial officer of
the Company stating: (i) that the signer thereof has reexamined the
terms and provisions of this Agreement and (ii) whether, to the best of
his knowledge (after due inquiry), there exists on the date of the
certificate any Default or Event of Default under this Agreement and, if
any such condition or event exists, specifying the nature and period of
existence thereof and the action the Company is taking and proposes to
take with respect thereto; and
(f) REQUESTED INFORMATION. Such additional information as you
or any such holder may reasonably request concerning the Company.
Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each institutional holder of 10% or more in
aggregate principal amount of the then outstanding Notes (or such Persons as
either you or such holder may designate), under the Company's guidance, to
examine all the books of account, records, reports and other papers of the
Company, to make copies and extracts therefrom as is reasonably necessary for
the purposes hereof, and to discuss its affairs, finances and accounts with its
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss with you the finances and affairs of the
Company) all at such reasonable times and as often as may be reasonably
requested. Any information obtained by you or such other holder from such
examination or discussion will be treated as confidential unless and until such
information has been publicly disclosed by the Company; PROVIDED, HOWEVER, that
nothing herein contained shall limit or impair the right or obligation of
yourself or such other holder to disclose such information when required by law
or to appropriate regulatory authorities having jurisdiction over your or its
affairs or to use the same in connection with the enforcement of the terms and
conditions of this Agreement. The Company shall not be required to pay or
reimburse you or any such holder for expenses which you or any such holder may
incur in connection with any such visitation or inspection.
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<PAGE>
SECTION 6.13. REPURCHASE OF NOTES. Neither the Company nor any Subsidiary,
directly or indirectly through an Affiliate or otherwise, may repurchase or make
any offer to repurchase any Notes unless the offer has been made to repurchase
Notes, pro rata, from all holders of the Notes at the same time and upon the
same terms. In case the company repurchases any Notes such Notes shall
thereafter be canceled and no Notes shall be issued in substitution therefor.
SECTION 6.14. TERMINATION OF PENSION PLANS. The Company will not permit any
employee benefit plan maintained by it to be terminated in a manner which could
result in the imposition of a Lien on any Property of the Company pursuant to
Section 4068 of the Employee Retirement Income Security Act of 1974, as amended.
SECTION 6.15. TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Subsidiary to, enter into or be a party to, any transaction or
arrangement with any Affiliate (including without limitation, the purchase from,
sale to or exchange of property with, or the rendering of any service by or for,
any Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person other than an
Affiliate.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
SECTION 7.1. EVENTS OF DEFAULT. Any one or more of the following shall
constitute an Event of Default as the term is used herein:
(a) default in the payment of interest on any Note when the same shall
have become due and such default shall continue for more than five days;
or
(b) default in the payment of principal or premium, if any, on any
Note when the same shall have become due; or
(c) default shall occur in the observance or performance of the
covenants or agreements contained in Sections 6.6 through 6.11; or
(d) default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) such default shall first become known to any executive
officer of the Company or the chief financial officer of the Company, or
(2) notice of such default of any holder of the Notes to any officer of
the Company; or
(e) any representation or warranty made by the Company herein, or made
by the Company in any statement or certificate furnished by the Company in
connection with the consummation of the issuance and sale of the Notes or
furnished by the Company pursuant hereto proves untrue or misleading in any
material respect as of the date of the issuance or making thereof; or
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<PAGE>
(f) the Company or any Subsidiary fails to make any payment of
principal and/or interest in respect of any indebtedness for borrowed
money aggregating more than $10,000,000 in original principal amount or
any event shall occur (other than the mere passage of time) or any
condition shall exist in respect of any indebtedness for borrowed money
aggregating more than $10,000,000 in original principal amount of the
Company or any Subsidiary, or under any agreement securing or relating
to such indebtedness, the effect of which is to cause such indebtedness
to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment; or
(g) the Company becomes insolvent or bankrupt, is generally
not paying its debts as they become due or makes an assignment for the
benefit of creditors, or the Company causes or suffers an order for
relief to be entered with respect to it under applicable Federal
bankruptcy law or applies for or consents to the appointment of a
custodian, trustee or receiver for the Company or for the major part of
the Property of either; or
(h) a custodian, trustee or receiver is appointed for the
Company or for the major part of the Property of the Company and is not
discharged within 90 days after such appointment; or
(i) final judgment or judgments for the payment of money
aggregating in excess of $500,000 is or are outstanding against the
Company or against any of the Property or assets of the Company and any
one of such judgments has remained unpaid, unvacated, unbonded or
unstayed by appeal or otherwise for a period of 30 days from the date of
its entry; or
(j) bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company and, if instituted against the Company, are
consented to or are not dismissed within 60 days after such institution.
SECTION 7.2. NOTICE TO HOLDERS. When any Event of Default described in the
foregoing Section 7.1 has occurred, the Company agrees to give notice within
seven business days of such event to all holders of the Notes then outstanding,
such notice to be in writing and sent by registered or certified mail or by
telegram.
SECTION 7.3. DEFAULT REMEDIES. When any Event of Default described in
subparagraphs (a) or (b) of Section 7.1 has occurred and is continuing, any
holder of any Note may, and when any Event of Default described in subparagraphs
(c) through (i), inclusive, of Section 7.1 has happened and is continuing, the
holder or holders of 35% or more of the principal amount of Notes at the time
outstanding may exercise any right, power or remedy permitted to such holder or
holders at law or in equity and shall have, in particular, without limiting the
generality of the foregoing, the right, by notice in writing sent by registered
or certified mail to the Company, to declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable without any presentment, demand, protest or other
notice of any kind, all of which
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are hereby expressly waived. When any Event of Default described in subparagraph
(j) of Section 7.1 has occurred, then all outstanding Notes shall immediately
become due and payable without presentment, demand or notice of any kind. Upon
the Notes becoming due and payable as a result of any Event of Default as
aforesaid, the Company will forthwith pay to the holders of the Notes the entire
principal and interest accrued on the Notes and to the extent permitted by law,
a premium equal to the then applicable Make Whole Premium. No course of dealing
on the part of any holder of the Notes nor any delay or failure on the part of
any such holder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to the holder or holders
of the Notes all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including reasonable compensation
to such holder's or holders' attorneys for all services rendered in connection
therewith.
SECTION 7.4. RESCISSION OF ACCELERATION. The provisions of Section 7.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(i), inclusive, of Section 7.1, the holders of 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
PROVIDED that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under Section 7.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to Section 8.1;
and PROVIDED FURTHER, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS.
SECTION 8.1. AMENDMENTS AND WAIVERS. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holders of at least 66-2/3% in aggregate principal
amount of outstanding Notes; PROVIDED, HOWEVER, that without the written consent
of the holders of all the Notes then outstanding no such waiver, modification,
alteration or amendment shall be effective (a) which will extend the time of
payment of the principal of or the interest on any Note or reduce the principal
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amount thereof or change the rate of interest thereon, or (b) which will change
any of the provisions of Section 2 in respect of optional prepayments or (c)
which will change the percentage of holders of the Notes required to consent to
any such amendment, alteration or modification or any of the provisions of this
Section 8 or Section 7.
SECTION 8.2. BINDING EFFECT. Any such amendment or waiver shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Company, whether or not such Note
shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waive or impair any right consequent thereon.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. REGISTERED NOTES. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register"), and the Company will register or
transfer or cause to be registered or transferred, as hereinafter provided and
under such reasonable regulations as it may prescribe, any Note issued pursuant
to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may transfer such Note, upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by such registered
holder or its attorney authorized in writing.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement and
the Company shall not be affected by any notice or knowledge to the contrary.
Payment of or on account of the principal, premium, if any, and interest on any
such Note shall be made to or upon the written order of such registered holder.
SECTION 9.2. EXCHANGE FOR DIFFERENT DENOMINATIONS. The Company will, at any
time and from time to time, upon not less than 30 days notice to that effect
given by the holder of any Note initially delivered or of any Note substituted
therefor pursuant to Section 9.1, this Section 9.2 or to Section 9.3, and, upon
surrender of such Note at its office, deliver in exchange therefor, without
expense to the holder, except as set forth below, Notes for the same aggregate
principal amount as the then unpaid principal amount of the Note so surrendered
and, as nearly as possible, in the denomination of $100,000 or any amount in
excess thereof as such holder shall specify, dated as of the date to which
interest has been paid on the Note so surrendered or, if such surrender is prior
to the payment of any interest thereon, then dated the date of original issuance
of Notes hereunder, registered in the name of such Person or Persons as may be
designated by such holder, and otherwise of the same form and tenor as the Notes
so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
-23-
<PAGE>
SECTION 9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
any Note, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and cancellation of the Note, the Company will make and
deliver a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. The Company may require the payment of a sum sufficient to
cover any stamp tax or governmental charge imposed upon such reissuance. If a
Holder or any subsequent institutional holder is the owner of any such lost,
stolen or destroyed Note, then the affidavit of the President, a Vice
President or other responsible officer of such owner, setting forth the fact
of loss, theft or destruction and of its ownership of the Note at the time of
such loss, theft or destruction shall be accepted as satisfactory evidence
thereof and no indemnity shall be required as a condition to execution and
delivery of a new Note other than the written agreement of such owner to
indemnify and hold the Company harmless.
SECTION 9.4. EXPENSES, STAMP TAX INDEMNITY. The Company agrees to pay all
expenses in connection with the issuance, sale and delivery to you of the Notes,
including the cost of shipping the same to you at your home office or such other
place as you may specify. Whether or not the purchase herein contemplated shall
be consummated, the Company agrees to reimburse you for all of your
out-of-pocket expenses, including, but not limited to, the reasonable charges
and disbursements of your special counsel in connection with the transaction
contemplated by this Agreement and all of your out-of-pocket expenses relating
to any amendments of this Agreement or waivers or consents pursuant to the
provisions hereof or thereof, including, without limitation, any amendments,
waivers or consents resulting from any work-out, restructuring or similar
proceedings relating to the performance by the Company of its obligations under
this Agreement and the Notes. The Company agrees to indemnify and hold you
harmless from any liability on account of stamp and other taxes, if any, which
may be payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes. The Company further
agrees to protect and indemnify you against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement.
SECTION 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to and are not exclusive of any rights or remedies
any such holder would otherwise have, and no waiver or consent, given or
extended pursuant to Section 8 hereof shall extend to or affect any obligation
or right not expressly waived or consented to.
SECTION 9.6. NOTICES. All communications provided for hereunder shall be in
writing and mailed by registered or certified mail or by overnight carrier in
each case prepaid and if to you, addressed to you at your address appearing on
Schedule I to this Agreement or such other address as you or the subsequent
holder of any Note initially issued to you, may
-24-
<PAGE>
designate to the Company in writing, or if to the Company, addressed to the
Company, at 7600 France Avenue South, Minneapolis, Minnesota 55440-0355,
Attention: Treasurer, or to such other address as you or the Company shall
designate by written notice to the other.
SECTION 9.7. SUCCESSORS AND ASSIGNS. This Agreement and all covenants
herein contained shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereunder.
SECTION 9.8. SURVIVAL OF REPRESENTATIONS. All covenants, representations
and warranties made by the Company herein and in any certificates delivered
pursuant hereto, whether or not in connection with the closing, shall survive
the closing and the delivery of this Agreement and the Notes.
SECTION 9.9. SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
thereof eliminated and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of this Agreement
without including therein any such part, parts, or portion which may, for any
reason, be hereafter declared invalid.
SECTION 9.10. GOVERNING LAW. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with
Minnesota law.
SECTION 9.11. CAPTIONS. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
-25-
<PAGE>
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one Agreement.
NASH-FINCH COMPANY
By: /s/ ALFRED N. FLATEN
--------------------------------
Its PRESIDENT
-----------------------------
The foregoing Agreement is hereby confirmed and accepted.
NATIONWIDE LIFE INSURANCE COMPANY
By:
--------------------------------
Its
-----------------------------
-26-
<PAGE>
NASH-FINCH COMPANY
PROFIT SHARING PLAN
1994 REVISION
THIRD DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.1 of the
instrument entitled "Nash-Finch Company Profit Sharing Plan -- 1994 Revision,"
the undersigned hereby amends such instrument in the manner described below.
1. A new Exhibit C is added thereto in the form attached hereto.
2. Section 5.2 thereof is amended to read as follows:
"5.2 INVESTMENT DIRECTIONS. (A) Each new Participant will direct the
manner in which contributions to his or her Accounts will be invested among
the investment funds maintained pursuant to Section 5.1. Investment
directions must be made in five percent increments and may be made
separately with respect to the Participant's Pre-Tax Contribution Account
and with respect to the aggregate of his or her Profit Sharing Contribution
and Rollover Accounts. Each direction must be made, in accordance with
Plan Rules, in conjunction with the Participant's enrollment in the Plan.
To the extent a Participant fails to direct Account investments, the
Accounts will be invested in accordance with Plan Rules.
(B) A Participant may direct a change in the manner in which his or
her Accounts will be invested among the investment funds maintained
pursuant to Section 5.1. Such a direction is subject to the rules set
forth in Subsection (A), and will be effective as soon as administratively
practicable after the Trustee receives the direction from the Participant
in accordance with Plan Rules.
(C) Plan Rules will include procedures that provide Participants
with the opportunity to obtain written confirmation of investment
directions made pursuant to this section."
3. Section 12.27 thereof is amended to read as follows:
"12.27 QUALIFIED EMPLOYEE. A 'Qualified Employee' is any individual who
performs services for a Participating Employer as a common-law employee and
is classified by the Participating Employer at the time the services are
performed as a common-law employee (without regard to any subsequent
reclassification), excluding however, any such individual who is -
(a) covered by a collective bargaining agreement, for whom
retirement benefits were the subject of good faith bargaining between such
person's representative
<PAGE>
and the Participating Employer, and who is not, as a result of such
bargaining, specifically covered by this Plan; or
(b) a nonresident alien who receives no earned income (within the
meaning of Code section 911(d)(2)) from a Participating Employer that
constitutes income from sources within the United States (within the
meaning of Code section 861(a)(3)).
In addition, any individual who performs services for Bellefontaine IGA
Federal as a common-law employee, is classified by Bellefontaine IGA
Federal at the time the services are performed as a common-law employee
(without regard to any subsequent reclassification) and was a participant
in the Super Food Services, Inc. 401(k) Savings Plan on March 31, 1997 is a
Qualified Employee for purposes of the Plan and Bellefontaine IGA Federal
is a Participating Employer with respect to such an individual. To the
extent required by the Code or Treasury Regulations, the limitations in
Article IX will be applied to Participants who are Qualified Employees of
Bellefontaine IGA Federal as if such Participants participated in a
separate plan maintained by an employer that is not an Affiliated
Organization.
The foregoing amendments are effective as of April 1, 1997.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by
its duly authorized officers and its corporate seal to be affixed hereto this
27th day of March, 1997.
NASH FINCH COMPANY
Attest:/s/ Norman R. Soland By /s/ Alfred N. Flaten
---------------------- --------------------------
Secretary President
2
<PAGE>
NASH-FINCH COMPANY
PROFIT SHARING PLAN
EXHIBIT C
SPECIAL RULES APPLICABLE TO CERTAIN FORMER PARTICIPANTS
IN THE SUPER FOOD SERVICES, INC. 401(k) SAVINGS PLAN
This exhibit sets forth special rules applicable to Participants whose account
balances under the Super Food Services, Inc. 401(k) Savings Plan (the "Super
Food Plan") were transferred to the Trust in connection with the merger of the
Super Food Plan with an into the Plan effective as of March 31, 1997 (the
"Merger"). For purposes of this exhibit, such a Participant is referred to as a
"Super Food Participant."
1. ACCOUNTS. The balance of a Super Food Participant's accounts under the
Super Food Plan will be transferred to Accounts under the Plan as follows:
(a) The balance of the Super Food Participant's "before-tax
contributions account" under the Super Food Plan, if any, will be transferred to
his or her Pre-Tax Contribution Account; and
(b) The balance of the Super Food Participant's "rollover account" under
the Super Food Plan, if any, will be transferred to his or her Rollover Account.
2. LOANS. Any loan outstanding under the Super Food Plan at the time of the
Merger will remain outstanding under the Plan in accordance with the terms of
such loan. No new loans will be made or permitted on or after the date of the
Merger.
3. PRIOR ACTIONS. Beneficiary designations and related spousal consents made
pursuant to the Super Food Plan prior to the Merger and in effect as of the date
of the Merger will remain in effect for purposes of the Plan until revoked or
withdrawn or otherwise made void pursuant to the terms of the Plan.
<PAGE>
NASH-FINCH COMPANY
PROFIT SHARING PLAN
1994 REVISION
FOURTH DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of the
instrument entitled "Nash-Finch Company Profit Sharing Plan -- 1994 Revision,"
the undersigned hereby amends the said instrument in the manner described below.
1. Section 2.1 thereof is amended by adding a new Subsection (D) which reads
as follows:
"(D) Notwithstanding Subsection (A)(3), a Qualified Employee on
January 1, 1998 who either
(1) was a participant in the Retirement Plan for Employees of
Super Food Services, Inc. on December 31, 1997 or
(2) had attained age 21 and completed one 'year of service,'
as defined in the Retirement Plan for Employees of Super Food
Services, Inc., on January 1, 1998,
is eligible to participate in the Plan on January 1, 1998 for the purpose
of being eligible to share in the allocation of the Profit Sharing
Contribution made pursuant to Section 3.2."
2. Section 3.2(B) thereof is amended by adding thereto a new final sentence
which reads as follows:
"Notwithstanding the foregoing provisions of this Subsection (B), a
Participant will not be eligible to share in his or her Participating
Employer's Profit Sharing Contributions if the Participant either (i) is
covered by a collective bargaining agreement between the Participant's
bargaining representative and a Participating Employer unless the
collective bargaining agreement expressly provides that the Profit Sharing
Contribution provisions of the Plan are applicable to Participants covered
by the collective bargaining agreement or (ii) was a participant in the
Retirement Plan for Employees of Super Food Services, Inc. on December 31,
1997, who attained age 55 on or before December 31, 1997 and was an
employee of a Participating Employer on December 31, 1997."
3. Section 3.2 thereof is amended by adding thereto a new Subsection (F) which
reads as follows:
"(F) In addition to the Profit Sharing Contribution allocation to
which a Participant may be entitled pursuant to the foregoing subsections
of this Section 3.2, for each Plan Year beginning after 1997 and ending
before 2003, the Participating Employer of an "eligible Participant," as
defined in clause (3) of this Subsection (F), who satisfies the eligibility
requirements set forth in Subsection (B) for the Plan Year will make a
contribution on behalf of the eligible Participant, which will be allocated
to the eligible Participant's Profit Sharing
<PAGE>
Account, in the amount determined under clause (1) or clause (2) of this
Subsection (F), whichever is applicable.
(1) If, on or before December 31, 1997, the eligible Participant had
attained age 40 but had not yet attained age 50, subject to the limitations
of Article IX and the Company's retained authority to amend and terminate
the Plan, the amount of the additional contribution made on the eligible
Participant's behalf for a Plan Year pursuant to this Subsection (F) will
be equal to the percentage of the eligible Participant's Eligible Earnings
for the Plan Year specified in the following table.
<TABLE>
<CAPTION>
AMOUNT OF CONTRIBUTION AS A
PLAN YEAR PERCENTAGE OF ELIGIBLE EARNINGS
--------- -------------------------------
<S> <C>
1998 3%
1999 3%
2000 2%
2001 1%
2002 1%
</TABLE>
(2) If, on or before December 31, 1997, the eligible Participant had
attained age 50 but had not yet attained age 55, subject to the limitations
of Article IX and the Company's retained authority to amend and terminate
the Plan, the amount of the additional contribution made on the eligible
Participant's behalf for a Plan Year pursuant to this Subsection (F) will
be equal to the percentage of the eligible Participant's Eligible Earnings
for the Plan Year specified in the following table.
<TABLE>
<CAPTION>
AMOUNT OF CONTRIBUTION AS A
PLAN YEAR PERCENTAGE OF ELIGIBLE EARNINGS
--------- -------------------------------
<S> <C>
1998 5%
1999 4%
2000 3%
2001 2%
2002 1%
</TABLE>
(3) An eligible Participant is a Participant who
(a) was a participant in the Retirement Plan for Employees of
Super Food Services, Inc. on December 31, 1997, and
(b) had attained age 40 but had not attained age 55 on or before
December 31, 1997, and
(c) was an employee of a Participating Employer on January 1,
1998."
<PAGE>
4. Section 10.6 thereof is amended by adding thereto a new final sentence
which reads as follows:
"Service completed as an employee of Super Food Services, Inc., or any
wholly owned subsidiary thereof after it became a wholly owned subsidiary,
prior to the date on which Super Food Services, Inc. became an Affiliated
Organization, will be taken into account under the Plan for all purposes in
accordance with the provisions of this article but only with respect to any
individual who was an Employee on January 1, 1998."
5. Section 12.27 thereof is amended to read as follows:
"12.27 QUALIFIED EMPLOYEE. A "Qualified Employee" is any individual who
performs services for a Participating Employer as a common-law employee
and is classified by the Participating Employer at the time the services
are performed as a common-law employee (without regard to any subsequent
reclassification), excluding however, any such individual who is -
(a) covered by a collective bargaining agreement, for whom retirement
benefits were the subject of good faith bargaining between such person's
representative and the Participating Employer, and who is not, as a result
of such bargaining, specifically covered by this Plan; or
(b) a nonresident alien who receives no earned income (within the
meaning of Code section 911(d)(2)) from a Participating Employer that
constitutes income from sources within the United States (within the
meaning of Code section 861(a)(3)).
For Plan Years beginning after 1997, any individual who performs services
for Bellefontaine IGA Federal Credit Union as a common-law employee is
not a Qualified Employee and the Accounts of any Participant who is an
employee of Bellefontaine IGA Federal Credit Union will be treated in the
same manner as if the employee transferred employment to an Affiliated
Organization that had not adopted the Plan."
The foregoing amendments are effective as of January 1, 1998.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by
its duly authorized officers and its corporate seal to be affixed hereto this
12th day of December, 1997.
NASH FINCH COMPANY
Attest: /s/ NORMAN R. SOLAND By: /s/ ALFRED N. FLATEN
---------------------------- ----------------------------
Secretary President
<PAGE>
NASH-FINCH COMPANY
PROFIT SHARING PLAN
1994 REVISION
FIFTH DECLARATION OF AMENDMENT
Pursuant to the retained power of amendment contained in Section 11.2 of
the instrument entitled "Nash-Finch Company Profit Sharing Plan -- 1994
Revision," the undersigned hereby amends Section 8.1 of said instrument
by substituting "$5000" for "$3500" each place it appears therein.
The foregoing amendment is effective as of January 1, 1998.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized officers and its corporate seal to be
affixed hereto this 24th day of February, 1998.
NASH FINCH COMPANY
Attest: /s/ NORMAN R. SOLAND By: /s/ ALFRED N. FLATEN
---------------------------- ----------------------------
Secretary President
<PAGE>
NASH FINCH COMPANY and Subsidiaries
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion of the Company's results of operations and financial condition
should be read in conjunction with the Consolidated Financial Statements and
accompanying notes.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues ......................... 100.0% 100.0% 100.0%
-----------------------------------------------
-----------------------------------------------
Gross margin ........................... 12.9 13.1 14.5
Selling, general and administrative,
and other operating expenses ...... 10.3 10.7 12.1
Special charges ........................ .7 -- --
Depreciation and amortization .......... 1.1 1.0 1.0
Interest expense ....................... .7 .4 .4
Earnings before income taxes ........... -- 1.0 1.0
Income taxes ........................... -- .4 .4
-----------------------------------------------
Net earnings ........................... -- .6 .6
-----------------------------------------------
-----------------------------------------------
</TABLE>
REVENUES
Total revenues increased 30.1% during fiscal 1997 to $4.392 billion compared
to $3.375 billion in 1996 and $2.889 billion in 1995. The increase in 1997 is
largely attributed to the acquisition of Super Food Services, Inc. ("Super
Food"), which took place during fiscal 1996 (see Note (2) of Notes to
Consolidated Financial Statements), the addition of new independent retail
accounts and an additional week of operations in 1997.
Wholesale segment revenues increased 41.9% to $3.503 billion from $2.469
billion in 1996, primarily due to the acquisitions of Super Food and T. J.
Morris Company ("T. J. Morris") in 1996 and the business and certain assets of
United-A.G. Cooperative Inc. ("United-A.G.") in fiscal 1997. Wholesale revenues
include an additional week of business and reflect a full year's volume from
Sunshine Food Markets, a seven-store chain which the Company began servicing in
November 1996, following its acquisition by a joint venture, 50% of which is
owned by the Company. Fiscal 1996 revenues increased 25.4% over 1995 because of
the expansion of business from acquisitions, in particular Military Distributors
of Virginia ("MDV") which occurred in January 1996.
Retail segment revenues declined 3.3% from $850.4 million in fiscal 1996 to
$822.2 million in 1997. The decline is attributed to a net reduction of nine
stores. During the year, the Company closed eight underperforming stores, sold
four other units to non-affiliated retailers and opened three stores to
strengthen existing market areas in South Dakota and North Carolina. Same store
sales, expressed on an equivalent 52-week basis, declined .9% compared to last
year. This decline is indicative of competitive market conditions in certain
market areas and little or no food price inflation. Retail revenues during 1996
decreased 1.1% from 1995, again due to the closing or selling of stores not
meeting performance expectations.
GROSS MARGINS
Gross margins were 12.9% in 1997, compared to 13.1% in 1996 and 14.5% in 1995.
The decline over the three-year period results from the growth of wholesale
revenues which achieve lower margins than retail. Wholesale operations
represented 80.0% of combined segment revenues in 1997, compared to 73.3% and
68.4% in 1996 and 1995, respectively. During 1997, wholesale margins increased
as a result of three initiatives: (i) regionalizing procurement functions for
the Company's Midwest and Southeast distribution centers, (ii) implementing more
efficient logistical systems for handling of variety or specialty food products
through the Company's distribution centers, and (iii) improving coordination
with suppliers to optimize ordering and delivery of product. All these have
contributed to improved operating efficiencies and lower product costs.
Retail margins for the year were flat. Improvements which resulted from a
continued trend of sales of higher margin prepared foods, specialty products and
services were offset by competitive pricing pressures which continued to
intensify in certain market areas.
Margins for fiscal 1995 reflect a greater proportion of retail segment
business which achieves higher margins.
OPERATING EXPENSES
Selling, general and administrative expenses as a percent of total revenues
were 10.3% in 1997 compared to 10.7% in 1996 and 12.1% in 1995. The decline in
expense levels as a percent of revenues is due to the increasing proportion of
wholesale business which operates at lower expense levels than retail.
For fiscal 1997, operating expense includes costs associated with a project
involving new business information systems technology, which the Company has
named HORIZONS. Although the project began in fiscal 1996, incremental expenses
associated with HORIZONS were of greater significance throughout 1997 as costs
associated with system design, software configuration and installation of
hardware across the Company were incurred. Operating expenses related to the
Company's management information systems were $3.2 million higher in 1997
compared to 1996, substantially all of which related to HORIZONS. This
incremental expenditure is expected to continue through 1998 and into 1999 as
the Company implements HORIZONS in substantially all operating units and trains
associates in the optimal use of the system. Because HORIZONS is anticipated to
become an integral part of the future of Nash Finch's business, incremental
technology-related spending is anticipated to continue beyond 1999 although at a
lesser rate.
The Company expects benefits from the project to begin to accrue as the system
becomes operational unit by unit, and to reach more significant levels beyond
1999 when the system is in place in substantially all operating units. The
project represents a major strategic investment for the Company's future and is
expected to provide greater flexibility to ultimately change business processes,
thereby improving efficiency and effectiveness.
Bad debt expense in 1997 was $5.1 million compared to $1.9 million in 1996.
The increase is attributed to maintaining adequate reserve levels consistent
with the growth, through acquisition, of customer receivables. Fiscal 1995
expense of $4.0 million included additional provisions primarily for Nash DeCamp
grower accounts and notes.
SPECIAL CHARGES
During 1997, the Company accelerated its strategic plan relative to
strengthening its competitive position for the future. Coincident with the
implementation of the plan, the Company recorded special charges, totaling $31.3
million, during the third quarter relating to all three operating segments of
its business.
The aggregate special charges include $14.5 million for the consolidation of
selected warehouses. This charge contains provisions for non-cancelable lease
obligations, expected losses on disposals of tangible assets, and other
continuing occupancy costs. Also included are employee severance costs
consistent with existing practices and the unamortized portion of goodwill for
one of the locations.
Also, related to wholesale operations, the special charges include $2.5
million of integration costs, incurred in the third quarter,
14
<PAGE>
NASH FINCH COMPANY and Subsidiaries
associated with the acquisition of the business and certain assets of
United-A.G. early in the third quarter. These expenses resulted from incremental
labor costs due to a substantial turnover in workforce, training and other
start-up activities. Stabilization of the workforce improved substantially
during the fourth quarter, lowering expenses from levels experienced just after
the acquisition.
In retail operations, the strategic plan involves the closing or consolidation
of fourteen, primarily leased stores. The special charges include a $5.2 million
provision for the continuing non-cancelable lease obligations, anticipated
losses on disposals of tangible assets, abandonment of certain leaseholds and
the write-off of intangibles. The time frame for individual store closings will
vary but should be completed by the first quarter of fiscal 1999. In some
instances, closed stores are expected to be consolidated with other retail
locations in the same relative market area, thereby minimizing the loss of
wholesale volume.
Continued operating losses through the dates of closing are unpredictable and
were not included in the special charges. For 1997, the retail units included in
the provision had aggregate sales and pretax losses of $82.9 million and $2.7
million, respectively, compared with $88.3 million and $1.8 million for 1996.
The aggregate special charges contain a provision of $5.4 million for asset
impairment of seven retail stores. Declining market share due to increasing
competition, deterioration of operating performance in the third quarter, and
forecasted future results that were less than previously planned, were the
factors leading to the impairment determination. The impaired assets covered by
the charge primarily include real estate, leasehold improvements and, to a
lesser extent, goodwill related to two of the stores.
An asset impairment charge of $1.0 million relating to agricultural assets was
also recorded against several farming operations of Nash DeCamp, the Company's
produce marketing subsidiary. The impairment determination was based on recent
downturns in the market for certain varieties of fruit. The impairment resulted
from anticipated future operating losses and inadequate projected cash flows
from agricultural production of these products.
Other special charges aggregating $2.8 million consist primarily of $.9
million related to the abandonment of current system software which is being
replaced by the Company's HORIZONS project, and a loss of $.6 million realized
on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a
Hungarian food wholesaler. Negotiations for the sale were substantially
completed during the third quarter, and the transaction was completed in the
fourth quarter. The remaining special charges relate principally to writing down
idle real estate held for resale to current market values.
The consolidations of wholesale and retail operations, as well as the
impairment adjustment to the assets identified, will favorably impact earnings
in the future due to reduced depreciation and amortization expenses and the
elimination of losses from certain affected operations. However, such amounts
are expected to be substantially offset by continuing costs related to HORIZONS.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased 37.2% from 1996 to $47.7
million in 1997. The increase was primarily due to a full year of amortization
of goodwill and depreciation of property, plant and equipment associated with
the acquisition of Super Food which occurred in 1996.
In addition, capital expenditures related to the HORIZONS project resulted in
increased depreciation expense of $2.0 million compared to last year. The
increase in 1996 compared to 1995 is the result of acquisitions occurring in
1996, partially offset by lower depreciation expenses resulting from sale or
closing of several retail stores.
INTEREST EXPENSE
Interest expense increased from $14.9 million to $32.8 million largely due to
the full year debt costs related to financing the Super Food acquisition last
year. The acquisition of the business and certain assets of United-A.G. also
contributed to higher interest expense in 1997. Interest expense as a percent of
revenues was .75%, .44% and .37% for 1997, 1996 and 1995, respectively.
The increase in interest expense in 1996 compared to 1995 was primarily due to
financing the acquisition of MDV early in 1996.
EARNINGS (LOSS) BEFORE INCOME TAXES
Including the special charges, the Company reported a pretax loss of $234,000
for 1997 compared to pretax earnings of $33.7 million in 1996 and $28.6 million
in 1995. Each segment of the Company's business was negatively affected by these
charges (see Note (14) of Notes to Consolidated Financial Statements). Operating
profit of $26.2 million in 1997 declined 44.1% from $46.9 million in 1996, while
1996 improved 28.2% compared to $36.6 million in 1995.
Excluding special charges, wholesale segment operating profit would have been
$50.8 million, or 1.45% of segment sales and other operating revenues, compared
to $37.1 million, or 1.5% of such revenues a year ago. The lower margin reflects
a decline in earnings as a percent of revenues for the existing and newly
acquired wholesale operations, where independent retail customers were affected
by a weak sales environment, somewhat offset by increases in earnings
contributions of the military division.
Retail segment operating profit before special charges would have been $5.8
million compared to $7.7 million last year. The decline resulted from
competitive pricing pressures in certain markets throughout the year, and the
loss of sales volume due to the sale or closure of certain underperforming
stores.
Nash DeCamp, the Company's produce marketing subsidiary would have reported
operating profit of $934,000 before special charges compared to $2.1 million and
$2.4 million in 1996 and 1995, respectively. The weak performance resulted from
poor market prices caused by a surplus of available product, particularly tree
fruit.
INCOME TAXES
The effective income tax rate for 1997 is influenced by a number of factors
that do not allow for a meaningful comparison to prior years. The tax provision
substantially results from the nondeductibility of goodwill relating to the
acquisitions of Super Food and T. J. Morris, partially offset by other items as
shown in tax rate tables in Note (6) of Notes to Consolidated Financial
Statements.
YEAR 2000 COMPLIANCE
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
15
<PAGE>
NASH FINCH COMPANY and Subsidiaries
The Company uses a significant number of computer software programs and
embedded operating systems that are essential to its business. The Company's
resolution to the year 2000 issue is substantially incorporated in the system
design of the HORIZONS project. In addition, since all segments of the Company
will not be initially impacted by HORIZONS, the Company has been actively
engaged in a process designed to mitigate any detrimental effects from the year
2000 to any of these segments.
The Company has also initiated communications with its significant suppliers
and large customers with whom the Company's systems interface, exchange data or
are dependent upon, for the purpose of coordinating efforts to minimize its
vulnerability resulting from third parties' failure to resolve their own year
2000 issues. However, there can be no guarantee that the systems of such third
parties will be timely corrected and would not have an adverse effect on the
Company's system. The Company expects to be completed with year 2000 compliance
in mid-1999 and believes that with the HORIZONS project and modifications of its
existing software and systems, year 2000 compliance will not pose significant
operating problems. However, the Company's business, results of operations or
financial condition could be adversely affected by the failure of its system, or
others' systems, to operate properly beyond 1999. Wherever possible, the Company
will be developing and executing contingency plans designed to allow continued
operation in the event of failure of the Company's or other third party systems.
Costs associated with a substantial portion of year 2000 compliance coincide
with the new software and system design of the HORIZONS project. The cost of
year 2000 compliance for business operations not affected by HORIZONS is not
expected to have a material effect on results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital needs through a combination
of internal and external sources. These sources include cash flow from
operations, short-term bank borrowings, various types of long-term debt, lease
and equity financing.
Cash provided from operating activities was $87.7 million compared to $32.9
million in 1996. The increase is attributed to the improvements in operating
profit before special charges and depreciation and amortization expenses.
Working capital at January 3, 1998 declined to $199.9 million compared to
$228.5 million at the end of 1996, reflecting the reduction in current assets.
The current ratio was 1.68 in 1997 compared to 1.77 in 1996.
At January 3, 1998, the Company had $11.3 million in short-term debt compared
to $16.2 million at fiscal year-end 1996. As of January 3, 1998, the Company had
uncommitted lines of credit totaling $25 million with two banks, under which a
total of $13.7 million was unused. The Revolving Credit Facility provides for
borrowings of up to $360 million, under which a total of $204 million was
outstanding at year-end. An agreement with a trust company provides for
borrowings of up to $150 million, under which $10 million was borrowed at
year-end. During the year, the Company utilized the existing revolving
agreements to finance the acquisition of United-A.G. and capital outlays related
to HORIZONS.
During the first quarter of 1998, and in conjunction with a planned $150
million unregistered, subordinated debt offering, the Company prepaid $106.3
million of senior notes and paid prepayment premiums totaling $9.4 million, all
with drawings under the Revolving Credit Facility. The Company intends to use
the net proceeds from the offering, after fees and expenses, to repay certain
amounts outstanding under the Revolving Credit Facility.
During fiscal 1997, the Company provided financial assistance in the form of
secured loans totaling $18.8 million to new or existing independent retailers.
These loans are generally used to maintain and expand their businesses. In
addition, the Company sold $37.0 million of trade accounts receivable and used
proceeds from the sale to reduce long-term debt.
Of the $31.3 million pretax special charges, approximately $13.6 million
involve cash outflows, while the balance are non-cash. On an after tax basis,
the cash impact is estimated to be $8.5 million, to be funded primarily from
internally generated funds.
Capital projects designed to maintain operating capacity, expand operations or
improve efficiency totaled $67.7 million in 1997 compared to $51.3 million in
1996. Included in 1997 and 1996 expenditures are approximately $20.0 million and
$8.1 million, respectively, related to the HORIZONS project. Total cash outlay
for the design, installation of, and training for HORIZONS is projected to be
about $76 million over the period of 1996 through 2004. Approximately half of
such amount had been expended as of January 3, 1998. Of the $76 million, $58.7
million is expected to be capitalized. A majority of the remaining projected
capital expenditures relating to HORIZONS are expected to be made in 1998.
The Company believes that borrowings under the Revolving Credit Facility,
other credit agreements, cash flows from operating activities and lease
financings will be adequate to meet the Company's working capital needs, planned
capital expenditures and debt service obligations for the foreseeable future.
FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report includes forward-looking
statements made under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements can be identified
by the use of words like "believes," "expects," "may," "will," "should,"
"anticipates" or similar expressions, as well as discussions of strategy.
Although such statements represent management's current expectations based on
available data, they are subject to risks, uncertainties and other factors which
could cause actual results to differ materially from those anticipated. Such
risks, uncertainties and other factors may include, but are not limited to, the
ability to: meet debt service obligations and maintain future financial
flexibility; respond to continuing competitive pricing pressures; retain
existing independent wholesale customers and attract new accounts; successfully
implement the HORIZONS system in a timely manner and without substantial
unexpected cost; otherwise address year 2000 issues as they affect the Company,
its customers and vendors; and fully integrate acquisitions and realize expected
synergies.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Nash Finch Company Common Stock is traded in the national over-the-counter
market under the symbol NAFC. The following table sets forth, for each of the
calendar periods indicated, the range of high and low closing sales prices for
the Common Stock as reported by the NASDAQ National Market System, and the cash
dividends paid per share of Common Stock. Prices do not include adjustments for
retail mark-ups, mark-downs or commissions. At January 3, 1998 there were 2,226
stockholders of record.
<TABLE>
<CAPTION>
Dividends
1997 1996 Per Share
--------------- ---------------- --------------
High Low High Low 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter ............... $22 18 18 1/2 16 .18 .18
Second Quarter .............. 22 1/4 17 1/2 18 15 3/4 .18 .18
Third Quarter ............... 24 7/8 19 3/4 16 3/4 15 1/2 .18 .18
Fourth Quarter .............. 24 1/2 17 1/2 21 3/4 16 1/4 .18 .21
- ---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
NASH FINCH COMPANY and Subsidiaries
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS/LOSS
Fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995. 1997 1996 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 53 WEEKS 52 weeks 52 weeks
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME:
Net sales ....................................................... $ 4,319,095 3,322,666 2,831,114
Other revenues .................................................. 72,507 52,819 57,722
----------- --------- ---------
Total revenues ................................................ 4,391,602 3,375,485 2,888,836
COST AND EXPENSES:
Cost of sales ................................................... 3,826,377 2,932,709 2,469,841
Selling, general and administrative, and other operating
expenses ....................................................... 453,645 359,456 350,201
Special charges ................................................. 31,272 -- --
Depreciation and amortization ................................... 47,697 34,759 29,406
Interest expense ................................................ 32,845 14,894 10,793
----------- --------- ---------
Total costs and expenses ...................................... 4,391,836 3,341,818 2,860,241
Earnings (loss) before income taxes ........................... (234) 33,667 28,595
Income taxes .................................................... 994 13,635 11,181
----------- --------- ---------
Net earnings (loss) ............................................. $ (1,228) 20,032 17,414
----------- --------- ---------
----------- --------- ---------
Basic earnings (loss) per share ................................. $ (0.11) 1.83 1.60
----------- --------- ---------
----------- --------- ---------
Diluted earnings (loss) per share ............................... $ (0.11) 1.81 1.60
----------- --------- ---------
----------- --------- ---------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Nash Finch Company:
[LOGO]
We have audited the accompanying consolidated balance sheets of Nash Finch
Company and subsidiaries as of January 3, 1998 and December 28, 1996, and the
related consolidated statements of earnings/loss, stockholders' equity, and cash
flows for each of the three years in the period ended January 3, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Nash Finch Company
and subsidiaries at January 3, 1998 and December 28, 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended January 3, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
March 26, 1998
17
<PAGE>
NASH FINCH COMPANY and Subsidiaries
CONSOLIDATED BALANCE SHEETS
January 3, 1998 and December 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash ....................................... $ 933 921
Accounts and notes receivable, net.......... 173,962 206,062
Inventories ................................ 287,801 293,458
Prepaid expenses ........................... 22,582 20,492
Deferred tax assets ........................ 9,072 4,663
--------- -------
Total current assets ..................... 494,350 525,596
Investments in affiliates .................... 7,679 10,300
Notes receivable, noncurrent ................. 23,092 21,652
PROPERTY, PLANT AND EQUIPMENT:
Land ....................................... 31,229 33,753
Buildings and improvements ................. 137,070 148,227
Furniture, fixtures and equipment .......... 306,762 295,147
Leasehold improvements ..................... 60,578 54,925
Construction in progress ................... 28,485 7,543
Assets under capitalized leases ............ 25,048 26,105
--------- -------
589,172 565,700
Less accumulated depreciation and
amortization .............................. (312,939) (293,845)
--------- -------
Net property, plant and equipment ........ 276,233 271,855
Intangible assets, net ....................... 70,732 80,312
Investment in direct financing leases ........ 19,094 22,011
Deferred tax asset, net ...................... 2,622 4,076
Other assets ................................. 11,081 9,675
--------- -------
Total assets ............................. $ 904,883 945,477
--------- -------
--------- -------
- -----------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
NASH FINCH COMPANY and Subsidiaries
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Outstanding checks ......................................................... $ 36,271 32,492
Short-term debt payable to banks ........................................... 11,300 16,171
Current maturities of long-term debt and capitalized lease
obligations .............................................................. 7,964 7,795
Accounts payable ........................................................... 177,548 183,501
Accrued expenses ........................................................... 60,599 54,130
Income taxes ............................................................... 737 2,999
--------- ---------
Total current liabilities ................................................ 294,419 297,088
Long-term debt ............................................................... 325,489 361,819
Capitalized lease obligations ................................................ 38,517 41,832
Deferred compensation ........................................................ 6,768 7,476
Other ........................................................................ 14,072 4,401
STOCKHOLDERS' EQUITY:
Preferred stock - no par value
Authorized 500 shares; none issued ..................................... -- --
Common stock of $1.66 2/3 par value
Authorized 25,000 shares; issued shares (1997 - 11,575; 1996 - 11,574) . 19,292 19,290
Additional paid-in capital ................................................. 17,648 16,816
Foreign currency translation adjustment - net of a $633
deferred tax benefit ..................................................... -- (950)
Restricted stock ........................................................... (391) (500)
Retained earnings .......................................................... 190,984 200,322
--------- ---------
227,533 234,978
Less cost of 252 shares and 307 shares of common stock in
treasury, respectively ................................................... (1,915) (2,117)
--------- ---------
Total stockholders' equity ............................................ 225,618 232,861
--------- ---------
Total liabilities and stockholders' equity ............................ $ 904,883 945,477
--------- ---------
--------- ---------
- -------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
NASH FINCH COMPANY and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995.
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) ................................... $ (1,228) 20,032 17,414
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Special charges ..................................... 28,749 -- --
Depreciation and amortization ....................... 47,697 34,759 29,406
Provision for bad debts ............................. 5,055 1,893 3,997
Provision for (recovery from) losses on closed lease
locations ......................................... 1,722 (458) 1,361
Deferred income taxes ............................... (2,955) (2,278) (4,187)
Deferred compensation ............................... (708) (149) (901)
Loss of equity investments .......................... 469 616 (501)
Other ............................................... 2,003 326 (157)
Changes in operating assets and liabilities:
Accounts and notes receivable ....................... (3,744) (12,544) 8,115
Inventories ......................................... 19,821 14,021 14,680
Prepaid expenses .................................... (1,201) (349) (3,441)
Accounts payable and outstanding checks ............. (3,174) (24,245) 15,339
Accrued expenses .................................... (2,512) 2,219 2,160
Income taxes ........................................ (2,262) (967) 2,508
-------- -------- --------
Net cash provided by operating activities ......... 87,732 32,876 85,793
-------- -------- --------
INVESTING ACTIVITIES:
Dividends received .................................. 1,600 -- 890
Disposals of property, plant and equipment, net ..... 16,721 9,169 14,858
Additions to property, plant and equipment,
excluding capital leases .......................... (67,725) (51,333) (33,264)
Businesses acquired, net of cash acquired ........... (17,863) (257,868) --
Investment in an affiliate .......................... -- (2,500) (1,379)
Loans to customers .................................. (18,816) (4,997) (9,199)
Payments from customers on loans .................... 14,080 4,713 8,788
Sale of receivables ................................. 37,000 3,402 13,744
Other ............................................... (739) (2,896) (137)
-------- -------- --------
Net cash used in investing activities ............. (35,742) (302,310) (5,699)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt ........................ -- 30,000 352
(Payments) proceeds from revolving debt ............. (30,000) 244,000 --
Dividends paid ...................................... (8,110) (8,288) (8,048)
Payments of short-term debt ......................... (4,871) 1,171 (41,400)
Payments of long-term debt .......................... (6,009) (21,946) (5,568)
Payments of capitalized lease obligations ........... (3,467) (717) (540)
Other ............................................... 479 111 56
-------- -------- --------
Net cash (used in) provided by financing
activities ...................................... (51,978) 244,331 (55,148)
-------- -------- --------
Net increase (decrease) cash ...................... $ 12 (25,103) 24,946
-------- -------- --------
-------- -------- --------
- --------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
NASH FINCH COMPANY and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common stock Additional
------------------ paid-in Retained
Shares Amount capital earnings
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 .............. 11,224 $18,706 11,977 179,212
Net earnings .............................. -- -- -- 17,414
Dividend declared of $.74 per share ....... -- -- -- (8,048)
Treasury stock issued upon
exercise of options ..................... -- -- 36 --
Foreign currency translation adjustment
- net of a $252 deferred tax benefit .... -- -- -- --
------- ------- ------- -------
BALANCE AT DECEMBER 30, 1995 .............. 11,224 18,706 12,013 188,578
Net earnings .............................. -- -- -- 20,032
Dividend declared of $.75 per share ....... -- -- -- (8,288)
Shares issued in connection with
acquisition of a business ............... 350 584 5,064 --
Treasury stock issued upon
exercise of options ..................... -- -- 47 --
Issuance of restricted stock .............. -- -- (308) --
Amortized compensation under
restricted stock plan ................... -- -- -- --
Treasury stock purchased .................. -- -- -- --
------- ------- ------- -------
BALANCE AT DECEMBER 28, 1996 .............. 11,574 19,290 16,816 200,322
Net earnings (loss) ....................... -- -- -- (1,228)
Dividend declared of $.72 per share ....... -- -- -- (8,110)
Treasury stock issued upon
exercise of options ..................... -- -- 354 --
Amortized compensation under
restricted stock plan ................... -- -- -- --
Repayment of notes receivable
from holders of restricted stock ........ -- -- -- --
Distribution of stock pursuant to
performance awards ...................... -- -- 460 --
Treasury stock purchased .................. -- -- -- --
Foreign currency translation
adjustment .............................. -- -- -- --
Other ..................................... 1 2 18 --
------- ------- ------- -------
BALANCE AT JANUARY 3, 1998 ................ 11,575 $19,292 17,648 190,984
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
Foreign
currency Treasury stock Total
translation Restricted -------------------- stockholders'
adjustment stock Shares Amount equity
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 .............. (572) -- (349) $(3,054) 206,269
Net earnings .............................. -- -- -- -- 17,414
Dividend declared of $.74 per share ....... -- -- -- -- (8,048)
Treasury stock issued upon
exercise of options ..................... -- -- 3 20 56
Foreign currency translation adjustment
- net of a $252 deferred tax benefit .... (378) -- -- -- (378)
------- ------- ------- ------- -------
BALANCE AT DECEMBER 30, 1995 .............. (950) -- (346) (3,034) 215,313
Net earnings .............................. -- -- -- -- 20,032
Dividend declared of $.75 per share ....... -- -- -- -- (8,288)
Shares issued in connection with
acquisition of a business ............... -- -- -- 5,648
Treasury stock issued upon
exercise of options ..................... -- 6 42 89
Issuance of restricted stock .............. -- (524) 40 995 163
Amortized compensation under
restricted stock plan ................... -- 24 -- -- 24
Treasury stock purchased .................. -- -- (7) (120) (120)
------- ------- ------- ------- -------
BALANCE AT DECEMBER 28, 1996 .............. (950) (500) (307) (2,117) 232,861
Net earnings (loss) ....................... -- -- -- -- (1,228)
Dividend declared of $.72 per share ....... -- -- -- -- (8,110)
Treasury stock issued upon
exercise of options ..................... -- -- 29 143 497
Amortized compensation under
restricted stock plan ................... -- 29 -- -- 29
Repayment of notes receivable
from holders of restricted stock ........ -- 80 -- -- 80
Distribution of stock pursuant to
performance awards ...................... -- -- 30 148 608
Treasury stock purchased .................. -- -- (4) (89) (89)
Foreign currency translation
adjustment .............................. 950 -- -- -- 950
Other ..................................... -- -- -- -- 20
------- ------- ------- ------- -------
BALANCE AT JANUARY 3, 1998 ................ -- (391) (252) $(1,915) 225,618
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
21
<PAGE>
NASH FINCH COMPANY and Subsidiaries
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES
FISCAL YEAR
Nash Finch Company's fiscal year ends on the Saturday nearest to December 31.
Fiscal year 1997 consisted of 53 weeks, while 1996 and 1995 consisted of 52
weeks.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Nash Finch
Company (the Company), its majority-owned subsidiaries and the Company's share
of net earnings or losses of 50% or less owned companies. All material
intercompany accounts and transactions have been eliminated in the consolidated
financial statements. Certain reclassifications were made to prior year amounts
to conform with 1997 presentation.
CASH AND CASH EQUIVALENTS
In the accompanying financial statements, and for purposes of the statements
of cash flows, cash and cash equivalents include cash on hand and short-term
investments with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. At both January 3, 1998
and December 28, 1996, approximately 85% of the Company's inventories are valued
on the last-in, first-out (LIFO) method. During fiscal 1997, the Company
recorded a LIFO charge of $1.5 million compared to $1.6 million in 1996. The
remaining inventories are valued on the first-in, first-out (FIFO) method. If
the FIFO method of accounting for inventories had been used, inventories would
have been $43.1 million and $41.6 million higher at January 3, 1998 and December
28, 1996, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Assets under capitalized
leases are recorded at the present value of future lease payments or fair market
value, whichever is lower. Expenditures which improve or extend the life of the
respective assets are capitalized while maintenance and repairs are expensed as
incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
An impairment loss is recognized whenever events or changes in
circumstances indicate that the carrying amount of an asset is not recoverable.
In applying Statement of Financial Accounting Standards ("SFAS") No. 121, assets
are grouped and evaluated at the lowest level for which there are identifiable
cash flows that are largely independent of the cash flows of other groups of
assets. The Company has generally identified this lowest level to be individual
stores; however, there are limited circumstances where, for evaluation purposes,
stores are considered with the distribution center they support. The Company
considers historical performance and future estimated results in its evaluation
of potential impairment. If the carrying amount of the asset exceeds estimated
expected undiscounted future cash flows, the Company measures the amount of the
impairment by comparing the carrying amount of the asset to its fair value,
generally measured by discounting expected future cash flows at the rate the
Company utilizes to evaluate potential investments.
INTANGIBLE ASSETS
Intangible assets consist primarily of covenants not to compete and goodwill,
and are carried at cost less accumulated amortization. Costs are amortized over
the estimated useful lives of the related assets ranging from 2-25 years.
Amortization expense charged to operations for fiscal years ended January 3,
1998, December 28, 1996, and December 30, 1995 was $5.9 million, $5.2 million
and $1.8 million, respectively. The accumulated amortization of intangible
assets was $13.5 million and $10.1 million at January 3, 1998 and December 28,
1996, respectively. The carrying value of intangible assets is reviewed for
impairment annually and/or when factors indicating impairment are present using
an undiscounted cash flow assumption.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are depreciated on a straight-line basis over
the estimated useful lives of the assets which generally range from 10-40 years
for buildings and improvements and 3 to 10 years for furniture, fixtures and
equipment. Leasehold improvements and capitalized leases are amortized to
expense on a straight-line basis over the term of the lease.
ADVERTISING
Advertising costs included in selling, general and administrative, and
other operating expenses, are expensed as incurred and were $5.0 million, $5.9
million and $8.5 million in 1997, 1996 and 1995, respectively.
INCOME TAXES
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128, EARNINGS PER SHARE. SFAS No. 128 replaced the previously reported primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, contingent, and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the SFAS No. 128
requirements.
STOCK OPTION PLANS
In accordance with the provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company has chosen to continue to apply Accounting Principles
Board Opinion No. 25, (APB 25) ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and
related interpretations in accounting for its stock option plans, and,
accordingly, does not recognize compensation costs, if the option price equals
or exceeds market price at date of grant. Note (7) of Notes to Consolidated
Financial Statements contains a summary of the pro forma effects to reported net
income and earnings per share had the Company elected to recognize compensation
costs as encouraged by SFAS No. 123.
22
<PAGE>
NASH FINCH COMPANY and Subsidiaries
FOREIGN CURRENCY TRANSLATION
Adjustments resulting from the translation of assets and liabilities of a
foreign investment are included in stockholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, REPORTING
COMPREHENSIVE INCOME and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 130
establishes standards for the reporting and presentation of
comprehensive income and its components. SFAS No. 131 establishes
standards for defining operating segments and the reporting of
certain information regarding operating segments. Because these
statements only impact how financial information is disclosed in
interim and annual reports, the adoption will have no impact to
the Company's financial condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. The SOP is effective for
the Company beginning on January 1, 1999, however, early adoption is permitted.
The SOP will require the capitalization of certain costs incurred after the date
of adoption in connection with developing or obtaining software for internal
use. Some, but not all, of the costs that are required to be capitalized by the
SOP are currently being expensed by the Company. The Company has not yet
assessed what the impact of the SOP will be on the Company's future earnings or
financial position.
(2) ACQUISITIONS
The following acquisitions have been accounted for by the purchase method of
accounting and accordingly, the operating results of the newly acquired
businesses have been included in the consolidated operating results of the
Company since their respective dates of acquisition.
On June 9, 1997, the Company acquired the business and certain assets from
United-A.G., a cooperative wholesale grocery distributor located in Omaha, for
approximately $17.9 million in cash. Real estate which was not included in the
purchase price, is being leased under a five-year agreement from a third party.
This operating lease contains an option to purchase the property at fair market
value, or a renewal option for an additional five years at the end of the
initial lease term. In addition, the Company has guaranteed a residual value for
the leased real estate. United-A.G., with pre-acquisition annual revenues of
approximately $200 million, served stores in Nebraska, Kansas, Iowa, Colorado
and South Dakota.
On November 7, 1996, the Company completed a tender offer to purchase the
outstanding shares of common stock of Super Food for $15.50 per share in cash,
with 10.6 million shares tendered at that date, representing approximately 96
percent of the outstanding common stock of Super Food. Super Food is a wholesale
grocery distributor based in Dayton, Ohio with annual revenues of approximately
$1.2 billion. The fair value of the assets acquired, including goodwill, was
$321.9 million, and liabilities assumed totaled $150.0 million. Goodwill of
$29.8 million and other intangibles of $7.1 million are being amortized over 25
years on a straight line basis.
On August 5, 1996, the Company acquired all of the outstanding stock of T. J.
Morris, a full line food wholesaler located in Statesboro, Georgia, with annual
revenues of $110.0 million. In exchange for the T. J. Morris stock, the Company
issued 350,764 shares of its common stock, valued at approximately $5.7 million,
of which 25,002 shares are held in escrow at January 3, 1998. Such shares were
issued January 8, 1998. The excess of purchase price over fair value of the
assets acquired resulted in goodwill of approximately $3.1 million which is
being amortized on a straight line basis over a 15-year period.
On January 2, 1996, the Company acquired substantially all of the business and
assets of MDV located in Norfolk, Virginia for approximately $56.0 million in
cash and the assumption of certain liabilities totaling approximately $54.0
million. MDV, with revenues of approximately $350.0 million, is a major
distributor of grocery products to military commissaries in the eastern United
States and Europe. The purchase price exceeded the fair value of the net assets
acquired by approximately $43 million. The resulting goodwill is being amortized
on a straight line basis over 15 years.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if the above operations had been acquired
as of the beginning of the periods presented, after including the impact of
certain adjustments such as amortization of intangibles, increased interest
expense on acquisition debt and related income tax effects:
PRO FORMA INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET REVENUES ............................................ $4,499,543 4,713,664 4,589,362
Earnings (loss) before income taxes ..................... (36) 23,790 32,291
Net income (loss) ....................................... (247) 14,120 19,060
Basic earnings (loss) per share ......................... $ (.02) 1.28 1.70
----------------------------------
</TABLE>
The pro forma information is provided for informational purposes only. It is
based on historical information and does not necessarily reflect results that
would have occurred had the acquisitions been made as of those dates or results
which may occur in the future.
23
<PAGE>
NASH FINCH COMPANY and Subsidiaries
(3) SPECIAL CHARGES
During the third quarter of 1997, the Company recorded special charges
totaling $31.3 million consisting of $12.6 million in asset writedowns and $6.5
million and $9.7 million classified as accrued expenses and other noncurrent
liabilities, respectively.
The aggregate special charges include $14.5 million for the consolidation of
selected warehouses. This charge contains provisions for non-cancelable lease
obligations, expected losses on disposals of tangible assets, and other
continuing occupancy costs. Also included are employee severance costs
consistent with existing practices and the unamortized portion of goodwill for
one of the locations.
Also, related to wholesale operations, the special charges include $2.5
million of integration costs, incurred in the third quarter, associated with the
acquisition of the business and certain assets from United-A.G.
In retail operations, the special charges relate to the closing or
consolidation of fourteen, primarily leased stores. The special charges include
a $5.2 million provision for continuing non-cancelable lease obligations,
anticipated losses on disposals of tangible assets, abandonment of certain
leaseholds and the write-off of intangibles. The time frame for individual store
closings will vary but should be completed by the first quarter of fiscal 1999.
For 1997, the retail units included in the provision had aggregate sales and
pretax losses of $82.9 million and $2.7 million, respectively, compared with
$88.3 million and $1.8 million for 1996.
The aggregate special charges contain a provision of $5.4 million for asset
impairment of seven retail stores. Declining market share due to increasing
competition, deterioration of operating performance in the third quarter, and
forecasted future results that were less than previously planned were the
factors leading to the impairment determination. The impaired assets covered by
the charge primarily include real estate, leasehold improvements and, to a
lesser extent, goodwill related to two of the stores.
An asset impairment charge of $1.0 million relating to agricultural assets was
also recorded against several farming operations of Nash DeCamp, the Company's
produce marketing subsidiary. The impairment determination was based on recent
downturns in the market for certain varieties of fruit. The impairment resulted
from anticipated future operating losses and insufficient projected cash flows
from agricultural production of these products.
Other special charges aggregating $2.8 million consist primarily of $.9
million related to the abandonment of current system software which is being
replaced by the Company's HORIZONS project, and a loss of $.6 million realized
on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a
Hungarian food wholesaler. The remaining special charges relate principally to
the write down of idle real estate held for sale to current market values.
During the fourth quarter of 1997, rents totaling $198,000 were charged to
reserves established as a result of the special charges recorded in the third
quarter. Reserves related to the closing or consolidation of wholesale and
retail operations in the amount of $6.3 million and $9.7 million are included in
accrued expense and other liabilities, respectively, on the balance sheet at
January 3, 1998.
(4) ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable at the end of fiscal years 1997 and 1996 are
comprised of the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Customer notes receivable - current portion ....... $ 9,256 8,090
Customer accounts receivable ...................... 157,737 197,336
Other receivables ................................. 26,970 21,158
Allowance for doubtful accounts ................... (20,001) (20,522)
----------------------
Net current accounts and notes receivable ......... $ 173,962 206,062
----------------------
----------------------
Noncurrent customer notes receivable .............. 29,759 29,223
Allowance for doubtful accounts ................... (6,667) (7,571)
----------------------
Net noncurrent notes receivable ................... $ 23,092 21,652
----------------------
----------------------
</TABLE>
Operating results include bad debt expense totaling $5.1 million, $1.9 million
and $4.0 million during fiscal years 1997, 1996 and 1995, respectively.
On January 1, 1997, the Company adopted the requirements of SFAS No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCED ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. SFAS No. 125 establishes accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on the application of a financial components approach which focuses on
control of the assets and extinguishments of liabilities that exist after the
transfer. The implementation of SFAS No. 125 did not have a material effect on
the Company's 1997 consolidated financial statements.
On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was
executed by the Company, Nash Finch Funding Corporation (NFFC), a wholly-owned
subsidiary of the Company, and a certain third party purchaser (the "Purchaser")
pursuant to a securitization transaction. On this date the Company sold $44.6
million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0
million of its undivided interest in such receivables to the Purchaser, subject
to specified collateral requirements. NFFC maintains a variable undivided
interest in these receivables and is subject to losses on its share of the
receivables and, accordingly, maintains an allowance for doubtful
accounts. In applying the provisions of SFAS No. 125, no gain or loss resulted
on the transaction. The Agreement is a five-year $50 million revolving
receivable purchase facility allowing the Company to sell additional receivables
to NFFC, and NFFC to sell, from time to time, variable undivided interests in
these receivables to the Purchaser.
In 1995, the Company entered into an agreement with a financial institution
which allowed the Company to sell on a revolving basis customer notes
receivable. Although the agreement lapsed on December 28, 1996, the notes, which
have maturities through the year 2002, were sold at face value with recourse. As
a result, the Company continues to be responsible for collection of the notes
and remits the principal plus a floating rate of interest to the purchaser on a
monthly basis. Proceeds from the sale of the notes receivable were used to fund
working capital requirements.
The remaining balances of such sold notes receivable totaled $9.1 million and
$14.0 million at January 3, 1998 and December 28, 1996, respectively. The
Company is contingently liable should these notes become uncollectible.
Substantially all notes receivable are based on floating interest rates which
adjust to changes in market rates. As a result, the carrying value of notes
receivable approximates market value.
24
<PAGE>
NASH FINCH COMPANY and Subsidiaries
(5) LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt at the end of the fiscal years 1997 and 1996 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Variable rate - revolving credit agreement ................................... $ 214,000 244,000
Industrial development bonds, 5.4% to 7.8% due in
various installments through 2009 .......................................... 4,370 4,885
Term loans, 7.5% to 9.9% due in various installments
through 2008 ............................................................... 107,528 112,250
Notes payable and mortgage notes, 9.3% to 12.0%
due in various installments through 2003 ................................... 5,975 6,747
----------------------
$ 331,873 367,882
Less current maturities ...................................................... 6,384 6,063
----------------------
$ 325,489 361,819
----------------------
----------------------
</TABLE>
During 1997, the Company entered into four swap agreements, with separate
financial institutions. The agreements which are based on a notional amount of
$30.0 million each, call for an exchange of interest payments with the Company
receiving payments based on a London Interbank Offered Rate (LIBOR) floating
rate and making payments based on a fixed rate, ranging from 6.21% to 6.54%,
without an exchange of the notional amount upon which the payments are based.
The differential to be paid or received from counter-parties as interest rates
change is included in other liabilities or assets, with the corresponding amount
accrued and recognized as an adjustment of interest expense related to the debt.
The Company is exposed to credit loss in the event of non-performance by
counter-parties to these financial instruments, but it does not expect any
counter-party to fail to meet its obligations. The amount of such credit
exposure is generally the unrealized gains in such contracts. To manage credit
risks, the Company selects counter-parties based on credit ratings, limits
exposure to a single counter-party and monitors the market position with each
counter-party.
The fair values of the swap agreements are not material and have not been
recognized in the financial statements at January 3, 1998. Gains and losses on
terminations of interest rate swap agreements are deferred as an adjustment to
the carrying amount of the outstanding debt and amortized as an adjustment to
the interest expense related to the debt over the remaining term of the original
contract life of the terminated swap agreement. In the event of the early
extinguishment of a designated debt obligation, any realized or unrealized gain
or loss from the swap would be recognized in income coincident with the
extinguishment. Any swap agreements that are not designated with outstanding
debt are recorded as an asset or liability at fair value, with changes in fair
value recorded in other income or expense.
On October 8, 1996, the Company entered into a $500 million senior unsecured
revolving credit facility (the "Revolving Credit Facility") with two lead banks.
The agreement calls for a scheduled reduction of the facility within two years,
to $400 million, with the remaining balance maturing five years from closing.
During 1997, the Company exercised its right to reduce the Revolving Credit
Facility to $360 million. Borrowings under this agreement bear interest at
variable rates equal to LIBOR plus .30%. In addition, the Company pays
commitment fees of .175% on the entire facility both used and unused. The
average borrowing rate during the period was 6.0%.
The Revolving Credit Facility contains covenants which, among other matters,
limits the Company's ability to incur indebtedness, buy and sell assets, and
requires compliance to predetermined ratios related to net worth, debt to equity
and interest coverage.
At January 3, 1998, land, buildings and other assets pledged to secure
outstanding mortgage notes and obligations under industrial development bond
issues have a depreciated cost of approximately $4.8 million and $4.3 million,
respectively.
Aggregate annual maturities of long-term debt for the five fiscal years after
January 3, 1998 are as follows (in thousands):
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
1998 ................................................................ $ 6,384
1999 ................................................................ 1,844
2000 ................................................................ 33,576
2001 ................................................................ 240,394
2002 and thereafter ................................................. $ 49,675
- --------------------------------------------------------------------------------
</TABLE>
Interest paid was $31.6 million, $14.3 million and $11.4 million, for the
fiscal years 1997, 1996 and 1995, respectively.
In addition, the Company maintains informal lines of credit at various
banks. At January 3, 1998, unused uncommitted lines of credit amounted to
$13.7 million.
Based on borrowing rates currently available to the Company for long-term
financing with similar terms and average maturities, the fair value of long-term
debt, including current maturities, utilizing discounted cash flows is $340.3
million.
(6) INCOME TAXES
Income tax expense for fiscal years 1997, 1996 and 1995 is made up of the
following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal .............................................. $ 3,293 12,125 12,244
State ................................................ 692 2,354 2,872
Deferred:
Federal .............................................. (2,644) (576) (3,145)
State ................................................ (347) (268) (790)
--------------------------------
Total .............................................. $ 994 13,635 11,181
--------------------------------
--------------------------------
</TABLE>
Total income tax expense represents effective tax rates of 425.4%, 40.5% and
39.1% for the fiscal years 1997, 1996 and 1995, respectively. The reasons for
differences compared with the U.S. federal statutory tax rate (expressed as a
percentage of pretax income) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate .............................. (35.0)% 35.0% 35.0%
Items affecting federal income tax rate:
State taxes, net of federal income tax benefit .......... 96.0 4.3 4.9
Foreign equity earnings ................................. (27.6) -- --
Dividends received deduction on
domestic stock of under
80% owned companies ................................. (191.7) -- --
Non-deductible goodwill ................................. 700.1 .2 --
Non-deductible meals and entertainment .................. 94.6 .6 .8
Adjustment to valuation allowance and
other income tax accruals ........................... (198.0) .4 (.6)
Other net ............................................... (13.0) -- (1.0)
-----------------------------
Effective tax rate .................................. 425.4% 40.5% 39.1%
-----------------------------
-----------------------------
</TABLE>
Income taxes paid were $8.9 million, $12.4 million and $10.8 million during
fiscal years 1997, 1996 and 1995, respectively.
25
<PAGE>
NASH FINCH COMPANY and Subsidiaries
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at January 3,
1998, December 28, 1996, and December 30, 1995, are presented below (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts and notes receivable, principally
due to allowance for doubtful accounts .............. $ 5,891 7,625 1,964
Inventories, principally due to additional
costs inventoried for tax purposes pursuant
to the Tax Reform Act of 1986 ....................... 3,405 2,956 1,654
Health care claims, principally due to accrual
for financial reporting purposes .................... 2,668 2,991 1,073
Deferred compensation, principally due to
accrual for financial reporting purposes ............ 2,546 2,376 3,173
Compensated absences, principally due to
accrual for financial reporting purposes ............ 3,086 2,286 1,379
Compensation and casualty loss,
principally due to accrual for financial
reporting purposes .................................. 1,780 1,959 2,135
Purchased intangibles ................................... -- -- 1,958
Closed locations ........................................ 10,612 3,126 1,110
Other ................................................... 731 2,236 1,193
--------------------------------
Total gross deferred tax assets ......................... 30,719 25,555 15,639
Less valuation allowance ................................ -- -- --
--------------------------------
Net deferred tax assets ............................. 30,719 25,555 15,639
--------------------------------
Deferred tax liabilities:
Purchased intangibles ................................... 231 1,055 --
Plant and equipment, principally due to
differences in depreciation ......................... 9,704 6,511 5,978
Inventories, principally due to differences
in LIFO basis ....................................... 7,686 7,230 2,070
Other ................................................... 1,404 2,020 1,082
--------------------------------
Total gross deferred tax liabilities .................... 19,025 16,816 9,130
--------------------------------
Net deferred tax asset .............................. $ 11,694 8,739 6,509
--------------------------------
--------------------------------
</TABLE>
Since it is more likely than not that the deferred tax asset of $30,719,
$25,555 and $15,639 at January 3, 1998, December 28, 1996 and December 30, 1995,
respectively, will be realized through carry back to taxable income in prior
years, future reversals of existing taxable temporary differences, future
taxable income and tax planning strategies, the Company has determined that
there is no need to establish a valuation allowance for the deferred tax asset
at January 3, 1998 and December 28, 1996 as required by SFAS No. 109, ACCOUNTING
FOR INCOME TAXES.
(7) STOCK RIGHTS AND OPTIONS
Under the Company's 1996 Stockholder Rights Plan, one right is attached to
each outstanding share of common stock. Each right entitles the holder to
purchase, under certain conditions, one-half share of common stock at a price of
$30.00 ($60.00 per full share). The rights are not yet exercisable and no
separate rights certificates have been distributed. All rights expire on March
31, 2006.
The rights become exercisable 20 days after a "flip-in event" has occurred or
10 business days (subject to extension) after a person or group makes a tender
offer for 15% or more of the Company's outstanding common stock. A flip-in event
would occur if a person or group acquires (1) 15% of the Company's outstanding
common stock, or (2) an ownership level set by the Board of Directors at less
than 15% if the person or group is deemed by the Board of Directors to have
interests adverse to those of the Company and its stockholders. The rights may
be redeemed by the Company at any time prior to the occurrence of a flip-in
event at $.01 per right. The power to redeem may be reinstated within 20 days
after a flip-in event occurs if the cause of the occurrence is removed.
Upon the rights becoming exercisable, subject to certain adjustments or
alternatives, each right would entitle the holder (other than the acquiring
person or group, whose rights become void) to purchase a number of shares of the
Company's common stock having a market value of twice the exercise price of the
right. If the Company is involved in a merger or other business combination, or
certain other events occur, each right would entitle the holder to purchase
common shares of the acquiring company having a market value of twice the
exercise price of the right. Within 30 days after the rights become exercisable
following a flip-in event, the Board of Directors may exchange shares of Company
common stock or cash or other property for exercisable rights.
The Company follows APB 25 and related interpretations in accounting for its
employee stock options. Under APB 25, when the exercise price of employee stock
options equals the market price of the underlying stock on the date of the
grant, no compensation expense is recognized.
Under the Company's 1994 Stock Incentive Plan, as amended (the "1994 Plan"), a
total of 845,296 shares were reserved for the granting of stock options,
restricted stock awards and performance unit awards. Stock options are granted
at not less than 100% of fair market value at date of grant and are exercisable
over a term which may not exceed 10 years from date of grant. Restricted stock
awards are subject to restrictions on transferability and such conditions for
vesting, including continuous employment for specified periods of time, as may
be determined at the date of grant. Performance unit awards are grants of rights
to receive shares of stock if certain performance goals or criteria, determined
at the time of grant, are achieved in accordance with the terms of the grants.
Under the 1995 Director Stock Option Plan (the "Director Plan"), for which a
total of 40,000 shares were reserved, annual grants of options to purchase 500
shares are made automatically to each eligible non-employee director following
each annual meeting of stockholders. The stock options are granted at 100% of
fair market value at date of grant, become exercisable six months following the
date of grant and may be exercised over a term of five years from the date of
grant.
At January 3, 1998, under the 1994 Plan, options to purchase 280,380 shares of
common stock of the Company at an average price of $17.23 per share and
exercisable over terms of five to seven years from the dates of grant, have been
granted and are outstanding. In February 1996, certain members of management
exercised rights to purchase restricted stock from the Company at a 25% discount
to fair market value pursuant to grants awarded in January 1996 under the terms
of the 1994 Plan. The purchase required a minimum of 10% payment in cash with
the remaining balance evidenced by a five-year promissory note to the Company.
Unearned compensation equivalent to the excess of market value of the shares
purchased over the price paid by the recipient at the date of grant, and the
unpaid balance of the promissory note have been charged to stockholders' equity;
amortization of compensation expense was not significant. At January 3, 1998,
32,832 shares of restricted stock have been issued and are outstanding.
Performance unit awards having a maximum potential payout of 340,071 shares have
also been granted and are outstanding.
26
<PAGE>
NASH FINCH COMPANY and Subsidiaries
Reserved for the granting of future stock options, restricted stock awards and
performance unit awards are 120,254 shares.
At January 3, 1998 under the Director Plan, options to purchase 12,000 shares
of common stock of the Company, at an average price of $17.47 per share and
exercisable over a term of five years from the date of grant, have been granted
and are outstanding. Reserved for the granting of future stock options are
26,000 shares.
Changes in outstanding options during the three fiscal years ended January 3,
1998 are summarized as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Weighted Average
Option Price
Shares Per Share
- ------------------------------------------------------------------------
<S> <C> <C>
Options outstanding December 31 1994 ...... 291 $ 16.86
Exercised ............................. (3) 16.72
Forfeited ............................. (36) 16.88
Granted ............................... 4 16.06
- ------------------------------------------------------------------------
Options outstanding December 30 1995 ...... 256 16.85
Exercised ............................. (4) 16.77
Forfeited ............................. (45) 17.05
Granted ............................... 142 17.72
- ------------------------------------------------------------------------
Options outstanding December 28, 1996 ..... 349 17.18
Exercised ............................. (29) 16.82
Forfeited ............................. (33) 17.08
Granted ............................... 5 18.38
- ------------------------------------------------------------------------
Options outstanding January 3, 1998 ....... 292(a) 17.24
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
(a) Remaining average contractual life of options outstanding at January 3, 1998
was 2.5 years.
<TABLE>
<CAPTION>
Options exercisable at:
<S> <C> <C>
January 3, 1998 ....................... 164 $ 17.09
December 28, 1996 ..................... 147 16.95
</TABLE>
The weighted average fair value of options granted during 1997, 1996 and 1995
are $2.62, $2.40 and $2.26, respectively. The fair value of each option grant is
estimated as of the date of grant using the Black-Scholes single option-pricing
model assuming a weighted average risk-free interest rate of 6.0%, an expected
dividend yield of 4.0%, expected lives of two and one-half years and volatility
of 22.1%. Had compensation expense for stock options been determined based on
the fair value method (instead of intrinsic value method) at the grant dates for
awards, the Company's 1997 and 1996 net earnings (loss) and earnings (loss) per
share would have been impacted by less than 1%. The effects of applying the fair
value method of measuring compensation expense for 1997 is likely not
representative of the effects for future years in part because the fair value
method was applied only to stock options granted after December 31, 1994.
(8) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net earnings (loss) ................................. $ (1,228) 20,032 17,414
--------------------------------
Denominator:
Denominator for basic earnings per share;
weighted average shares ............................. 11,270 10,947 10,875
Effect of dilutive securities:
Employee stock options .............................. -- 8 20
Contingent shares ................................... 46 138 --
--------------------------------
Dilutive common shares .................................. 46 146 20
Denominator for diluted earnings per share;
adjusted weighted average shares .................... 11,316 11,093 10,895
--------------------------------
--------------------------------
Basic earnings (loss) per share ......................... $ (0.11) 1.83 1.60
--------------------------------
--------------------------------
Diluted earnings (loss) per share ....................... $ (0.11) 1.81 1.60
--------------------------------
--------------------------------
</TABLE>
(9) LEASE AND OTHER COMMITMENTS
A substantial portion of the store and warehouse properties of the Company are
leased. The following table summarizes assets under capitalized leases (in
thousands):
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Buildings and improvements ..................... $ 25,048 26,105
Less accumulated amortization .................. (10,243) (10,147)
----------------------
Net assets under capitalized leases ............ $ 14,805 15,958
----------------------
----------------------
</TABLE>
At January 3, 1998, future minimum rental payments under non-cancelable leases
and subleases are as follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital
leases leases
- ----------------------------------------------------------------------------------------
<S> <C> <C>
1998 .............................................................. $ 29,877 $ 6,006
1999 .............................................................. 26,186 6,168
2000 .............................................................. 23,488 6,035
2001 .............................................................. 20,548 5,934
2002 and thereafter ............................................... 117,400 57,161
-------------------
Total minimum lease payments (a) .................................. $ 217,499 81,304
Less imputed interest (rates ranging from 7.8% to 16.0%) .......... (41,207)
--------
Present value of net minimum lease payments ....................... 40,097
Less current maturities ........................................... (1,580)
--------
Capitalized lease obligations ..................................... $ 38,517
--------
--------
</TABLE>
(a) Future minimum payments for operating and capital leases have not been
reduced by minimum sublease rentals receivable under non-cancelable subleases.
Total future minimum sublease rentals related to operating and capital lease
obligations as of January 3, 1998 are $91.8 million and $41.7 million,
respectively.
Total rental expense under operating leases for fiscal years 1997, 1996 and
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total rentals ........................................... $ 42,584 33,316 27,533
Less real estate taxes, insurance and
other occupancy costs ............................... (2,731) (2,070) (2,095)
--------------------------------
Minimum rentals ......................................... 39,853 31,246 25,438
Contingent rentals ...................................... 244 183 312
Sublease rentals ........................................ (13,744) (9,449) (7,964)
--------------------------------
$ 26,353 21,980 17,786
--------------------------------
--------------------------------
</TABLE>
27
<PAGE>
NASH FINCH COMPANY and Subsidiaries
Most of the Company's leases provide that the Company pay real estate taxes,
insurance and other occupancy costs applicable to the leased premises.
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities. Operating leases
often contain renewal options. Management expects that, in the normal course of
business, leases that expire will be renewed or replaced by other leases.
The Company has guaranteed certain lease and promissory note obligations of
customers aggregating approximately $28.6 million.
In addition, the Company had outstanding letters of credit in the amounts of
$9.1 million and $9.0 million at January 3, 1998 and December 28, 1996,
respectively, primarily supporting workers' compensation obligations.
(10) CONCENTRATION OF CREDIT RISK
The Company provides financial assistance in the form of secured loans to some
of its independent retailers for inventories, store fixtures and equipment,
working capital and store improvements. Loans are secured by liens on inventory
or equipment or both, by personal guarantees and by other types of collateral.
In addition, the Company may guarantee lease and promissory note obligations of
customers.
As of January 3, 1998, the Company has guaranteed outstanding promissory note
obligations of one customer in the amount of $8.4 million and of another
customer in the amount of $7.1 million.
In the normal course of business, the Company's produce marketing operation in
California makes cash advances to produce growers during various product growing
seasons to fund production costs. Such advances are repayable at the end of the
respective growing seasons. Unpaid advances are generally secured by liens on
real estate and in certain instances, on crops yet to be harvested. At January
3, 1998, $9.2 million in notes and growers advances were outstanding.
The Company establishes allowances for doubtful accounts based upon the credit
risk of specific customers, historical trends and other information. Management
believes that adequate provisions have been made for any doubtful accounts.
(11) PROFIT SHARING PLAN
The Company has a profit sharing plan covering substantially all employees
meeting specified requirements. Contributions, determined by the Board of
Directors, are made to a noncontributory profit sharing trust based on profit
performances. Profit sharing expense for 1997, 1996 and 1995 was $2.5 million,
$4.1 million and $3.8 million, respectively.
Certain officers and key employees are participants in a deferred compensation
plan providing fixed benefits payable in equal monthly installments upon
retirement. Annual increments to the deferred compensation plan are charged to
earnings. No annual contribution was made in 1997.
(12) PENSION
Super Food has a qualified noncontributory retirement plan to provide
retirement income for eligible full-time employees who are not covered by union
retirement plans. Pension benefits under the plan are based on length of service
and compensation. The Company contributes amounts necessary to meet minimum
funding requirements.
During 1997, the Company formalized a curtailment plan affecting all
participants under the age of 55. The plan, effective January 1, 1998, did not
result in a material effect on the Company's financial position or results of
operations. All employees impacted by the curtailment will be transferred into
the Company's existing defined contribution plan.
The plan's funded status at January 3, 1998 was (in thousands):
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits .......................................................... $ 36,772 28,979
Nonvested benefits ....................................................... -- 388
----------------------
Accumulated benefit obligation ...................................... 36,772 29,367
Additional benefits based on future salary levels ........................ 874 3,193
----------------------
Projected benefit obligation ............................................. 37,646 32,560
Plan assets at fair value, principally listed securities ................. (36,261) (34,274)
----------------------
Plan assets (over) under projected benefit obligation .................... 1,385 (1,714)
Unrecognized net (gain) loss ................................................. 2,098 (911)
----------------------
Net prepaid pension cost ............................................ $ 713 (803)
----------------------
----------------------
</TABLE>
Assumptions used in the determination of the above amounts, in conjunction
with the recording of the Super Food acquisition, include the following:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Discount rate for determining
estimated obligations and interest cost ........ 7.25% 8.5%
Expected aggregate average long-term
change in compensation ......................... 5.0% 4.5%
Expected long-term return on assets ................ 8.0% 8.5%
</TABLE>
Approximately 49% of Super Food employees are covered by
collectively-bargained, multi-employer pension plans. Contributions are
determined in accordance with the provisions of negotiated union contracts and
generally are based on the number of hours worked. The Company does not have the
information available to determine its share of the accumulated plan benefits or
net assets available for benefits under the multi-employer plans.
Aggregate cost for the Company's retirement plans includes the following
components (in thousands):
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Defined benefit plan:
Service cost benefits earned during the year ............................. $ 660 237
Interest cost on projected benefit obligation ............................ 2,663 882
Return on assets ......................................................... (3,587) (1,855)
Net amortization and deferral ............................................ 730 931
----------------------
Net pension expense .......................................................... 466 195
Multi-employer plans ......................................................... 2,166 370
----------------------
Total pension and retirement plan expense ................................ $ 2,632 565
----------------------
----------------------
</TABLE>
Fiscal 1996 costs reflect the two month period following the acquisition of
Super Food.
(13) POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides certain health care benefits for retired employees.
Substantially all of the Company's employees not subject to collective
bargaining agreements, become eligible for those benefits when they reach normal
retirement age and who meet minimum age and service requirements. Health care
benefits for retirees are provided under a self-insured program administered by
an insurance company.
The estimated future cost of providing postretirement health costs is accrued
over the active service life of the employee.
The periodic postretirement benefit costs were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs ........................................... $ 354 260 273
Interest costs .......................................... 576 403 382
Amortization of unrecognized
transition obligation ............................... 235 248 249
--------------------------------
Net postretirement costs ................................ $ 1,165 911 904
--------------------------------
--------------------------------
</TABLE>
28
<PAGE>
NASH FINCH COMPANY and Subsidiaries
The actuarial present value of benefit obligations at January 3, 1998,
December 28, 1996 and December 30, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retirees eligible for benefits .......................... $ 3,092 1,969 1,903
Active employees fully eligible ......................... 617 428 493
Active employees not fully eligible ..................... 4,895 3,204 3,147
--------------------------------
$ 8,604 5,601 5,543
--------------------------------
--------------------------------
</TABLE>
The assumed annual rate of future increases in per capita cost of health care
benefits was 10.5% in fiscal 1997 declining at a rate of .5% per year to 6.5% in
2005 and thereafter. Increasing the health care cost trend rate by 1% in each
year would increase the accumulated benefit obligation by $475,000 at January 3,
1998 and the service and interest costs by $77,000 for fiscal 1997. The discount
rate used in determining the accumulated benefit obligation was 6.75%.
(14) SEGMENT INFORMATION
The Company and its subsidiaries sell and distribute food and nonfood products
that are typically found in supermarkets. The Company's wholesale distribution
segment sells to independently owned retail food stores, institutional and
military customers while the retail distribution segment sells directly to the
consumer. Produce marketing includes farming, packing and marketing operations.
The Company's market areas are in the Midwest, West, Mid-Atlantic and
Southeastern United States.
Operating profit is net sales and other revenues, less operating expenses. In
computing operating profit, none of the following items have been added or
deducted: general corporate expenses, interest expense, interest income, income
taxes and earnings from equity investments. Wholesale distribution operating
profits on sales through Company-owned stores have been allocated to the retail
segment.
Identifiable assets are those used exclusively by that industry segment or an
allocated portion of assets used jointly by two industry segments. Corporate
assets are principally cash and cash equivalents, notes receivable, corporate
office facilities and equipment.
MAJOR SEGMENTS OF BUSINESS
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and other operating revenues:
Wholesale distribution .............................. $3,502,822 2,468,695 1,968,982
Retail distribution ................................. 822,178 850,404 859,956
Produce marketing and other ......................... 50,949 50,410 48,154
----------------------------------
Total net sales and other
operating revenues .............................. $4,375,949 3,369,509 2,877,092
----------------------------------
----------------------------------
Operating profit (loss):
Wholesale distribution .............................. $ 32,576 37,115 30,047
Retail distribution ................................. (6,041) 7,709 4,143
Produce marketing and other ......................... (303) 2,124 2,439
----------------------------------
Total operating profit ............................ 26,232 46,948 36,629
Interest income ..................................... 6,379 1,613 2,759
Interest expense .................................... (32,845) (14,894) (10,793)
----------------------------------
Earnings (loss) before income taxes ............... $ (234) 33,667 28,595
----------------------------------
----------------------------------
Identifiable assets:
Wholesale distribution .............................. 620,644 649,470 205,288
Retail distribution ................................. 171,326 203,217 201,493
Produce marketing and other ......................... 47,191 41,948 45,662
Corporate ........................................... 65,722 50,842 61,817
----------------------------------
$904,883 945,477 514,260
----------------------------------
----------------------------------
Capital expenditures:
Wholesale distribution .............................. $ 18,245 15,511 8,704
Retail distribution ................................. 23,246 19,795 15,517
Produce marketing and other ......................... 4,166 2,234 5,259
Corporate ........................................... 22,068 13,793 3,784
----------------------------------
$ 67,725 51,333 33,264
----------------------------------
----------------------------------
Depreciation and amortization:
Wholesale distribution .............................. $ 25,148 14,996 11,121
Retail distribution ................................. 16,158 15,791 14,454
Produce marketing and other ......................... 1,481 1,511 1,597
Corporate ........................................... 4,910 2,461 2,234
----------------------------------
$ 47,697 34,759 29,406
----------------------------------
----------------------------------
</TABLE>
Fiscal 1997 operating profit before the effects of the special charges for the
wholesale, retail and produce marketing segments would have been $50.8 million,
$5.8 million and $.9 million, respectively.
(15) SUBSEQUENT EVENT
During the first quarter of 1998, and in conjunction with a planned $150
million unregistered, subordinated debt offering, the Company prepaid $106.3
million of senior notes and paid prepayment premiums totaling $9.4 million, all
with drawings under the Revolving Credit Facility. As a result, the Company
recorded an extraordinary charge of $5.5 million, net of $4.0 million in taxes,
consisting of prepayment premiums and the write-off of deferred financing costs
related to early extinguishment of debt.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
A summary of quarterly financial First Quarter Second Quarter Third Quarter Fourth Quarter
information is presented. 12 Weeks 12 Weeks 16 Weeks 13 Weeks 12 Weeks
------------------ ----------------- ---------------------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and other revenue ............... $947,832 684,494 975,450 735,242 1,354,430 1,003,867 1,113,890 951,882
Cost of sales ............................. 825,189 593,145 845,450 635,315 1,179,698 869,669 976,040 834,580
Earnings (loss) before income taxes ....... 5,259 4,699 11,126 10,253 (23,892) 11,421 7,273 7,294
Income taxes .............................. 2,203 1,903 4,662 4,153 7,435 4,625 1,564 2,954
Net earnings (loss) ....................... 3,056 2,796 6,464 6,100 (16,457) 6,796 5,708 4,340
Percent to sales and revenues ............. .32 .41 .66 .82 (1.22) .68 .51 .46
Net earnings (loss) per share
Basic .................................. $ .27 .26 .58 .56 (1.47) .62 .51 .39
Diluted ................................ $ .27 .26 .57 .56 (1.46) .61 .50 .38
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
NASH FINCH COMPANY and Subsidiaries
CONSOLIDATED SUMMARY OF OPERATIONS
Eleven years ended January 3, 1998
(not covered by Independent Auditors' Report)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (53 WEEKS) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales and revenues .................................... $ 4,375,949 3,369,509 2,877,092 2,822,262 2,715,787 2,509,464
Other income .......................................... 15,653 5,976 11,744 9,738 7,748 5,974
----------- --------- --------- --------- --------- ---------
Total sales, revenues and other income ................ 4,391,602 3,375,485 2,888,836 2,832,000 2,723,535 2,515,438
Cost of sales ......................................... 3,826,377 2,932,709 2,469,841 2,410,292 2,325,249 2,147,845
Selling, general and administrative, and other
operating expenses, including warehousing
and transportation expenses ......................... 451,126 355,364 346,442 349,190 328,703 294,700
Special charges ....................................... 31,272 -- -- -- -- --
Interest expense ...................................... 32,845 14,894 10,793 11,384 10,114 9,294
Depreciation and amortization ......................... 47,697 34,759 29,406 31,831 29,145 27,038
Profit sharing contribution ........................... 2,519 4,092 3,759 3,493 3,646 3,963
Provision for income taxes ............................ 994 13,635 11,181 10,330 10,804 12,530
----------- --------- --------- --------- --------- ---------
Net earnings (loss) ................................... $ (1,228) 20,032 17,414 15,480 15,874 20,068
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Basic earnings (loss) per share ....................... $ (0.11) 1.83 1.60 1.42 1.46 1.85
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Diluted earnings (loss) per share ..................... $ (0.11) 1.81 1.60 1.42 1.46 1.85
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Cash dividends declared per common share (2) .......... $ .72 .75 .74 .73 .72 .71
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Pretax earnings as a percent of
sales and revenues .................................. % -- 1.00 .99 .91 .98 1.30
Net earnings (loss) as a percent
of sales and revenues ............................... % (0.03) .59 .60 .55 .58 .80
Effective income tax rate ............................. % 425.4 40.5 39.1 40.0 40.5 38.4
Current assets ........................................ $ 494,350 525,596 311,690 309,522 294,925 310,170
Current liabilities ................................... $ 294,419 297,088 207,688 220,065 215,021 213,691
Net working capital ................................... $ 199,931 228,508 104,002 89,457 79,904 96,479
Ratio of current assets to current liabilities ........ 1.68 1.77 1.50 1.41 1.37 1.45
Total assets .......................................... $ 904,883 945,477 514,260 531,604 521,654 513,615
Capital expenditures .................................. $ 67,725 51,333 33,264 34,965 36,382 42,991
Long-term obligations (long-term debt
and capitalized lease obligations) .................. $ 364,006 403,651 81,188 95,960 97,887 94,145
Stockholders' equity .................................. $ 225,618 232,861 215,313 206,269 199,264 191,204
Stockholders' equity per share (1), (2) ............... $ 19.96 21.06 19.80 18.97 18.33 17.59
Return (loss) on average stockholders' equity ......... % (0.53) 8.94 8.26 7.63 8.13 10.85
Number of common stockholders of record
at year-end ......................................... 2,226 2,230 1,940 2,074 2,074 2,087
Common stock high price (2), (3) ...................... $ 24 7/8 21 3/4 20 1/2 18 1/4 23 1/4 19 3/4
Common stock low price (2), (3) ....................... $ 17 1/2 15 1/2 15 3/4 15 3/8 17 16 1/4
<CAPTION>
1991 1990 1989 1988 1987
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and revenues .................................... 2,337,560 2,369,054 2,219,451 2,091,822 1,938,758
Other income .......................................... 5,718 5,799 4,312 6,012 4,590
--------- --------- --------- --------- ---------
Total sales, revenues and other income ................ 2,343,278 2,374,853 2,223,763 2,097,834 1,943,348
Cost of sales ......................................... 1,997,462 2,036,335 1,904,041 1,807,448 1,682,667
Selling, general and administrative, and other
operating expenses, including warehousing
and transportation expenses ......................... 276,144 271,735 264,024 230,221 198,553
Special charges ....................................... -- -- -- -- --
Interest expense ...................................... 8,966 8,670 8,277 8,106 8,087
Depreciation and amortization ......................... 26,124 25,551 23,170 20,193 18,389
Profit sharing contribution ........................... 3,789 3,603 3,089 2,832 2,734
Provision for income taxes ............................ 11,738 11,129 8,010 10,859 14,416
--------- --------- --------- --------- ---------
Net earnings (loss) ................................... 19,055 17,830 13,152 18,175 18,502
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Basic earnings (loss) per share ....................... 1.75 1.64 1.21 1.67 1.75
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted earnings (loss) per share ..................... 1.75 1.64 1.21 1.67 1.74
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash dividends declared per common share (2) .......... .70 .69 .67 .65 .57
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pretax earnings as a percent of
sales and revenues .................................. 1.31 1.22 .95 1.38 1.69
Net earnings (loss) as a percent
of sales and revenues ............................... .81 .75 .59 .87 .95
Effective income tax rate ............................. 38.1 38.4 37.9 37.4 43.8
Current assets ........................................ 239,850 234,121 212,264 219,956 209,305
Current liabilities ................................... 154,993 159,439 128,159 153,068 127,608
Net working capital ................................... 84,857 74,682 84,105 66,888 81,697
Ratio of current assets to current liabilities ........ 1.55 1.47 1.66 1.44 1.64
Total assets .......................................... 429,648 416,233 380,771 388,269 352,187
Capital expenditures .................................. 36,836 36,129 34,635 52,019 29,680
Long-term obligations (long-term debt
and capitalized lease obligations) .................. 82,532 74,333 77,950 66,216 66,988
Stockholders' equity .................................. 178,846 167,388 157,024 151,043 140,850
Stockholders' equity per share (1), (2) ............... 16.45 15.40 14.45 13.90 12.97
Return (loss) on average stockholders' equity ......... 11.01 10.99 8.54 12.45 14.38
Number of common stockholders of record
at year-end ......................................... 2,122 2,138 2,146 2,227 2,234
Common stock high price (2), (3) ...................... 20 1/4 25 1/4 25 3/4 27 1/2 26 1/2
Common stock low price (2), (3) ....................... 16 1/2 16 1/4 21 1/4 18 14 3/4
</TABLE>
(1) Based on weighted average outstanding shares at year-end.
(2) Adjusted to reflect 2-for-1 stock split 1987.
(3) High and low closing sale price.
30
<PAGE>
[CHART]
TOTAL ASSETS
MILLIONS Of DOLLARS
[CHART]
WORKING CAPITAL PROVIDED FROM OPERATIONS
MILLIONS Of DOLLARS
- - DEPRECIATION AND AMORTIZATION
- - NET EARNINGS (LOSS)
[CHART]
CAPITAL STRUCTURE
MILLIONS Of DOLLARS
- - STOCKHOLDERS' EQUITY
- - LONG-TERM DEBT INCLUDING CAPITALIZED LEASES
31
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF NASH FINCH COMPANY
A. Direct subsidiaries of Nash Finch Company (the voting stock of which is
owned, with respect to each subsidiary, 100 percent by Nash Finch Company):
<TABLE>
<CAPTION>
Subsidiary State of
Corporation Incorporation
----------- -------------
<S> <C>
GTL Truck Lines, Inc. Nebraska
Norfolk, Nebraska
Nash De-Camp Company California
Visalia, California
Nash Finch Funding Corp. Delaware
Edina, Minnesota
Piggly Wiggly Northland Corporation Minnesota
Edina, Minnesota
Super Food Services, Inc. Delaware
Dayton, Ohio
T.J. Morris Company Georgia
Statesboro, Georgia
</TABLE>
B. Direct subsidiaries of Nash Finch Company (the voting stock of which is
owned, with respect to each subisidiary, 66.6 percent by Nash Finch Company):
<TABLE>
<CAPTION>
Subsidiary State of
Corporation Incorporation
----------- -------------
<S> <C>
Gillette Dairy of the Black Hills, South Dakota
Inc.
Rapid City, South Dakota
Nebraska Dairies, Inc. Nebraska
Norfolk, Nebraska
</TABLE>
<PAGE>
C. Subsidiaries of Nash-DeCamp Company (the voting stock of which is owned,
with respect to each subsidiary other than Agricola Nadco Limitada, 100 percent
by Nash-DeCamp Company):
<TABLE>
<CAPTION>
Subsidiary State of
Corporation Incorporation
----------- -------------
<S> <C>
Forrest Transportation Service, Inc. California
Visalia, California
Agricola Nadco Limitada (*) Chile
</TABLE>
* Ninety-nine percent (99%) is owned
by Nash-DeCamp Company.
D. Material Subsidiaries of Super Food Services, Inc. (the voting stock of
which is owned, with respect to each subsidiary 100 percent by Super Food
Services, Inc.):
<TABLE>
<CAPTION>
Subsidiary State of
Corporation Incorporation
----------- -------------
<S> <C>
Kentucky Food Stores, Inc. Kentucky
Lexington, Kentucky
</TABLE>
<PAGE>
Exhibit 23.1
[LOGO]
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Nash Finch Company of our report dated March 26, 1998, included in the 1997
Annual Report to Shareholders of Nash Finch Company.
Our audit also included the financial statement schedule of Nash Finch Company
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth herein insofar as such
information relates to periods covered by our report.
We also consent to the incorporation by reference in Registration Statement No.
33-64313, Registration Statement No. 33-54487 and Registration Statement No.
333-27563 on Form S-8 of our report dated March 26, 1998 with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Nash Finch
Company.
/s/Ernst & Young LLP
- -------------------------------
Minneapolis, Minnesota
April 3, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JAN-03-1998
<CASH> 933
<SECURITIES> 0
<RECEIVABLES> 193,963
<ALLOWANCES> 20,001
<INVENTORY> 287,801
<CURRENT-ASSETS> 494,350
<PP&E> 589,172
<DEPRECIATION> 312,939
<TOTAL-ASSETS> 276,233
<CURRENT-LIABILITIES> 294,419
<BONDS> 325,489
0
0
<COMMON> 19,292
<OTHER-SE> 208,241
<TOTAL-LIABILITY-AND-EQUITY> 904,883
<SALES> 4,319,095
<TOTAL-REVENUES> 4,391,602
<CGS> 3,826,377
<TOTAL-COSTS> 496,287
<OTHER-EXPENSES> 31,272
<LOSS-PROVISION> 5,055
<INTEREST-EXPENSE> 32,845
<INCOME-PRETAX> (234)
<INCOME-TAX> 994
<INCOME-CONTINUING> (1,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,228)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-03-1998 JAN-03-1998 JAN-03-1998
<PERIOD-START> DEC-29-1996 DEC-29-1996 DEC-29-1996
<PERIOD-END> MAR-22-1997 JUN-14-1997 OCT-04-1997
<CASH> 886 909 891
<SECURITIES> 0 0 0
<RECEIVABLES> 216,610 241,653 228,268
<ALLOWANCES> 19,655 22,522 19,066
<INVENTORY> 291,207 297,904 323,329
<CURRENT-ASSETS> 522,678 546,920 560,856
<PP&E> 569,680 577,274 586,787
<DEPRECIATION> 300,515 306,340 323,061
<TOTAL-ASSETS> 935,806 964,903 971,796
<CURRENT-LIABILITIES> 275,284 292,728 318,063
<BONDS> 374,793 377,171 376,058
0 0 0
0 0 0
<COMMON> 19,290 19,292 19,292
<OTHER-SE> 215,276 219,860 202,614
<TOTAL-LIABILITY-AND-EQUITY> 935,806 964,903 971,796
<SALES> 935,997 1,896,597 3,225,711
<TOTAL-REVENUES> 947,832 1,923,282 3,277,712
<CGS> 825,189 1,670,639 2,850,337
<TOTAL-COSTS> 933,959 1,889,938 3,226,585
<OTHER-EXPENSES> 0 0 31,272
<LOSS-PROVISION> 1,293 2,139 2,771
<INTEREST-EXPENSE> 7,321 14,820 24,591
<INCOME-PRETAX> 5,259 16,385 (7,507)
<INCOME-TAX> 2,203 6,865 (570)
<INCOME-CONTINUING> 3,056 9,520 (6,937)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,056 9,520 (6,937)
<EPS-PRIMARY> .27 .85 (.62)
<EPS-DILUTED> .27 .84 (.62)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 6-MOS
9-MOS
<FISCAL-YEAR-END> DEC-30-1995 DEC-28-1996 DEC-28-1996 DEC-28-1996
DEC-28-1996
<PERIOD-START> JAN-01-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995
DEC-31-1995
<PERIOD-END> DEC-30-1995 DEC-28-1996 MAR-23-1996 JUN-15-1996
OCT-05-1996
<CASH> 26,024 921 1,008 1,456
1,005
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 87,377 226,584 123,539 143,079
144,804
<ALLOWANCES> 1,409 20,522 726 746
816
<INVENTORY> 183,957 293,458 191,117 196,042
226,092
<CURRENT-ASSETS> 311,690 525,596 336,760 360,127
390,291
<PP&E> 388,826 565,700 399,551 404,953
420,767
<DEPRECIATION> 210,787 293,845 214,100 214,327
221,954
<TOTAL-ASSETS> 514,260 945,477 589,005 616,509
655,020
<CURRENT-LIABILITIES> 207,688 297,088 216,963 234,998
248,420
<BONDS> 71,030 361,819 136,006 141,378
156,185
0 0 0 0
0
0 0 0 0
0
<COMMON> 18,706 19,290 18,706 18,706
19,290
<OTHER-SE> 199,641 215,688 197,556 201,697
211,555
<TOTAL-LIABILITY-AND-EQUITY> 514,260 945,477 589,006 616,509
655,020
<SALES> 2,831,114 3,322,666 675,484 1,399,290
2,384,089
<TOTAL-REVENUES> 2,888,836 3,375,485 684,494 1,419,736
2,423,603
<CGS> 2,469,841 2,932,709 593,145 1,228,460
2,098,129
<TOTAL-COSTS> 375,610 392,322 83,338 169,619
288,037
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 3,997 1,893 389 702
1,092
<INTEREST-EXPENSE> 10,793 14,894 2,923 6,003
9,972
<INCOME-PRETAX> 28,595 33,667 4,699 14,952
26,373
<INCOME-TAX> 11,181 13,635 1,903 6,056
10,681
<INCOME-CONTINUING> 17,414 20,032 2,796 8,896
15,692
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 17,414 20,032 2,796 8,896
15,692
<EPS-PRIMARY> 1.60 1.83 .26 .82
1.44
<EPS-DILUTED> 1.60 1.81 .26 .82
1.43
</TABLE>
