SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 1996
Commission File Number 0-12923
Delchamps, Inc.
- ---------------------------------------
(Exact name of registrant as
specified in its charter)
Alabama 63-0245434
- --------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
305 Delchamps Drive Mobile, AL 36602
- --------------------------------------- -------------------------------
(Address of Principal executive (Zip Code)
offices)
(334) 433-0431
- ---------------------------------------
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (g) of the Act: Common Stock,
$.01 par value.
Indicate by check mark whether the
registrant (1) has filed all reports
required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934
during the preceding 12 months ( or for
such shorter period the registrant was
required to file such reports), and (2) has
been subject to such filing requirements
for the past 90 days. Yes __X__ No _____
Indicate 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.
The aggregate market value of the voting
stock held by non-affiliates ( affiliates
being directors, executive officers and
holders of more than 5% of the Company's
common stock) of the Registrant at
September 12, 1996 was approximately
$76,800,000.
The number of shares of Registrant's
common stock, par value one cent ($.01)
per share, outstanding at September 12,
1996, was 7,112,940.
Documents incorporated by reference:
Parts II and IV incorporate by reference
portions of the Company's Annual Report to
shareholders for 1996. The Company's
definitive Proxy Statement dated September
16, 1996 is incorporated by reference into
Part III.
The exhibit Index is located on page 27
of this document.
PART I
Item 1. Business
(a) Delchamps, Inc. ("the Company") is
a corporation that was organized under
the laws of the State of Alabama
in 1946; from the Company's
founding in 1921 until it was
incorporated, it operated as a
partnership. The Company operates a chain
of supermarkets under the name "Delchamps"
in Alabama, Florida, Louisiana, and
Mississippi and has operated continuously
for over 70 years. In addition, the Company
operates ten liquor stores in the state of
Florida.
The number of supermarkets operated by
the Company has changed from 115 at June
27, 1992 to 120 at July 2, 1994 and 117 at
June 29, 1996. In addition to regularly
opening new stores, the Company expands
and remodels existing units, and closes
outmoded or unprofitable stores. During
the five years ended June 29, 1996, the
Company closed 19 outdated or unprofitable
stores and opened 24 new stores.
The Company also remodeled and expanded
(which includes replacement of certain
fixtures and equipment) 22 stores during
the same five year period and renovated (which
includes decor packages, new signage and
painting) 48 stores in 1996.
The Company has one wholly-owned subsidiary,
Supermarket Cigarette Sales, Inc., which
functions as the purchasing agent and
distributor for cigarettes sold by the
Company's supermarkets in Louisiana,
Mississippi, and Florida.
The 117 supermarkets operated by the
Company at June 29, 1996 range in size
from 12,000 square feet to 61,980 square
feet, and average 41,600 square feet. The
average square footage of selling area per
supermarket increased from approximately
30,070 square feet at June 27, 1992, to
approximately 31,684 at June 29, 1996, and
the total sales area in all stores
increased from 3,458,000 to 3,707,000
square feet during the same period. The
Company's new stores will range from
approximately 35,000 to 48,000 square feet
in size (and from approximately 26,000 to
36,000 square feet of selling space)
depending upon the size of the store's
market area.
The Company plans to continue to expand
the supermarket chain through the addition
of new supermarkets in its present areas
of operation, through expansion of
existing stores, and through renovation of
existing stores.
During fiscal year 1996, the Company
opened one supermarket and closed two
supermarkets. The Company has plans to
open two additional supermarkets during
fiscal year 1997. One store was expanded
and 48 were renovated during the
1996 fiscal year, and the Company plans to
expand or remodel 17 existing supermarkets
in fiscal 1997.
<PAGE>
The following table sets forth certain statistical information
with respect to the Company's operations for the period indicated:
<TABLE>
<CAPTION>
DELCHAMPS, INC.
Selected Financial Information
Fiscal Year Ended
____________________________________________________________________________________
June 29, July 1, July 2, July 3, June 27,
1996 1995 1994 1993 1992
52 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
_________ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Sales (in thousands) 1,126,629 1,054,088 1,067,191 1,034,531 949,849
Number of supermarkets:
Opened in period 1 10 3 4 6
Closed in period 2 12 1 1 3
Total <FN1> 117 118 120 118 115
Average sales per supermarket
(in thousands) <FN2> 9,588 8,858 8,968 8,880 8,369
Total square feet of selling
space (in thousands:)
Opened in period 39 362 155 167 241
Closed in period 85 348 22 19 65
Total 3,707 3,753 3,739 3,606 3,458
Total square feet of selling
space per supermarket<FN1> 31,684 31,805 31,158 30,559 30,070
Average sales per square foot
of selling space<FN3> 302 281 291 293 282
_______________________________
<FN1> At the end of period
<FN2> Sales for the period divided by the average number of supermarkets
for the period.
<FN3> Sales for the period divided by the average square feet of selling
space for the period.
</TABLE>
<PAGE>
The Company believes that a vital factor in a
successful supermarket expansion program is the
careful selection of store locations. The
Company analyzes prospective locations on a
continuous basis, both internally and with
assistance of outside consultants, and locates
stores primarily in suburban shopping centers
in areas with stable or growing middle and
upper-middle class populations. The Company
enlarges, modernizes, relocates or closes
stores in light of their past performance and
the Company's assessment of their future
potential.
(b) Financial information on industry
segments and lines of business is omitted
because, apart from its principal business of
operating retail self-service food stores and
liquor stores, the Company had no other lines
of business or industry segments.
(c)(i) Merchandising is the
responsibility of the Senior Vice President,
Marketing who supervises the directors of the
five merchandising departments: Grocery;
Meat; Produce; Deli/bakery; and General
Merchandise and Health and Beauty Care. The
department directors, in turn, supervise the
twelve category managers responsible for
purchasing and merchandising various lines of
products.
The Company's principal merchandising
strategies are to maintain an overall value
image and to achieve high sales volume by
offering quality products and services at
competitive prices. Since the Company's stores
carry many of the same products, centralized
purchasing and distribution facilities are
essential. All purchases are made by
specialized category managers under central
buying procedures, rather than on a store-by-
store basis, which allows the Company to
maintain quality control of its products and to
take advantage of volume discounts.
Inventories are adjusted on a frequent basis to
take into account seasonal changes in consumer
demand.
Delchamps supermarkets operate on a self-
service basis, and are open seven days per
week, except Christmas and Thanksgiving. The
supermarkets are clean, spacious, air
conditioned, well-lighted, colorfully
decorated, well-stocked, equipped with modern
features and adjacent to offstreet parking
facilities. Customers carry their own purchases from the
check-out counters to their automobiles unless
they ask for special assistance.
Delchamps supermarkets carry fresh meat and
produce, frozen and other convenience foods,
dairy products, specialty and gourmet products,
and general grocery products, as well as
selected lines of non-grocery merchandise. All
stores opened and remodeled during the last
several years contain bakeries, delicatessens, service meat
departments, seafood departments, video
departments and offer prepared ready-to-eat
foods. The Company also operates four
pharmacies and may add pharmacies to selected
locations.
The Company's supermarkets offer a selection
of national and regional brand-name products,
generic products and products bearing brand
names of Topco Associates, Inc. ("Topco"), a
cooperative purchasing organization of which
the Company is a shareholding member.
The Company's affiliation with Topco, the
largest cooperative grocery products purchasing
organization in the United States, enables it
to procure quality merchandise on a competitive
basis with larger, national food retailers.
Topco's membership of 32 retail grocery chains
and wholesalers located throughout the United
States enables it to employ large volume buying
techniques on behalf of its members. Topco
products are sold under its own brand names,
such as "Food Club", "Topco", "Top Fresh" and
"Top Frost", or under generic labels.
Effective in fiscal year 94, the Company began using a
Delchamps label to replace the TOPCO labels
on certain products. The Company's purchases
from or through Topco were approximately 19% of
total inventory purchases in fiscal years 1996
and 1995 and 20% in 1994.
Advertising and promotion are important
factors in the Company's merchandising
strategy. In fiscal year 1996, the Company's
advertising expenditures, including television,
radio, newspaper, magazine and circular
advertising, were .84% of sales. The
Company's advertising program features a
quality image, emphasizing value with
competitive prices and "bonus buys"
(merchandise purchased at reduced prices from
vendors and featured for resale with favorable
retail prices). The Company does not issue
trading stamps at any of its stores and does not
expect to do so in the future.
Store operations are the responsibility of
the Senior Vice President, Operations, who
supervises the Company's two Zone Managers, who
in turn supervise the Company's eight District
Managers. Each District Manager is responsible
for approximately 12 to 18 supermarkets in his
area. District Managers regularly visit the
supermarkets under their jurisdiction, thereby
providing continuous, direct supervision of
day-to-day store operations, including such
matters as quality of merchandise, adequacy of
staffing levels and adherence to Company
policies. Each supermarket is individually
supervised by a store manager, assistant store
managers, and department managers. The
Company's management monitors the results of
operations of each supermarket through the
close and direct supervision of the Zone
Managers and District Managers.
The Company stresses the importance of
customer satisfaction with its associates and
insists that associates provide courteous and
efficient service. Customer satisfaction is
also achieved through rapid response to
changing consumer tastes and well-stocked
stores. Additionally, it is the Company's
policy to have a management or supervisory
associate respond personally to customer
complaints and comments.
Technology also enables the Company to more
efficiently serve its customers. The use of
such technological advances as computerized
scanning check-out equipment, direct store
delivery systems, coupon scanning and time and
attendance systems are designed to enhance
customer satisfaction and employee
productivity.
The Company was among the first grocery
chains operating in the Southeast to install
computerized scanning check-out equipment in
its stores and now has such equipment in all of
its stores. A computerized order entry system
is used at each of the Company's supermarkets
to record merchandise orders and transmit them
electronically to the Company's central
distribution facilities. Restocking is
achieved through frequent deliveries from the
Company's central distribution centers and from
local suppliers, thus minimizing the space
required at each store for warehousing
inventory.
A computerized direct store delivery system
has been implemented in all of the Company's
stores. This system improves accounting for
and control of the merchandise delivered
directly to the Company's supermarkets by
suppliers, which represented 30% of total
merchandise inventory purchases in fiscal year
1996. In addition, an electronic time and
attendance system, which utilizes
the same hardware as the direct store
delivery system, has been installed in the
Company's supermarkets.
Advances in technology are important to the
Company's ability to improve productivity and
keep costs in line and emphasis will continue
to be placed on innovations in this area.
The Company's supermarket products are
purchased from over 1,000 suppliers, of which
Topco is by far the most significant, supplying
approximately 19% of the Company's total
inventory purchases during fiscal year 1996.
No other supplier accounted for more than 5% of
the Company's purchases during the fiscal year.
During fiscal year 1996, approximately 70% of
inventories (valued at cost) were supplied to
the Company's stores through its central
distribution facilities in Mobile and Hammond.
The remaining items were furnished directly to
the stores by local distributors. Major
product lines supplied in this manner included
beverages, bread and snack foods.
The Company's central distribution facilities
are serviced by truck and are operated
24 hours per day, six days per week. The
majority of supermarkets receive deliveries six
days per week from the Mobile and Hammond
facilities through a transportation fleet
leased by the Company. The Company believes
that its distribution system has an effective
range of approximately 350 miles in all
directions.
(ii) The Company has not publicly announced
or otherwise made public information about any
new product or industry segment that would
require the investment of a material amount of
the assets of the Company or which otherwise is
material.
(iii) Sources and availability of raw
materials are factors that do not directly
affect the Company's business.
(iv) Patents and trademarks owned by the
Company are not of material importance to its
operations.
(v) Seasonality does impact the Company, as
sales tend to increase in the summer season
because certain of its stores are located near
Gulf Coast beaches.
(vi) The Company has no unusual working
capital requirements.
(vii) The business of the Company is not
dependent upon a single or a few customers.
The Company does not sell goods or services in
an amount that equals 10 % or more of the
company's consolidated revenue to any single
customer or group of customers under common
control or to any affiliated group of
customers.
(viii) Backlog ordering is not a factor in
the business of the Company.
(ix) No portion of the business of the
Company is subject to renegotiation of profits
or termination of contracts or subcontracts at
the election of any government.
(x) The supermarket business is intensely
competitive. The number of competitors and the
amount of competition experienced by the
Company's supermarkets vary by location.
Principal competitive factors include store
location, price, service, convenience,
cleanliness and product quality and variety.
Because the supermarket business is
characterized by narrow profit margins, the
Company's earnings depend primarily on the
efficiency of its operations and its ability to
maintain a large sales volume.
The Company's principal competitors are the
supermarket chains operated by Winn-Dixie
Stores, Inc., The Great Atlantic and Pacific
Tea Company ("A&P"), Bruno's, Inc., and
Albertson's, Inc., and other large regional and
national food store chains. Winn-Dixie, A&P,
Wal-Mart, K-Mart and Sam's compete with the
Company throughout Alabama, Florida, Louisiana,
and Mississippi. Bruno's supermarkets compete
with the Company's Alabama, Florida and
Mississippi Gulf Coast supermarkets.
Albertson's competes with the Company in the
Florida panhandle and certain locations in
Louisiana. Delchamps supermarkets
also compete with local supermarkets, specialty
and convenience food stores and local chains
that have significant market shares in limited
areas, such as the Schwegmann Brothers' Giant
Supermarket chain in Southeastern Louisiana.
Certain of the company's major competitors have
financial resources that are substantially
greater than those of the Company.
(xi) The Company did not spend a material
amount on Company sponsored research and
development activities or on customer sponsored
research activities relating to the development
of new products, services or techniques, or the
improvement of existing products, services or
techniques during fiscal years 1996, 1995, and
1994.
(xii) The Company 's compliance with federal,
state, and local provisions that have been
enacted or adopted regulating the discharge of
materials into the environment, or otherwise
relating to the protection of the environment
has not had, and is not expected to have, a
material effect upon its capital expenditures,
earnings or competitive position.
(xiii) At the end of fiscal year 1996, the
Company had approximately 3,335 full-time and
4,713 part-time employees, none of whom is
covered by a collective bargaining agreement.
(d) The Company does not engage in any
operations in foreign countries, nor is any
portion of its sales or revenue derived from
customers in any foreign country. All sales by
the Company occur at locations in Alabama,
Florida, Louisiana and Mississippi.
Item 2. Properties
The Company leases all of its supermarkets
under standard commercial leases, no one of
which is material to the Company. Most of these
leases are for a period of 20 years, and
contain several renewal options. The leases
provide for fixed rentals ranging from $2.10 to
$14.15 per square foot, with an average rental
of $7.55 per square foot. Nearly all of its
leases, including most of the leases negotiated
in the last five years, provide for the payment
by the Company of taxes, insurance and certain
maintenance expenses, as well as additional
rental based on sales volume. Four of the
Company's store leases are scheduled to expire
during the 1997 fiscal year, and no more than
five leases will expire in any one year
thereafter until the year 2005.
When a store is closed, the Company attempts
to sublease or assign its lease. The Company
is presently paying $256,000 in aggregate
monthly rentals on sixteen leases of closed
stores that have not yet been sublet or
assigned.
The Company owns the furnishings and fixtures
in all supermarkets. It is anticipated that
the Company will own the furnishings and
fixtures in its stores presently under
construction.
The Company's central distribution center is
on a 272-acre site in Hammond, Louisiana. The
distribution facility comprises approximately
662,000 square feet and has fully automated dry
grocery and frozen food warehouses. The center
also contains a perishables warehouse, an ice
manufacturing plant, a remote storage facility
to house flammable items, and a transportation
facility.
The Company owns the 65,000 square foot
building in which its corporate headquarters is
situated at 305 Delchamps Drive, Mobile,
Alabama, as well as a 2.7 acre parcel adjacent
to the headquarters which may be used for
future office expansion and parking. The
Company also owns an undeveloped 6.8 acre
parcel of real estate and a 3 acre parcel on
which a Company supermarket is located; both
were acquired from Western Supermarkets in 1987
and are located near Birmingham, Alabama. In
addition, the company owns a one-half interest
in a partnership which has developed a 22 acre
site near Mobile; the site currently has a
Company supermarket, K-Mart, and other shops.
Further, the Company owns a one-half interest
in land located in Panama City, Florida. The
Company intends to develop this land for
resale. In addition, the Company owns 23.2
acres of land in Mandeville, Louisiana which
the Company plans to develop into a supermarket.
Item 3. Legal Proceedings
On August 10, 1995, a complaint was filed in
the United States District Court for the
Southern District of Alabama styled Amanda
Williams and Kenneth O. McLaughlin, on Behalf
of Themselves and all Other Similarly Situated
v. Delchamps, Inc. The class action complaint
alleges racially discriminatory practices in
hiring and promoting. The relief sought
includes compensatory damages, punitive damages
and reinstatement of employment.
On January 24, 1996, a complaint was filed in
the United States District Court for the
Southern District of Alabama styled Tracie
Kennedy v. Delchamps, Inc. The class action
complaint alleges gender and race
discriminatory practices in hiring, promoting,
compensation, termination, and other conditions
of employment. The relief sought includes
compensatory damages, punitive damages,
reinstatement of employment with promotions and
pay raises, and legal and other costs.
The Company is also the defendant in a number
of legal proceedings involving claims for money
damages arising in the ordinary course of
business which are either covered by insurance
or are within the Company's self-insurance
program, and in a number of other proceedings
otherwise not deemed material. In the opinion
of management, none of such litigation has
resulted or will result in any materially
adverse effect on the financial position or
operations of the Company.
Item 4. Submission of Matters to a Vote of
Security Holders
The Company did not submit any matters to a
vote of security holders during the fourth
quarter of its fiscal year ended June 29, 1996.
Item 4.(a) Executive Officers of the Registrant
All Executive Officers are appointed by the
Board of Directors and, except in certain
circumstances following a change in control,
may be removed at any time, with or without
cause by the Board.
<TABLE>
<CAPTION>
NAME POSITIONS HELD WITH COMPANY AGE
<S> <C> <C>
David W. Morrow Chairman of the Board and Chief Executive Officer 64
Richard W. La Trace President 59
Timothy E. Kullman Senior Vice President, Chief Financial Officer 40
Treasurer and Secretary
Frank L. Bennen Senior Vice President, Operations 56
Thomas P. Robbins Senior Vice President, Marketing 52
V. Lawrence Abreo Vice President 43
Management Information Services
Larry S. Griffin Vice President, Real Estate 54
Thomas R. Trebesh Vice President, Human Resources 47
</TABLE>
David W. Morrow began employment with the Company in
April, 1995 and serves as Chairman of the Board and
Chief Executive Officer. Prior to Delchamps, Mr.
Morrow served as Chairman, President, and Chief
Executive Officer of Pueblo XTRA International.
Richard W. La Trace began employment with the
Company in June, 1995 and serves as President. Prior
to Delchamps, Mr. La Trace served as President and
Chief Operating Officer of XTRA Super Foods, Inc. Mr.
La Trace's experience also includes serving as
President of Corporate Retail at Wetterau, Inc. and
Senior Vice President of Operations at ABCO Markets,
Inc.
Timothy E. Kullman began employment in August, 1994
and serves as Senior Vice President, Chief Financial
Officer, Treasurer and Secretary. Mr. Kullman was
previously with Farm Fresh, Inc., Norfolk, Virginia as
Senior Vice President and Chief Financial Officer. He
was also associated with Blue Cross/Blue Shield of
Michigan as well as Deloitte, Haskins and Sells of
Detroit, Michigan.
Frank L. Bennen began employment with the Company in
June, 1995 and serves as Senior Vice President of
Operations. Prior to Delchamps, Mr. Bennen served as
President of Laneco, Inc., a chain of 52 retail
stores. Mr. Bennen's experience also includes prior
service with Skaggs Alpha Beta Company and Alpha Beta
Company.
Thomas P. Robbins began employment with the Company
in October, 1995. He serves as Senior Vice President,
Marketing. Prior to Delchamps, Mr. Robbins served as
Senior Vice President of Operations and Merchandising
at Thriftway Food and Drug. Mr. Robbins' experience
also includes prior service with Great Atlantic and
Pacific Tea Company and Kroger Company.
V. Lawrence Abreo has been employed by the Company
since 1971. He serves as Vice President, Management
and Information Services, and was appointed to that
position in January, 1992. Prior to that time, Mr.
Abreo was Director of Management Information Services.
Larry S. Griffin has been employed by the Company
since 1964. In July 1995, Mr. Griffin was named Vice
President, Real Estate. He was named Vice President,
Planning and Development in April 1994, Senior Vice
President, Merchandising, in January, 1992, and Vice
President, Merchandising, in July, 1988. In March
1987, he was appointed Director, Merchandising and,
prior to that time, served as Director of Grocery
Merchandising.
Thomas R. Trebesh has been employed by the Company
since 1978. He serves as Vice President, Human
Resources, and was appointed to that position in July
1995. Prior to that time Mr. Trebesh served as Vice
President , Personnel, and was appointed to that
position in June 1993.
PART II
Item 5. Market for the Registrant's Common Stock and
Related Matters
"Dividends and Stock Prices" on page 4 of the
Company's Annual Report to Shareholders for 1996 is
incorporated herein by reference.
As of August 14, 1996, there were 2,230 shareholders
of record of the Company's common stock.
The following table sets forth the cash dividends
declared on the Company's common stock for the two
most recent fiscal years. Future dividends will
depend on the Company's earnings, financial
requirements and other relevant factors.
<TABLE>
<CAPTION>
1996 1995
____ ____
<S> <C> <C>
First Quarter $0.11 $0.11
Second Quarter 0.11 0.11
Third Quarter 0.11 0.11
Fourth Quarter 0.11 0.11
____ ____
TOTAL $0.44 $0.44
==== ====
</TABLE>
Restrictions on the Company's ability to pay dividends
are set forth in Note 5 of the Company's financial
statements on pages 9 and 10 of the Company's 1996 Annual
Report to Shareholders, which is incorporated herein by
reference.
Item 6. Selected Financial Data
The selected financial data of the Company are set
forth under the caption "Five Year Financial
Highlights" included in the Company's Annual Report to
Shareholders for 1996 and are incorporated herein by
reference. Such financial data should be read in
conjunction with the financial statements and
accompanying notes included under item 8, below.
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 13, 14,
and 15 of the 1996 Annual Report to Shareholders is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Company's financial statements, including the
notes thereto, and the report of KPMG Peat Marwick LLP
are contained on pages 4 through 12 of the Company's
Annual Report to Shareholders for 1996 and are
incorporated herein by reference.
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
There have been no changes in or disagreements on
accounting principles or practices or financial
statement disclosure between the Company and its
independent certified public accountants within the
twenty-four months prior to June 29, 1996.
PART III
Item 10. Directors and Executive Officers of the
Registrant
Information about nominees for election as Director
and the Directors of the Company appears on pages 1,
2, and 3 of the Company's definitive Proxy Statement
dated September 16, 1996, under the caption "Election
of Directors" and is incorporated herein by
reference. Certain information concerning the
Company's Executive Officers is included in Item 4 (a)
of Part I of this report.
Item 11. Executive Compensation
Information concerning executive compensation is
contained on pages 5 and 6 of the Company's definitive
Proxy Statement dated September 16, 1996, under the
caption "Executive Compensation", and is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Information concerning certain beneficial owners of
the Company's stock appears on pages 4 and 5 of the
Company's definitive Proxy Statement dated September
16, 1996, under the subcaption "Security Holdings of
Certain Beneficial Owners"; information as to security
ownership of management is contained on page 4 of the
Company's definitive Proxy Statement dated September
16, 1996, under the subcaption "Security Holdings of
Directors and Executive Officers". All such
information is incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions
Information concerning certain relationships and
related transactions appears on page 7 of the
Company's definitive Proxy Statement dated September
16, 1996, under the caption "Compensation Committee
Interlocks and Insider Participation."
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports and Form 8-K
(a) Documents filed as part of this report:
(1) Financial Statements
The financial statements of Delchamps, Inc. listed
below are incorporated by reference from the Company's
1996 Annual Report to Shareholders.
<TABLE>
<CAPTION>
Page In
Annual
Report
<S> <C>
Report of KPMG Peat Marwick LLP 4
Consolidated Balance Sheets as of June 29,
1996 and July 1, 1995 5
Consolidated Statements of Earnings for the
fiscal years ended June 29, 1996 , July 1,
1995, and July 2, 1994 6
Consolidated Statements of Stockholders'
Equity for the fiscal years ended June 29,
1996, July 1, 1995, and July 2, 1994 6
Consolidated Statements of Cash Flows for
the fiscal years ended June 29, 1996,
July 1, 1995, and July 2, 1994 7
Notes to Consolidated Financial Statements 8
</TABLE>
(2) Financial Statement Schedules.
Schedules are omitted as the required
information is inapplicable or the
information is presented in the statements
of the related notes.
(3) Exhibits.
The exhibits listed below and marked with
an asterisk are filed herewith and are
listed in the attached Exhibit Index; the
other exhibits are incorporated herein by
reference from the document indicated:
(b) Reports on Form 8-K - There were
no reports filed on Form 8-K during the
quarter ended June 29, 1996.
Exhibit No.
3(a) Articles of Amendment to the Articles of
Incorporation and Restated Articles of
Incorporation of the Company, each dated
October 5, 1984. (Exhibit 3 (a) to Form
10-K for fiscal year ended June 29, 1985.)
3(b) The Company's By-Laws, as amended on July 28,
1989 (Exhibit 3 (b) to Form 10-K for fiscal
year ended July 1, 1989.)
4(a) Specimen of Common Stock Certificate (Exhibit
4(a) to Form 10-K for fiscal year ended
June 30, 1990).
10(a) Membership and Licensing Agreement dated
August 1, 1973 between Topco Associates, Inc.
and Delchamps, Inc. and attached copy of
Articles of Incorporation and By-Laws of
Topco Associates, Inc. (Exhibit 10(a) to
Registration Statement on Form S-1, No. 2-86926).
10(b) 1987 Restricted Stock Plan, as amended
(Exhibit 10 (i) to Form 10-K for fiscal year
ended July 2, 1988).
10(c) Indemnity Agreement dated November 24, 1987
between Delchamps, Inc. and First Alabama
Bank (Exhibit 10(o) to Form 10-K for fiscal
year ended July 2, 1988).
10(d) Guaranty Agreement dated November 24, 1987
between Delchamps, Inc. and First Alabama
(Exhibit 10(p) to Form 10-K for fiscal year
ended July 2, 1988).
10(e) The Company's Share Purchase Rights Plan
(Exhibit 1 to Report on Form 8-K filed with
the Securities and Exchange Commission
October 20, 1988.)
10(f) Form of Change of Control Severance Agreement
between the Company and certain of its officers
and employees dated September 11, 1989 (exhibit
10 (n) to Form 10-K for fiscal year ended
July 1, 1989).
10(g) Loan agreement dated June 30, 1993 between
Delchamps, Inc. and the Great West Life and
Annuity, Mutual of Omaha Insurance Company,
and United of Omaha insurance Company.
10(h) Loan agreement dated June, 1995 between
Delchamps, Inc. and Hibernia National
Bank, as agent for itself and other banks.*
13(a) The Company's Annual Report to Shareholders
for 1996 included as an exhibit (Deemed filed
as to only those portions specifically
incorporated herein by reference).*
21 Subsidiary of the Registrant.*
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ David W. Morrow
____________________ Chairman of the Board, Sept. 12, 1996
David W. Morrow Chief Executive Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Richard W. La Trace
_______________________ President Sept. 12, 1996
Richard W. La Trace
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Timothy E. Kullman
______________________ Senior Vice President, Sept. 12, 1996
Timothy E. Kullman Chief Financial Officer,
Treasurer & Secretary
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ J. Thomas Arendall,Jr. Director Sept. 12, 1996
_____________________
J. Thomas Arendall, Jr.
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Carl F. Bailey Director Sept. 12, 1996
_____________________
Carl F. Bailey
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ E. Eugene Bishop Director Sept. 12, 1996
_____________________
E. Eugene Bishop
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ John A. Caddell Director Sept. 12, 1996
_____________________
John A. Caddell
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ James M. Cain Director Sept. 12, 1996
_____________________
James M. Cain
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report as been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ William W. Crawford Director Sept. 12, 1996
_____________________
William W. Crawford
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
<S> <C> <C>
10 (h) Loan agreement dated June, 1995 28
between Delchamps, Inc. and Hibernia
Naitonal Bank, as agent for itself and other
banks
13 (a) The Company's Annual Report to Shareholders 85
for 1996 (Deemed filed as to only
those portions specifically incorporated
herein by reference).
21 Subsidiary of the Company 107
</TABLE>
FIVE YEAR FINANCIAL HIGHLIGHTS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
___________________________________________________________
June 29, July 1, July 2, July 3, June 27,
STATEMENT OF EARNINGS DATA: 1996 1995 1994 1993 1992
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $1,126,629 $1,054,088 $1,067,191 $1,034,531 $949,849
Operating income (loss) 13,119 (34,991) 22,019 27,907 12,885
Earnings (loss) before income taxes
and cumulative effect of changes
in accounting principles 6,299 (40,266) 17,858 22,738 8,005
Net earnings (loss) 3,852 (25,666) 10,951 14,373 5,799
Net earnings (loss) per common share 0.54 (3.61) 1.54 2.02 0.81
Dividends per common share 0.44 0.44 0.44 0.44 0.44
Weighted average shares outstanding 7,110 7,113 7,114 7,114 7,126
BALANCE SHEET DATA:
________________________________________________________________________________________________________________
Working Capital $22,067 $22,920 $54,926 $49,511 $38,448
Total assets 255,183 269,412 263,269 252,052 246,725
Long-term debt and obligations under
capital leases, excluding current
installments 21,237 25,745 32,169 39,503 42,214
Stockholders' equity 112,925 110,042 136,300 126,262 112,800
</TABLE>
Delchamps, Inc. founded in 1921, operates 117 grocery stores in
Alabama, Florida, Louisiana and Mississippi. The Company also
operates 10 liquor stores in Florida. A distribution center is
located in Hammond, Louisiana. Delchamps employs 9,000 people.
The Company's stock is traded on the Nasdaq National Market,
under the symbol DLCH.
The first chart is a bar graph of sales by year for the years 1992
through 1996. In the years 1992, 1993, 1994, 1995 and 1996
sales were $950 million, $1,035 million, $1,067 million, $1,054
million and $1,127 million, respectively.
The second chart is a bar graph of net earnings (loss) in millions
by year for the years 1992 through 1996. In 1992, 1993, 1994
and 1996 net earnings were $5.8 million, $14.37 million, $10.95
million and $3.85 million, respectively. In 1995, net losses were
$25.67 million.
The third chart is a bar graph of net earnings (loss) per common
share by year for the years 1992 through 1996. In 1992, 1993, 1994
and 1996 net earnings were $.81, $2.02, $1.54 and $.54, respectively.
In 1995, net losses were $3.61.
The first chart is a bar graph of the total number
of food stores at year end by year for the years
1992 through 1996 and an estimate for the 1997 year.
In 1992, 1993, 1994, 1995 and 1996 the total number
of food stores were 115, 118, 120, 118 and 117,
respectively. It is estimated that in 1997 there
will be a total of 118 food stores.
The second chart is a bar graph of total square feet
of selling space in thousands by year for the years
1992 through 1996 and an estimate for the 1997 year.
In 1992, 1993, 1994, 1995 and 1996 total square feet
of selling space was 3,458, 3,606, 3,739, 3,753 and
3,707, respectively. It is estimated that in 1997
there will be 3,775 total square feet of selling
space.
The third chart is a bar graph of capital structure
showing total shareholder investment, capital leases
and long-term debt by year for the years 1992
through 1996. In 1992 total shareholder investment
was 73%, capital leases 10% and long-term debt 17%.
In 1993 total shareholder investment was 76%,
capital leases 8% and long-term debt 16%. In 1994
total shareholder investment was 81%, capital leases
7% and long-term debt 12%. In 1995 total
shareholder investment was 81%, capital leases 8%
and long-term debt 11%. In 1996 total shareholder
investment was 84%, capital leases 8% and long-term
debt 8%.
The fourth chart is a bar graph of stores opened and
closed by year for the years 1992 though 1996 and an
estimate for the 1997 year. In 1992 three stores
were closed and six were opened, in 1993 one store
was closed and four were opened, in 1994 one store
was closed and three were opened, in 1995 twelve
stores were closed and ten were opened, in 1996 two
stores were closed and one store
was opened. It is estimated in 1997 that one store
will be closed and two stores will be opened.
This is a photograph of Standing (left to right):
Frank Bennen, senior vice president of operations,
Timothy Kullman, senior vice president and chief
financial officer, and Thomas Robbins, senior vice
president of marketing. Seated (left to right):
Richard La Trace, president, and David Morrow,
chairman and chief executive officer.
This is a map showing Delchamps' area of operation and the
location and number of its stores at year end. There are
43 stores in Alabama, 15 food stores and 10 liquor stores
in Florida, 42 stores in Louisiana and 17 stores in
Mississippi. The Distribution Center, 600,000 square feet
and covering 13 acres in located in Hammond, Louisiana.
Teamwork is an essential ingredient in Delchamps successful
four-state operation. At Delchamps teamwork includes
effective cooperation, shared problem solving and recognition
of individual importance.
Every department in the Company is dependent on every other
department, and we recognize the worth and importance of each
individual and every job. Delchamps is dedicated to teamwork
as a vital component of our continued growth and success, and
in fulfilling our Pledge to our customers, employees and
stockholders.
<PAGE>
TO OUR STOCKHOLDERS
The year 1996 marks Delchamps' 75th
anniversary. Seventy-five years of
continuous quality service is a real
testament to the corporation's commitment
to excellence.
Last year we regained our momentum and
finished fiscal year 1996 with sales of
more than 1.1 billion. This was 6.9%
better than the previous year. Same
store sales increased 7%. 1996 net
earnings were $3.9 million or $.54 per
share, significantly better than the
previous year's net loss per share of
$.48, excluding the effects of non-
recurring items.
During the year the Company made
several management and operational
changes as part of a comprehensive
business plan. We divided our selling
territory into two zones: (East and West)
comprised of eight districts. Two Zones
Directors, eight District Managers and
twenty-four Specialists in
Produce/Floral, Meat and Deli/Bakery now
supervise our 117 stores to insure that
customer expectations are met.
Additionally, as part of our business
plan, we have established a new Training
Department with a Training Manager and
eight District Trainers. Each trainer
works in an assigned district to insure
that our customers are always in contact
with a knowledgeable, courteous and
supportive staff.
Another component of the comprehensive
plan to increase profitability is our
focus on capital investment. Last year
we opened a 46,000 square foot
supermarket and a liquor store in
Warrington, Florida. We also renovated
48 stores and expanded one store.
Thirty-eight percent of our stores were
remodeled in some way during this past
year.
To continue our store improvement plan
and reach our goal of better sales per
square foot, we plan to remodel another
17 stores next year and open 2 new
stores. Improvements in selling space
and better sales per square foot will
also allow us to increase profits.
The management focus at Delchamps is
to increase sales and profit. To
accomplish our task, we will continue to
emphasize the absolute need to win in the
areas our customers deem most important:
low prices, fresh top quality
perishables, improved variety, improved
check-out service and dependability.
We have completed a very exciting and
productive year at Delchamps. We are now
well positioned to take advantage of all
opportunities for future growth.
Finally, I want to thank all of our
associates for their efforts to improve
customer service and financial results.
David W. Morrow
Chairman of the Board and Chief Executive Officer
<PAGE>
TRADITION OF EXCELLENCE
From its humble beginnings at the corner of Canal, Lawrence
and Madison streets in Mobile, Alabama Delchamps has grown
into a sizable corporation operating 117 grocery stores in
Louisiana, Mississippi, Alabama and Florida, and 10 liquor
stores in Florida. In 1921 Alfred, Oliver, Katherine and
Annie Delchamps pooled their limited resources and with less
than $1,000 established a 20 by 50 foot cash and carry
operation. Today, the Company's average store size has grown
to 41,000 square feet.
The Company's founders established a high set of standards
for the operation of their Company that centered around
quality, service, value, and cleanliness. Seventy-five years
later, these standards are still in practice in each and
every Delchamps supermarket.
Several changes have taken place since 1921. What was once
a family run company is now a publicly traded, professionally
managed chain equipped with the latest in technological
equipment.
The Delchamps brothers believed it was possible to offer
quality foods in a low-price, low-profit operation and still
be competitive and successful. They were correct. This simple
philosophy enabled them to increase sales and open a new store
every year for the first five years.
Delchamps' current executive management team has renewed the
Company's focus on reduced prices and quality foods and has
positioned the Company to compete effectively with other
supermarkets throughout the Gulf South. The Company expects
to build upon on its 75-year reputation, in-depth knowledge
of its customers and convenient store locations to gain market
share and increase profits.
Continuing to keep abreast of the technological advances in
the industry has long been an integral part of the Company's
policy. Already equipped with state-of-the-art computerized
systems for check-out scanning, coupon scanning and check
cashing, soon a new device will be installed at all Delchamps'
stores to further accommodate credit card and check
transaction. Also, a direct store delivery system has been
implemented in each store to improve accounting and control
of merchandise delivered by suppliers.
Delchamps customers are among the most loyal in the industry
and have come to expect a certain level of commitment to the
community by the Company. Through the years, Delchamps has
given unselfishly of its time and money to several community
endeavors. One such example is the Delchamps Senior Bowl
and Charity Run which has raised a substantial amount of
money for charities in our 4 states of operation.
Historically, no company has survived 75 years without
real value. As Delchamps enters into another 75 years of
service, the basic premise of providing Value to its customers
and shareholders will continue to be of utmost importance.
The Company is proud of its origins and is equally proud
of the progress it has made over the year and will continue
to maintain its position as the premier supermarket chain
in the South.
THE DELCHAMPS TEAM
As our Company continues build on its successes, we have
made specific adjustments in our work force. New to our
management team is Thomas P. Robbins who has been appointed
as Senior Vice President of Marketing, Fred Rayle and
Dennis Smith who have been appointed Zone Directors, John
Estes, District VI Manager, John Zeller, District III Manager
and Richard Overbey who is our Director of Public Relations.
Each of these individuals has embraced our team approach to
management and emulate the values and standards that have
made Delchamps the premier supermarket chain operating in
the South.
Joining our merchandising operations are Mike Doan, Director
of Deli-Bakery Merchandising, and Daniel Bates, Director of
Produce Merchandising, who both have brought unique and
innovative approaches to the Company's merchandising efforts,
and Ed Van Fleet, Director of Loss Prevention.
Tom Kersteins has enhanced our advertising efforts since
being appointed as Corporate Advertising Manager and is
responsible for imparting our sales message in each of the
markets.
This is a photograph of Standing (l to r) Fred Rayle, East
Zone Director, Wayne Wiggins, Manager District VIII, Harry
Spencer, Sr., Manager District I, David Powell, Manager
District IV, and Dennis Smith, West Zone Director.
Seated (l to r) Russell Veazey, Manager District V, John
Estes, Manager District VI, John Zeller, Manager District
III, and Rick Bonner, Manager District II.
This chart is a bar graph that shows the amount of money
raised by the Delchamps Senior Bowl and Charity Run by
year for the years 1989 through 1995. In 1989, 1990, 1991,
1992, 1993, 1994 and 1995 money raised was $70,000,
$109,000, $110,000, $135,000, $160,000, $180,000 and
$193,000, respectively.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Reports of Independent Auditors and
Management
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Delchamps, Inc.:
We have audited the accompanying consolidated balance sheets of
Delchamps, Inc. and subsidiary as of June 29, 1996 and July 1,
1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the
three-year period ended June 29, 1996. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Delchamps, Inc. and subsidiary at June 29, 1996 and
July 1, 1995 and the results of their operations and their cash
flows for each of the years in the three-year period ended June
29, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 9 to the consolidated financial
statements, the Company changed its method of accounting for
postemployment benefits in 1994 to adopt the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." As discussed in note 10 to the
consolidated financial statements, the Company changed its method
of accounting for income taxes in 1994 to adopt the provisions of
the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
August 1, 1996
Atlanta, Georgia
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The Management of Delchamps, Inc. and subsidiary (the
"Company") is responsible for the preparation, integrity, and
objectivity of the consolidated financial statements and related
information appearing in the Annual Report. The consolidated
financial statements were prepared in accordance with generally
accepted accounting principles and include amounts and
interpretations that are based on Management's best estimates and
judgments.
The Company maintains a system of internal accounting control
which provides reasonable assurance that financial records are
reliable for preparation of financial statements and that assets
are properly accounted for and safeguarded.
The consolidated financial statements were audited by KPMG Peat
Marwick, LLP independent auditors appointed by the Stockholders
of the Company upon the recommendation of the Board of Directors.
The Audit and Finance Committee of the Board of Directors, the
majority of whom are outside directors, meets periodically with
the internal and independent auditors to review their accounting,
financial and audit reports and any recommendations they have for
improvements in the system of internal accounting control.
<PAGE>
DIVIDENDS AND STOCK PRICES
The common stock of Delchamps, Inc. is traded on the Nasdaq
National Market under the symbol DLCH. Trading commenced with
the Company's Initial Public Offering on November 23, 1983. The
following information represents the high and low sales prices on
the Nasdaq's National Market.
Fiscal Year Ended June 29, 1996 High Low
First Quarter 21 3/4 17 1/4
Second Quarter 20 3/4 16 3/4
Third Quarter 25 1/8 20 1/4
Fourth Quarter 24 1/2 20 1/2
Fiscal Year Ended July 1, 1995 High Low
First Quarter 24 21 1/2
Second Quarter 21 14 1/2
Third Quarter 18 1/2 14 3/4
Fourth Quarter 22 1/2 17 3/4
The Company has paid a regular quarterly dividend of $.07 per
share from November 1, 1983 through August 1988, $.09 per share
from September 1988 through August 1989, $.10 per share from
September 1989 through August 1990, and $.11 per share
thereafter.
As of August 14, 1996, there were approximately 2,230
shareholders of record.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 29, 1996 and July 1, 1995
(In thousands except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Asset 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 2) $10,503 15,906
Trade and other accounts receivable 8,422 9,214
Merchandise inventories (note 3) 90,797 93,808
Prepaid expenses 1,376 1,420
Income taxes receivable (note 10) 764 6,549
Deferred income taxes (note 10) 3,878 2,045
_______ _______
Total current assets 115,740 128,942
_______ _______
Property and equipment (notes 4 and 5):
Land 15,210 13,312
Buildings and improvements 58,111 56,632
Fixtures and equipment 221,090 220,903
Construction in progress 9,771 2,649
_______ _______
304,182 293,496
Less accumulated depreciation and amortization 166,931 155,411
_______ _______
Net property and equipment 137,251 138,085
_______ _______
Other assets 2,192 2,385
_______ _______
Total assets $255,183 269,412
======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current installments of obligations under
capital leases (note 4) $749 665
Current installments of long-term debt (note 5) 3,760 3,760
Notes payable (note 6) 14,000 30,000
Current installments of guaranteed ESOP debt
(note 7) - 2,000
Restructure obligation (note 12) 3,996 6,364
Accounts payable 48,308 45,063
Accrued expenses:
Salaries and wages 4,603 3,019
Licenses and other taxes 8,017 7,738
Other 10,240 7,413
_______ _______
Total accrued expenses 22,860 18,170
_______ _______
Total current liabilities 93,673 106,022
_______ _______
Obligations under capital leases, excluding current
installments (note 4) 10,398 11,147
Long-term debt, excluding current installments
(note 5) 10,839 14,598
Restructure obligation (note 12) 15,668 19,219
Deferred income taxes (note 10) 9,225 5,464
Other liabilities 2,455 2,920
_______ _______
Total liabilities 142,258 159,370
_______ _______
Stockholders' equity (notes 5 and 11):
Junior participating preferred stock of
no par value.
Authorized 5,000,000 shares; no shares
issued - -
Common stock of $.01 par value. Authorized
25,000,000 shares; issued 7,112,320 shares
in 1996 and 7,108,781 71 71
shares in 1995
Additional paid-in capital 19,657 19,603
Retained earnings 93,359 92,637
_______ _______
113,087 112,311
Less:
Guaranteed ESOP debt (note 7) - 2,000
Unamortized restricted stock award
compensation (note 8) 162 269
_______ _______
Total stockholders' equity 112,925 110,042
_______ _______
Commitments and contingencies (notes 4, 8, and 13)
Total liabilities and stockholders' equity $255,183 269,412
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended June 29, 1996, July 1, 1995 and July 2, 1994
(In thousands except per share data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,126,629 1,054,088 1,067,191
Cost of sales (note 3) 863,389 798,537 796,364
_________ _________ _________
Gross profit 263,240 255,551 270,827
Selling, general and administrative expenses ("S G & A"):
Restructuring charge (note 12) - 28,779 -
Other S G & A 250,121 261,763 248,808
_________ _________ _________
Total S G & A 250,121 290,542 248,808
_________ _________ _________
Operating income (loss) 13,119 (34,991) 22,019
_________ _________ _________
Other (expense) income:
Interest expense (7,169) (5,375) (4,298)
Interest income 349 100 137
_________ _________ _________
(6,820) (5,275) (4,161)
_________ _________ _________
Earnings (loss) before income taxes and cumulative effect of
changes in accounting principles 6,299 (40,266) 17,858
Income tax expense (benefit) (note 10) 2,447 (14,600) 6,207
_________ _________ _________
Earnings (loss) before cumulative effect of changes in
accounting principles 3,852 (25,666) 11,651
Cumulative effect of change in accounting for income taxes (note 10) - - 900
Cumulative effect of change in accounting for postemployment benefits
(net of income tax benefits of $1,000) (note 9) - - (1,600)
_________ _________ _________
Net earnings (loss) $3,852 (25,666) 10,951
========= ========= =========
Earnings (loss) per common share:
Earnings (loss) before cumulative effect of changes in accounting
priciples $0.54 (3.61) 1.64
Cumulative effect of change in accounting for income taxes - - 0.12
Cumulative effect of change in accounting for postemployment benefits - - (0.22)
_________ _________ _________
Net earnings (loss) per common share $0.54 (3.61) 1.54
_________ _________ _________
Weighted average number of common shares 7,110 7,113 7,114
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended June 29, 1996, July 1, 1995 and July 2, 1994
(In thousands)
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________________
Common Stock
Issued Additional Restricted Total
Paid-In Retained Guaranteed Stock Stockholders'
Shares Amount Capital Earnings ESOP Debt Awards Equity
_______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 3, 1993 7,114 $71 19,731 113,611 (6,000) (1,151) 126,262
Amortization of restricted stock awards - - - - - 215 215
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Net earnings - - - 10,951 - - 10,951
Dividends declared of $.44 per share - - - (3,128) - - (3,128)
_______ _______ _______ ________ ________ ______ _________
Balances at July 2, 1994 7,114 71 19,731 121,434 (4,000) (936) 136,300
Amortization of restricted stock awards - - - - - 539 539
Retirement of restricted stock awards (5) - (128) - - 128 -
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Net loss - - - (25,666) - - (25,666)
Dividends declared of $.44 per share - - - (3,131) - - (3,131)
_______ _______ _______ ________ ________ ______ _________
Balances at July 1, 1995 7,109 71 19,603 92,637 (2,000) (269) 110,042
Amortization of restricted stock awards - - - - - 21 21
Retirement of restricted stock awards (3) - (86) - - 86 -
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Issuance of shares for director compensatio 4 - 108 - - - 108
Stock options exercised 2 - 32 - - - 32
Net earnings - - - 3,852 - - 3,852
Dividends declared of $.44 per share - - - (3,130) - - (3,130)
_______ _______ _______ ________ ________ ______ _________
Balances at June 29, 1996 7,112 $71 19,657 93,359 - (162) 112,925
======= ======= ======= ======== ======== ====== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 29, 1996, July 1, 1995 and July 2, 1994
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $3,852 (25,666) 10,951
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 21,771 19,472 18,770
Write off of cost in excess of fair value
of assets acquired - 5,050 -
(Gain) loss on sale of property and equipment (420) 231 (115)
Restricted stock award amortization 21 667 215
Non cash director compensation expense 108 - -
Deferred income tax expense (benefit) 1,928 (8,689) (631)
Cumulative effect of change in accounting for income - (900)
Cumulative effect of change in accounting for postemploy- -
ment benefits - - 1,600
Decrease (increase) in merchandise inventories 3,011 11,859 (8,580)
Increase in accounts payable, accrued expenses, and
current installments of restructure obligation 5,568 10,884 501
Increase (decrease) in income taxes, net 5,785 (7,007) (889)
(Decrease) increase in other liabilities and restructure
obligation (1,653) 19,114 700
Increase in other assets (890) (719) -
_______ _______ _______
Net cash flows provided by operating activities 39,080 25,196 21,622
Cash flows from investing activities:
Additions to property and equipment (21,671) (35,239) (17,705)
Proceeds from sale of property and equipment, net 710 611 256
_______ _______ _______
Net cash used in investing activities (20,961) (34,628) (17,449)
Cash flows from financing activities:
Principal payments on obligations under capital leases (665) (1,576) (1,705)
Principal payments on long-term debt and notes payable (25,239) (15,333) (7,606)
Proceeds from issuance of long-term debt and notes payable 5,480 30,000 11,574
Issuance of stock options 32 - -
Dividends paid (3,130) (3,131) (3,128)
_______ _______ _______
Net cash (used in) provided by financing activities (23,522) 9,960 (865)
Net (decrease) increase in cash and cash equivalents (5,403) 528 3,308
Cash and cash equivalents at beginning of year 15,906 15,378 12,070
_______ _______ _______
Cash and cash equivalents at end of year $10,503 15,906 15,378
======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
June 29, 1996, July 1, 1995, and July 2, 1994
(1) Summary of Significant Accounting Policies
(a) Description of Business
Delchamps, Inc. and subsidiary (the
"Company") are engaged in the business
of retail food distribution through the
Company's supermarkets located in
Alabama, Florida, Louisiana, and
Mississippi.
(b) Definition of Fiscal Year
The Company's fiscal year ends on the
Saturday closest to June 30. Fiscal
years 1996, 1995 and 1994 all comprised
52 weeks.
(c) Principles of Consolidation
The consolidated financial statements
include the accounts of Delchamps, Inc.
and its wholly owned wholesale
subsidiary. All significant
intercompany balances and transactions
have been eliminated in consolidation.
(d) Cash Equivalents
For purposes of the consolidated statements
of cash flows, the Company considers all
highly liquid debt instruments purchased
with a maturity of three months or less
to be cash equivalents.
(e) Merchandise Inventories
Inventories are stated at the lower of cost
or market. Cost is determined on the
last-in, first-out ("LIFO") basis for
88% of inventories in 1996 and 87% in
1995 and 1994. With respect to the
remaining inventories, primarily produce
and market, cost is determined on the
first-in, first-out ("FIFO") basis.
Inventories developed from the retail
method comprised approximately 58% of
total inventories in 1996, 55% in 1995,
and 50% in 1994.
(f) Property and Equipment
Property and equipment are stated at cost.
Buildings and equipment acquired prior
to July 1, 1984 are depreciated over the
estimated useful lives of the respective
assets using primarily the double-
declining-balance method. Buildings and
equipment acquired subsequent to July 1,
1984, are depreciated over the estimated
useful lives of the respective assets
using the straight-line method.
Buildings and equipment under capital
leases are stated at the lower of the
present value of the minimum lease
payments at the beginning of the lease
term or fair value of the property at
the inception of the lease. Assets
leased under capital leases and
leasehold improvements are amortized
using the straight-line method over the
lesser of the lease term or the
estimated useful lives of the related
assets. The Company uses the following
periods for depreciating and amortizing
property and equipment:
Buildings.....................................10 - 50 years
Leasehold improvement.........................10 years
Fixtures and equipment........................5 - 10 years
(g) Cost in Excess of Fair Value of Assets
Acquired
Cost in excess of fair value of assets
acquired arose from the purchase of
three supermarkets and real estate in
fiscal year 1988. For fiscal years 1988
through 1994, amortization was recorded
over a 40 year period on a straight-line
basis.
Since the acquisition in fiscal year 1988,
the acquired property has not achieved
sales and earnings projections prepared
at the time of the acquisition. The
primary cause of the shortfall in the
Company's projections was because of
competitors increasing promotional
activity, competitors opening new
supermarkets, and competitors expanding
existing supermarkets. The Company
determined, based on the trend of
operating results for 1988 through 1995,
that the projected results of the
acquired property would not support the
future amortization of the remaining
balance of the cost in excess of fair
value of assets acquired. Accordingly,
the Company wrote-off its remaining
balance of cost in excess of fair value
of assets acquired of $5.1 million in
the fourth quarter of fiscal year 1995.
(h) Income Taxes
Deferred income taxes are recognized for
all significant temporary differences
between the tax basis and financial
statement amount of assets and
liabilities. The tax consequences of
those differences expected to occur in
the subsequent year are classified as a
current asset or liability.
Job credits are recorded as a reduction of
the provision for Federal income taxes
in the year realized.
In February 1992, the Financial Accounting
Standards Board ("FASB") issued
Statement of Financial Accounting
Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109") which
supersedes SFAS No. 96. Under the asset
and liability method of SFAS No. 109,
deferred tax assets and liabilities 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. Under SFAS No.
109, the effect on deferred tax assets
and liabilities of a change in tax rates
is recognized in income in the period
that includes the enactment date.
In fiscal year 1994, the Company adopted
SFAS No. 109, and has reported the
cumulative effect of that change in the
method of accounting for income taxes in
the 1994 consolidated statements of
earnings.
(i) Earnings Per Share
Earnings per share are computed by dividing
net earnings by the weighted average
number of shares of common stock
outstanding.
(j) Management Estimates
Management of the Company has made a
number of estimates and assumptions
relating to the reporting of assets
and liabilities and the disclosure of
contingent assets and liabilities to
prepare these financial statements in
conformity with generally accepted
accounting principles. Actual results
could differ from these estimates.
(k) Fair Value of Financial Instruments
The carrying amounts of cash, accounts
receivable, accounts payable, and
accrued expenses approximate fair value
because of the short maturity of these
items.
The carrying amounts of the notes payable
and long-term debt approximate fair
value because the interest rates in
these instruments approximate market
interest rates.
(l) Recent Accounting Pronouncements
In March 1995, Statement of Financial
Accounting Standards No. 121,
"Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets
to be Disposed Of" ("SFAS No. 121") was
issued. SFAS No.121 establishes
accounting standards for the impairment
of long-lived assets, certain
identifiable intangibles and goodwill
related to those assets to be held and
used, or to be disposed of. The Company
does not believe the adoption of SFAS
No. 121 in fiscal year 1997 will have a
significant impact on the Company's
financial condition or results of
operation.
(2) Cash Equivalents
Cash equivalents are stated at cost which
approximates market value. Cash
equivalents at June 29, 1996 and July 1,
1995 consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
__________________
<S> <C> <C>
Euro Dollar Time
Deposits..........................$1,130 6,995
Marketable Unit Investment Fund... 856 928
Cash Management Tax Exempt Fund... 20 36
__________________
$2,006 7,959
__________________
</TABLE>
(3) Merchandise Inventories
The Company uses the LIFO method of valuing
certain of its merchandise inventories to
minimize inflation-induced inventory
profits and to achieve a better matching of
current costs with current revenues.
Inventories would increase by approximately
$13,780,000 at June 29, 1996 and
$13,358,000 at July 1, 1995 if all of the
Company's inventories were stated at cost
determined by the first-in, first-out
method. Further, net earnings would
increase by approximately $262,000 in
fiscal year 1996, increase by $322,000 in
fiscal year 1995, and decrease by $24,000
in fiscal year 1994, after applying the
Company's marginal tax rate and without
assuming an investment return on the
applicable income tax savings.
The Company is a member of a cooperative
association from which it purchases private
label merchandise for resale and certain
store equipment. Merchandise inventories
purchased from this cooperative association
approximated 19% of total inventory
purchases in 1996 and 1995, and 20% in
1994.
(4) Leases
The Company leases certain store properties
and equipment under capital leases that
expire over the next 12 years. The Company
also leases warehouses, store properties,
and store equipment under noncancellable
operating leases that expire over the next
21 years. Contingent rentals on store
properties are paid as a percentage of
sales in excess of a stipulated minimum.
In the normal course of business, it is
expected that most leases will be renewed
or replaced by leases on other properties
and equipment.
Included in property and equipment are the
following amounts applicable to capital
leases:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
<S> <C> <C>
Buildings.................................$13,998 13,998
Fixtures and equipment.................... 19,040 19,040
33,038 33,038
Less accumulated amortization............. 26,888 26,197
$6,150 6,841
</TABLE>
Future minimum lease payments under
noncancellable operating leases and the
present value of future minimum capital
lease payments as of June 29, 1996 are as
follows:
<TABLE>
<CAPTION>
(In thousands)
Capital Operating
Leases Leases
Fiscal Year
<S> <C> <C>
1997........................... $2,079 39,300
1998........................... 2,081 38,337
1999........................... 2,081 37,770
2000........................... 2,081 37,081
2001........................... 2,081 34,904
Later years.................... 8,929 275,526
Total minimum lease payments...... 19,332 462,918
Less amount representing
interest 8,185
Present value of net minimum
capital lease payments...... 11,147
Less current installment of
obligations under capital
leases......................... 749
Long-term obligations under capital
leases ........................$10,398
</TABLE>
Rental expense and contingent rentals for
operating leases are as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
_______________________________
<S> <C> <C> <C>
Minimum rentals............... $45,514 43,552 40,979
Contingent rentals.............. 66 99 110
_______________________________
$45,580 43,651 41,089
_______________________________
</TABLE>
Most of the Company's leases stipulate that
the Company pay taxes, maintenance,
insurance, and certain other operating
expenses applicable to the leased
property.
(5) Long-term Debt
Long-term debt as of June 29, 1996 and July 1,
1995 consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
___________________
<S> <C> <C>
5.51% note payable, due in 84
monthly installments of $297,619
in principal plus interest, with
the final installment due
July 1, 2000, unsecured.................$14,286 17,858
Note payable, with interest rates based
on LIBOR + 1.5%, due
in 60 monthly installments of
$15,625 in principal plus interest,
with the final installment due
March 1, 1998, secured by
deposit accounts with the lender ....... 313 500
__________________
Total long-term debt................... 14,599 18,358
Less current installments............... 3,760 3,760
Long-term debt, excluding
current installments..................$10,839 14,598
__________________
</TABLE>
Agreements underlying the notes payable
contain restrictive covenants which limit
the payment of dividends, additional debt,
lease rentals, and transactions with
affiliates, and require maintenance of
certain working capital and equity levels.
At June 29, 1996, the Company was in
compliance with all covenants. At June 29,
1996, approximately $4,107,000 of the
Company's retained earnings was available
for the payment of dividends under such
restrictive provisions.
Cash payments for interest were approximately
$7,129,000, $5,368,000, and $4,312,000 in
1996, 1995 and 1994, respectively.
Aggregate annual maturities of long-term debt
for fiscal years after June 29, 1996 are
approximately as follows:
<TABLE>
<CAPTION>
(In thousands)
Fiscal year Annual maturities
<S> <C>
1997 $ 3,760
1998 3,697
1999 3,571
2000 3,571
_____________
$ 14,599
_____________
</TABLE>
Based on the borrowing rates currently
available to the Company for long-term debt
with similar terms and maturities, the fair
value of the long-term debt outstanding at
June 29, 1996 approximates the carrying
value, with the exception of the 5.51% note
payable which the fair value approximates
$13.7 million. The fair value was
estimated using a discounted cash flow
analysis based on the Company's borrowing
rate for similar liabilities.
(6) Notes Payable
Short-term borrowings as of June 29, 1996 and
July 1, 1995 consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
__________________
<S> <C> <C>
Revolving loan commitments, due on
various dates throughout fiscal 1996,
with interest rates based on LIBOR +
1.25%, secured by all of the
Company's inventory ............ $ 14,000 30,000
__________________
</TABLE>
On June 29, 1995, the Company entered into a
$75,000,000 revolving loan credit
agreement. The revolving loan agreement is
committed through June, 1998. There is an
annual commitment fee of .45 of 1% on the
unused portion. At the Company's option,
interest under the agreement may be based
on LIBOR or the prime rate. As of June 29,
1996, the Company is committed to a LIBOR
contract which expires July 24, 1996 and
has a weighted average interest rate of
6.875%.
The credit agreement requires the Company to
maintain minimum levels of earnings and to
comply with stated debt covenants. At June
29, 1996, the Company was in compliance
with all covenants.
(7) Leveraged Employee Stock Ownership Plan
In November 1987, the Company leveraged its
existing Employee Stock Ownership Plan
("ESOP"). The ESOP used the proceeds of
the loan to purchase approximately
1,097,000 shares of the Company's common
stock. The common stock has been held by
the ESOP trustee in a suspense account and
these shares served as collateral for the
loan. Each year the Company has made a
contribution to the ESOP which the trustee
has used to make principal payments. With
each loan payment a portion of the common
stock has been released from the suspense
account and allocated to participating
employees. The Company was required to pay
interest on the loan in excess of any
dividends received on unallocated shares.
The Company guaranteed $20 million of ESOP
debt under the loan agreement. On June 26,
1996, the ESOP loan was repaid in full.
Therefore, as of June 29, 1996, all shares
have been allocated to participants and no
shares remain in the "suspense account."
The loan obligation of the ESOP was considered
an unearned employee profit sharing trust
contribution and was recorded as a
reduction of the Company's stockholders'
equity. Both the loan obligation and the
unearned employee profit sharing trust
contribution were reduced by the amount of
any loan repayments made by the ESOP.
(8) Employee Benefit and Incentive Plans
The Company has an employee stock ownership
plan and a profit sharing plan pursuant to
section 401(k) of the Internal Revenue Code
which cover substantially all employees who
have completed two years of service. The
profit sharing plan was implemented in
fiscal year 1995. Participants may
contribute a percentage of compensation,
but not in excess of the maximum allowed
under the Code. The plan provides for a
matching contribution by the Company. The
total annual contributions of these plans
for fiscal years 1996, 1995, and 1994 were
as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
__________________________
<S> <C> <C> <C>
Employee stock ownership plan............$ 2,000 2,000 2,000
Profit sharing plan...................... 1,157 1,421 ----
__________________________
$ 3,157 3,421 2,000
__________________________
</TABLE>
The Company has an incentive compensation
plan for certain management personnel tied
to the Company's overall performance.
Incentive compensation expense was
$1,252,000 in 1996. Incentive compensation
was not paid in 1995 and 1994.
In fiscal 1988, the Company adopted, with
stockholder approval, a restricted stock
award plan. The plan provides that a
maximum of 150,000 shares of common stock
be awarded to key executives. During 1989,
138,000 shares were awarded to key
executives at a price of $.01 per share.
No shares have been awarded since 1989.
These awarded shares are held by the
Company for future distribution in
accordance with the provisions of the plan.
Total compensation expense to be charged to
operations over the term of the plan is
approximately $3,209,000. Total
compensation expense associated with the
plan was determined based on the difference
between the market value and the option
price of the stock at the date of award,
and is being amortized on a straight-line
basis over the period the restrictions
lapse. Charges to operations for this plan
were approximately $21,000 in 1996,
$293,000 in 1995, and $215,000 in 1994.
(9) Postemployment Benefits Other Than Pensions
Effective for fiscal year 1994 the Company
adopted Statement of Financial Accounting
Standards No. 112, ("SFAS No. 112"),
"Employers' Accounting for Postemployment
Benefits". Under SFAS No. 112, the cost of
employment benefits must be recognized on
an accrual basis as employees perform
services to earn the benefits.
The Company provides a postemployment
longevity bonus to associates that leave
employment after either attaining age 55 or
completing 25 years of service. The amount
of longevity bonus is based on length of
service.
The Company previously expensed the cost of
these benefits as incurred. The Company
has elected to recognize this change in
accounting principle on the immediate
recognition basis. The cumulative effect
for fiscal year 1994 of adopting SFAS No.
112 was an increase in accrued
postemployment benefit costs of $2,600,000
($1,600,000 after the income tax benefit or
$.22 per share).
(10) Income Taxes
As discussed in note 1, the Company adopted
Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"
("SFAS No. 109") for fiscal 1994. The
cumulative effect of this change in
accounting for income taxes of $900,000 is
determined as of July 4, 1993 and is
reported separately in the consolidated
statements of earnings for the year ended
July 2, 1994. Prior years' financial
statements have not been restated to apply
the provisions of SFAS No. 109.
The components of income tax expense
(benefit) are as follows:
<TABLE>
<CAPTION>
(In thousands)
Current Deferred Total
_______________________________________
<S> <C> <C> <C>
1996:
Federal........................$ 461 1,711 2,172
State.......................... 58 217 275
_______________________________________
$ 519 1,928 2,447
_______________________________________
1995:
Federal........................$ (4,746) (8,101) (12,847)
State.......................... (648) (1,105) (1,753)
_______________________________________
$ (5,394) (9,206) (14,600)
_______________________________________
1994:
Federal........................$ 5,304 176 5,480
State.......................... 706 21 727
_______________________________________
$ 6,010 197 6,207
_______________________________________
</TABLE>
The actual income tax expense (benefit)
differs from the statutory tax rate for all
years (computed by applying the U.S.
Federal corporate rate to earnings (loss)
before income taxes) as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Statutory tax rate...............$ 2,142 (13,690) 6,072
Increase (reduction) in
income taxes
resulting from:
State income taxes,
net of Federal
income tax benefit... 270 (2,219) 480
Targeted jobs tax credits.... (25) (385) (507)
Cost in excess of fair value
of assets acquired........ -- 1,771 53
Other, net..................... 60 (77) 109
_______________________________________
Actual tax expense
(benefit)................... $ 2,447 (14,600) 6,207
_______________________________________
Effective tax rate............. 38.8% 36.3 34.8
_______________________________________
</TABLE>
The tax effects of temporary differences that
give rise to the deferred tax assets and
deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
____________________
<S> <C> <C>
Deferred Tax Assets:
Restructure obligation..................$ 7,531 9,977
Capital lease obligation................ 1,914 1,939
Accrued self-insurance................. 2,879 1,937
Accrued postemployment
benefits.............................. 888 1,026
Other accrued liabilities................ 1,585 1,779
____________________
Net deferred tax assets............. 14,797 16,658
____________________
Deferred Tax Liabilities:
Accelerated depreciation............... 19,985 19,915
Other.................................... 159 162
____________________
Total gross deferred
liabilities............................ 20,144 20,077
____________________
Net deferred tax liability................$ 5,347 3,419
____________________
</TABLE>
No valuation allowance was recorded against
the deferred tax assets at June 29, 1996.
The Company's management believes the
existing net deductible temporary
differences comprising the total gross
deferred tax assets will reverse during the
periods in which the Company generates net
taxable income.
Cash payments for income taxes were
approximately $67,000, $1,437,000, and
$5,741,000 in 1996, 1995, and 1994,
respectively.
(11) Share Purchase Rights Plan
In October 1988, the Company adopted a Share
Purchase Rights Plan and declared a
dividend distribution of one Right for each
outstanding share of common stock. Under
certain conditions, each Right may be
exercised to purchase one one-hundredth of
a share of Junior Participating Preferred
Stock at a purchase price of $70, subject
to adjustment. The Company will be
entitled to redeem the Rights at $.01 per
Right at any time prior to the earlier of
the expiration of the Rights in October
1998 or ten days following the time a
person or group acquires or obtains the
right to acquire a 15% position in the
Company. The Rights do not have voting or
dividend privileges. Until such time as
they become exercisable, the Rights have no
dilutive effect on the earnings per share
of the Company.
(12) Restructuring Charge
During fiscal year 1995, the Company recorded
a pretax restructuring charge of $28.8
million. The charge reflected anticipated
costs associated with a program to close
certain underperforming stores which could
not be subleased in whole or in part and,
to a lesser extent, severance costs related
to the termination of employment of former
executives. Of the total $28.8 million
restructuring reserve, $5.9 million and
$3.2 million of costs and payments have
been charged against the reserve as of the
end of fiscal years 1996 and
1995respectively. A detail of charges
against the restructure charge follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
______________________
<S> <C> <C>
Lease payments...........................$ 3,438 1,421
Inventory write-offs..................... 253 -----
Fixture and equipment write-offs......... 1,828 24
Severance payments....................... 400 1,752
______________________
$ 5,919 3,197
______________________
</TABLE>
(13) Commitments and Contingencies
The Company is a defendant in various claims
and legal actions considered to be in the
normal course of business. Management
intends to vigorously defend these claims
and believes that the ultimate disposition
of these matters will not have a material
adverse effect on the Company's
consolidated financial condition.
In fiscal 1989, and subsequently, the Company
has entered into certain agreements with
officers and key management. The
agreements contain provisions entitling
each officer or employee covered by these
agreements to receive from 1 to 3 times his
annual compensation (as defined) if there
is a change in control of the Company (as
defined) and a termination of his
employment. The agreements also provide
for severance benefits under certain other
circumstances. The agreements do not
constitute employment contracts and only
apply in circumstances following a change
in control of the Company. In the event of
a change in control of the Company and
termination of all persons covered by these
agreements, the cost would be approximately
$10,000,000.
(14) Stock Incentive Plan
Key employees of the Company (including
officers and directors who are also full-
time employees of the Company) are eligible
to receive one or more of the following:
incentive stock options and non-qualified
stock options, stock awards, restricted
stock, performance shares, and cash awards.
Approximately 275,000 stock options have
been granted of which approximately 230,000
shares are exercisable as of June 29, 1996.
The stock options expire from December 2000
through October 2005. During fiscal year
1996, approximately 2,000 options were
exercised. Exercise prices range from
$17.88 to $18.18 which was market value at
date of grant.
(15) Selected Quarterly Financial Data
(Unaudited)
Selected quarterly financial data for the
years ended June 29, 1996, and July 1, 1995
is summarized as follows:
<TABLE>
<CAPTION>
(In thousands except per share amounts)
Fiscal quarters
___________________________________________________________________
1996 Fourth Third Second First
<S> <C> <C> <C> <C>
Sales.................$ 284,662 280,225 277,053 284,689
Gross profit......... 68,171 65,684 64,915 64,470
Earnings (loss)
before tax......... 4,236 1,897 1,290 (1,124)
Net earnings (loss). 2,653 1,147 808 (756)
Net earnings (loss)
per common
share...............$ 0.37 0.16 0.12 (0.11)
Dividends declared
per common
share...............$ 0.11 0.11 0.11 0.11
</TABLE>
<TABLE>
<CAPTION>
(In thousands except per share amounts)
Fiscal quarters
___________________________________________________________________
1995 Fourth Third Second First
<S> <C> <C> <C> <C>
Sales................ $ 271,839 255,592 260,452 266,205
Gross profit........ 63,881 60,956 64,912 65,802
(Loss) earnings
before tax....... (22,945) (19,752) 202 2,229
Net (loss) earnings (15,664) (11,645) 168 1,475
Net (loss) earnings
per common
share............. $ (2.20) (1.64) 0.02 0.21
Dividends declared
per common
share............. $ 0.11 0.11 0.11 0.11
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL
CONDITION
The following discussion should be read in
conjunction with the financial statements and
notes thereto contained herein.
RESULTS OF OPERATIONS
At the end of the 1996 fiscal year Delchamps
operated 117 supermarkets in Alabama, Florida,
Mississippi and Louisiana, compared with 118
at the end of the 1995 fiscal year and 120 at
the end of the 1994 fiscal year. The Company
also operated ten liquor stores in Florida at
the end of fiscal year 1996 compared with
twelve liquor stores at the end of fiscal
years 1995 and 1994. Results of operations
set forth in the following tables and
narrative are for 52-week periods in fiscal
years 1996, 1995, and 1994. The Company's
fiscal year ends on the Saturday closest to
June 30.
<TABLE>
<CAPTION>
Sales (Dollars in thousands)
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Sales.......................... $ 1,126,629 1,054,088 1,067,191
Increase (decrease)
from prior year.......... 72,541 (13,103) 32,660
Percentage increase
(decrease) from
prior year................. 6.9% (1.2%) 3.2%
Percentage increase
(decrease) in same
store sales................. 7.1% (3.7%) 1.2%
</TABLE>
Sales increased in 1996 because a new
merchandising program was implemented during
the fourth quarter of fiscal year 1995, a new
supermarket renovation program was
implemented, and new programs were
implemented to supermarket operations which
have improved customer service. The new
merchandising program included 1) retail
prices were reduced on thousands of items, 2)
the amount of which coupons are doubled was
increased from $.49 to $.50, and 3) a new
advertising campaign was implemented to
promote these changes. The new supermarket
renovation program affected 48 supermarkets
and included, for the most part, new decor
packages, new in-store signage, and
painting, and for some stores, new fixtures,
cases, and shelving. The new programs
related to supermarket operations included:
1) new training programs were implemented
for all levels of store personnel and 2) a
field specialist program was enhanced in
which field specialists (who have expertise
in certain perishable departments) visit
perishable departments in all supermarkets to
improve quality and freshness of product,
signage, and displays.
Sales decreased in 1995 because the Company
operated fewer supermarkets (118 at the end
of fiscal 1995 compared to 120 at the end of
fiscal 1994) and same store sales decreased
3.7%. The decrease in same store sales was
primarily because of competitors opening new
supermarkets and expanding existing
supermarkets. As noted above, a new
merchandising program was implemented in the
fourth quarter of fiscal year 1995, and
fourth quarter same store sales increased
2.9% compared to decreases of 3.1%, 7.8%, and
6.3% for the first, second, and third
quarters of fiscal year 1995, respectively.
Sales increased in 1994 because of the
addition of new supermarkets (three were
opened in 1994 and four were opened in 1993),
the expansion of supermarkets (four were
expanded in 1994 and seven were expanded in
1993), and same store sales increased 1.2%
based on a comparable 52 week period in
fiscal year 1993. Same store sales increased
because of supermarket expansions and
increased sales from promotional activities.
Promotional activities include increased
"Bonus Buy" promotions (in which certain
products are featured at reduced retail
prices), implementing a dish program which
promoted dinner plates, soup bowls and other
dinnerware at discount prices, and
introducing a line of soft drink products
with Delchamps as the brand name. In
addition, there was significant growth in the
existing Cash Back For Schools program (in
which the Company makes cash donations to
schools equal to 1% of the total cash
register receipts collected by each school .)
<TABLE>
<CAPTION>
Gross Profit (Dollars in thousands)
1996 1995 1994
_____________________________________
<S> <C> <C> <C>
Gross profit.................. $ 263,240 255,551 270,827
Gross profit percentage.... 23.4% 24.2% 25.4%
(Decrease) increase from
prior year................ (.8%) (1.2%) (.1%)
</TABLE>
Gross profit percentage decreased in 1996
because the new merchandising program, in
which retail prices were reduced on thousands
of items, was in place for all of 1996 (and
was only in place for the last quarter of
1995).
Gross profit percentage decreased in 1995
because the new merchandising program was in
place for the last quarter of 1995 and was
not in place during the 1994 fiscal year.
Gross profit percentage decreased slightly
in 1994 because of increased markdowns
(retail price reductions) from the "Bonus
Buy" promotional program.
<TABLE>
<CAPTION>
Selling, General and (Dollars in thousands)
Administrative Expenses 1996 1995 1994
_________________________________
<S> <C> <C> <C>
Selling, general and
administrative
("S G & A").............$ 250,121 290,542 248,808
(Decrease) increase
from prior year......... (40,421) 41,734 12,641
S G & A as a
percentage of sales..... 22.2% 27.6% 23.3%
(Decrease) increase in
percentage from
prior year................ (5.4%) 4.3% 0.5%
</TABLE>
S G & A expense decreased in 1996 because
the 1995 fiscal year included restructuring charges of $28.8
million which resulted primarily from closed
stores that could not be subleased in whole
or in part, the 1995 year included a goodwill
write-off of $5.1 million which resulted from
acquired assets which were consistently
producing negative results, and supermarket
salaries and wages decreased $5.4 million
which resulted from the implementation of a
labor scheduling program.
S G & A expense increased in 1995 because
restructuring charges of $28.8 million were
recorded (as described above), a goodwill
write-off of $5.1 million was recorded (as
described above), and the Company implemented
a 401 (k) program in fiscal 1995 which
required Company contributions of $1.4
million.
S G & A expense increased in 1994 primarily
because of expenses related to new and
expanded supermarkets. These expenses
included: salaries and wages increased $3.5
million, utilities increased $1.2 million,
and building rent increased $2.7 million. The
Company also incurred costs totaling $2.2
million for the dish program (described in
the sales section).
<TABLE>
<CAPTION>
Other Income and Expense (In thousands)
1996 1995 1994
_______________________
<S> <C> <C> <C>
Interest expense.................. $ 7,169 5,375 4,298
Increase (decrease)
from prior year............ 1,794 1,077 (1,091)
Interest income............... 349 100 137
Increase (decrease)
from prior year............ 249 (37) (83)
</TABLE>
Interest expense increased in 1996 because
the Company's restructure obligation was
outstanding for all of 1996 and only
outstanding during the fourth quarter of
1995.
Interest expense increased in 1995 because
of higher levels of indebtedness on the
Company's credit lines which was caused
primarily by increased capital expenditures
($35.2 million in 1995 compared to $17.7
million in 1994) and because of interest
related to the restructure obligation
incurred in the fourth quarter of 1995.
Interest expense decreased in 1994
primarily because the Company refinanced $25
million of long-term debt at the end of the
1993 fiscal year. The interest rate on this
debt was reduced to 5.51% from 7.70%. The
decrease in interest expense was also caused by lower
levels of indebtedness and a general decline
in interest rates.
Interest income increased in 1996 and
decreased in 1995 and 1994. These changes in
interest income are a function of invested
cash.
<TABLE>
<CAPTION>
Income Taxes (Dollars in thousands)
1996 1995 1994
_______________________________
<S> <C> <C> <C>
Income tax expense
(benefit)................... $2,447 (14,600) 6,207
Income tax effective rate... 38.8% 36.3% 34.8%
Increase (decrease) in rate
from prior year.......... 2.5% 1.5% (2.0%)
</TABLE>
The income tax effective rate increased in
1996 because of the expiration of the
targeted jobs tax credit. The effective rate
in 1996 approximates the combined Federal and
states statutory rates.
In fiscal year 1995, the Company recorded
an income tax benefit as a result of the loss
in earnings before taxes. The effective tax
rate was negatively affected by the goodwill
write-off of $5.1 million (goodwill expense
is not deductible for income tax purposes)
and positively affected by targeted jobs tax
credits.
In fiscal year 1994, the Company's
effective income tax rate decreased from the
1993 level because earnings decreased (in
1994 the majority of earnings were taxed at a
Federal rate of 34% and in 1993 the majority
of earnings were taxed at a Federal rate of
35%) and targeted jobs tax credits were
reinstated by the Revenue Reconciliation Act
of 1993.
<TABLE>
<CAPTION>
Net Earnings (Dollars in thousands)
1996 1995 1994
_________________________________
<S> <C> <C> <C>
Net earnings (loss)................$ 3,852 (25,666) 10,951
Increase (decrease) from
prior year........................ 29,518 (36,617) (3,422)
Net earnings (loss)
percentage of sales............... .3% (2.4%) 1.0%
</TABLE>
Net earnings increased in 1996 because of
increased sales levels which resulted from
positive customer response to merchandising
programs and reduced expense levels which
included decreased labor expense. In
addition, the 1995 fiscal year included
expenses resulting from a restructuring
charge and goodwill write-off.
Net earnings decreased in 1995 because of
the decline in same store sales, a lower
gross profit margin, and increased S G & A
expenses resulting from a restructuring
charge, a goodwill write-off, and costs for
the implementation of a 401(k) benefit
program.
Net earnings decreased in 1994 from 1993
because same store sales growth decreased (to
1.2% in 1994 from3.2% in 1993) and the
Company experienced an increased rate of
growth in S G & A expenses (to 23.3% of sales
in 1994 from 22.8% of sales in 1993.)
<TABLE>
<CAPTION>
Other (Dollars in thousands)
1996 1995 1994
___________________________
<S> <C> <C> <C>
Provision for LIFO
expense (benefit)...............$ 422 536 (38)
Inflation index................... 1.00473 1.00375 0.99960
</TABLE>
In fiscal years 1996 and 1995, the rate of
inflation was less than one-half of 1%. In
fiscal year 1994, there was slight deflation.
The effect of inflation on the Company's
operating earnings is considered to be
minimal. Management does not expect the
Company to be adversely affected by future
inflation because a large number of its
stores are leased at fixed rents for up to
twenty-five year periods and because
increases in the cost of merchandise can be
generally passed on through retail price
increases. While inflation has not had a
material impact on past operating results,
there is no assurance that the Company will
not be affected by inflation in the future.
<TABLE>
<CAPTION>
1996 1995 1994
_________________________________________
<S> <C> <C> <C>
Inventory turnover
(annual) 9.4 times 8.0 times 7.9 times
Increase (decrease)
from prior year 1.4 0.1 (.1)
</TABLE>
Inventory turnover increased in 1996
because of increased sales levels (same store
sales increased 7.1%) combined with
reductions in inventory levels. For fiscal
year 1996 merchandise inventory was $90.8
million compared to $93.8 million for fiscal
year 1995. The reduction in merchandise
inventory was due to management's directive
to reduce inventory levels in the Company's
warehouses and supermarkets.
Inventory turnover increased slightly in
1995 compared to 1994 because of decreases in
the Company's merchandise inventories. For
fiscal year 1995 merchandise inventory was
$93.8 million compared to $105.7 million for
fiscal year 1994. The reduction in
merchandise inventory was due to management
implementing a plan to reduce inventory
levels at the Company's warehouses.
Inventory turnover decreased slightly in
1994 compared to 1993 because the 1994 period
was a 52-week fiscal year compared to the
1993 period which was a 53-week fiscal year.
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995 1994
________________________________
<S> <C> <C> <C>
Dividends paid......................$ 3,130 3,131 3,128
Dividends per share................. 0.44 0.44 0.44
Dividends as a percentage
of net earnings................... 81.3% (12.2%) 28.6%
</TABLE>
For fiscal years 1996, 1995 and 1994, the
Company paid annual dividends totaling $.44 per share.
LIQUIDITY AND CAPITAL RESOURCES
Capital Spending
The following table shows capital
expenditures during the last three fiscal
years and planned capital expenditures during
the 1997 fiscal year.
<TABLE>
<CAPTION>
Plan Actual
_______________________________
1997 1996 1995 1994
_______________________________
<S> <C> <C> <C> <C>
Capital expenditures (millions) $ 25.2 21.7 35.2 17.7
Supermarkets opened............ 2 1 10 3
Supermarkets closed............. 1 2 12 1
Remodels:
Expansions / remodels completed 17 1 5 4
Renovations completed........ ---- 48 ---- ----
</TABLE>
The Company's plans with respect to store
construction, acquisition, remodeling and
expansion are frequently reviewed and revised
in light of changing conditions. In
addition, the Company's ability to proceed
with projects, or to complete projects during
a particular period, is subject to successful
negotiation of satisfactory contractual
arrangements, and the timing of projects is
subject to normal construction and other
delays. Therefore, it is possible that not
all the projects described above will be
commenced or completed in fiscal year 1997,
and it is possible that a portion of the
expenditures with respect to projects
commenced during a fiscal year will carry
over to the next year.
Financing and Liquidity
Although the Company's supermarket
locations are leased, the Company makes
substantial expenditures to equip new and
expanded supermarkets. The cost to equip a
new supermarket is approximately $2.3 million
while the cost to equip an expanded
supermarket is approximately $1.5 million.
In addition, the Company makes substantial
expenditures for distribution center
facilities and equipment. The Company plans
to finance its capital expenditures with
funds provided by operations. However, if an
insufficient amount of funds is generated,
the Company may obtain long-term financing or
draw on short-term credit lines. The Company
has a $75.0 million credit line from
financial institutions of which $61.0 million
is available for future use. The credit line
is committed to the Company through June
1998.
Working capital decreased $853,000 to
$22,067,000 from July 1, 1995 to June 29,
1996. Additions to property and equipment
were $21,671,000 during fiscal 1996 and
consisted primarily of purchases of fixtures
and equipment for new and remodeled stores
and equipment for distribution center
facilities.
<PAGE>
BOARD OF DIRECTORS
These are photographs of the Board of Directors
J. Thomas Arendall, Jr.
President
Arendall and Associates, Inc.
Carl F. Bailey
Retired President and
Chief Executive Officer
South Central Bell
E. Eugene Bishop
Retired Chairman of the Board
Morrison Restaurants, Inc.
John A. Caddell
President and Chief Executive Officer
Caddell Construction Company
James M. Cain
Retired Vice Chairman
Entergy Corporation
William W. Crawford
Retired Senior Vice President
and Secretary
Kraft, Inc.
Timothy E. Kullman
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Delchamps, Inc.
Richard La Trace
President
Delchamps, Inc.
David W. Morrow
Chairman of the Board,
Chief Executive Officer
Delchamps, Inc.
OFFICERS, BOARD & CORPORATE INFORMATION
OFFICERS
David W. Morrow
Chairman of the Board & Chief Executive Officer
Richard W. La Trace
President
Timothy E. Kullman
Senior Vice President, Chief Financial Officer
Treasurer & Secretary
Frank L. Bennen
Senior Vice President, Operations
Thomas P. Robbins
Senior Vice President, Marketing
V. Lawrence Abreo
Vice President, Management Information Systems
Larry S. Griffin
Vice President, Real Estate
Thomas R. Trebesh
Vice President, Human Resources
Sarah F. Watson
Assistant Secretary
BOARD OF DIRECTORS
J. Thomas Arendall, Jr.
President
Arendall and Associates, Inc.
.
Carl F. Bailey
Retired President and Chief Executive Officer
South Central Bell
E. Eugene Bishop
Retired Chairman of the Board
Morrison Restaurants, Inc.
John A. Caddell
President and Chief Executive Officer
Caddell Construction Company
James M. Cain
Retired Vice Chairman
Entergy Corporation
William W. Crawford
Retired Senior Vice President and Secretary
Kraft, Inc.
Timothy E. Kullman
Senior Vice President, Chief Financial Officer,
Treasurer & Secretary
Delchamps, Inc.
Richard La Trace
President
Delchamps, Inc.
David W. Morrow
Chairman of the Board, Chief Executive Officer
Delchamps, Inc.
CORPORATE INFORMATION
CORPORATE ADDRESS
Delchamps, Inc.
305 Delchamps Drive
Post Office Box 1668
Mobile, Alabama 36633
Telephone (334) 433-0431
TRANSFER AGENT, REGISTRAR AND
DIVIDEND DISBURSEMENT AGENT
AmSouth Bank of Alabama
P.O. Box 11426
Birmingham, Alabama 35202
STOCK LISTING
NASDAQ National Market
Symbol: DLCH
FORM 10-K
A copy of the Company's annual report to
the Securities and Exchange Commission is
available to stockholders without charge
upon written request to the Senior Vice
President, Chief Financial Officer,
Treasurer and Secretary at the Corporate
Offices.
ANNUAL MEETING
The annual meeting of stockholders of
Delchamps, Inc. will be held in the Adam's
Mark Riverview Plaza Hotel, Alabama
Ballroom, 64 South Water Street, Mobile,
Alabama at 10:00 a.m. on October 22, 1996
AUDITORS
KPMG Peat Marwick LLP
303 Peachtree Street N.E.
Atlanta, Georgia 30308
MARKET MAKERS FOR DELCHAMPS STOCK
J.C. Bradford & Company
Morgan, Keegan & Company
Sterne, Agee & Leach
Troster Singer Corporation
Mayer & Schweitzer, Inc.
Herzog, Heine, Geduld, Inc.
Goldman, Sachs & Company
Gabelli & Company, Inc.
<TABLE>
<CAPTION>
Exhibit 21
Percentage
of Voting
Securities
Jurisdiction of Owned By
Name Incorporation Registrant
__________________________________________________________________
<S> <C> <C>
Supermarket Cigarette
Sales, Inc. Louisiana 100%
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 10,503,000
<SECURITIES> 0
<RECEIVABLES> 8,422,000
<ALLOWANCES> 0
<INVENTORY> 90,797,000
<CURRENT-ASSETS> 115,740,000
<PP&E> 304,182,000
<DEPRECIATION> 166,931,000
<TOTAL-ASSETS> 255,183,000
<CURRENT-LIABILITIES> 93,673,000
<BONDS> 10,839,000
<COMMON> 71,000
0
0
<OTHER-SE> (162,000)
<TOTAL-LIABILITY-AND-EQUITY> 255,183,000
<SALES> 1,126,629,000
<TOTAL-REVENUES> 1,126,629,000
<CGS> 863,389,000
<TOTAL-COSTS> 250,121,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,820,000
<INCOME-PRETAX> 6,299,000
<INCOME-TAX> 2,447,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,852,000
<EPS-PRIMARY> .54
<EPS-DILUTED> 0
</TABLE>
LOAN AGREEMENT
dated as of
June _, 1995
Between
DELCHAMPS, INC.
and
HIBERNIA NATIONAL BANK, AS AGENT
FOR ITSELF AND OTHER BANKS WHO
ARE OR MAY BECOME A PARTY HERETO
LOAN AGREEMENT
THIS LOAN AGREEMENT dated ____________ 1995, is made and
entered into by and among DELCHAMPS, INC., an Alabama
corporation (the "Debtor"); Hibernia National Bank, AmSouth Bank
of Alabama, First Alabama Bank (each an "Original Bank"' and
collectively the "Original Banks"), and each of the banks which
may from time to time become a party hereto (individually, a
"Bank" and collectively the "Banks"), and HIBERNIA NATIONAL BANK
("Hibernia"), a national banking association, as agent for the
Banks (in such capacity, together with its successors in such
capacity, the "Agent").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Defined Terms. As used in this Agreement, and
unless the context requires a different meaning, the following
terms have the meanings indicated:
"Absolute Rate" shall have the meaning given it in Section
2.2.4 (d) (2) (C) hereof.
"Accounts" shall mean all accounts of such Person,
including but not limited to all indebtedness presently
existing or hereafter owing to such Person in connection
with such Person's business, profession, occupation or
undertaking, whether or not earned by performance,
including but not limited to all rights to payment for
goods sold or for services rendered which are not evidenced
by an instrument or chattel paper, together with all
proceeds thereof.
"Agreement" shall mean this Loan Agreement, as the same may
from time to time be amended, modified or supplemented and
in effect.
"Agent" shall mean Hibernia National Bank, a national
banking association.
"Applicable Margin" shall mean the percentage set forth on
Schedule 1 attached hereto.
-1-
"Banks" shall mean each of the banks which is or may hereafter
become a party to this Agreement.
"Base Rate" shall mean the base rate on corporate loans, adjusted
daily, as reported by the Wall Street Journal, or if the Wall
Street Journal discontinues its publication of said base rate of
interest, then the rate of interest established from time to time
by the Board of Directors of Citibank, N.A., New York, New York,
as its "prime" or "base" lending rate, whether or not that rate
is published, such rate to be adjusted automatically on and as of
the effective date of any change in such Base Rate. The Base
Rate is not necessarily the lowest rate charged by Bank or by
Citibank, N.A.
"Base Rate Loan" shall mean the portion of the Revolving Loans
bearing interest calculated on the basis of the Base Rate.
"Business Day" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of
Louisiana or a day on which national banks are authorized to be
closed in New Orleans, Louisiana, and, if such day relates to a
Conversion to, or Continuation of, the LIBOR Rate, also a day on
which dealings in Dollar deposits are carried out in the
interbank market selected by Agent for purposes of setting the
LIBOR Rate.
"Cash Available for Fixed Charges" shall mean the sum of (i) Net
Income, (ii) income taxes, (iii) interest expense, (iv)
depreciation and amortization, (v) operating lease expense and
(vi) any expenses that do not require the payment of cash, less
non-cash gains.
"Closing Date" shall mean the date hereof.
"Collateral" shall mean any interest in any kind of property or
assets pledged, mortgaged or otherwise subject to an Encumbrance
in favor of Agent, for the benefit of Banks, pursuant to the
Collateral Documents.
"Collateral Documents" shall collectively refer to the Security
Agreements, the Guaranty, and any and all other documents in
which an Encumbrance is created on any property of Debtor or of
any third person to secure payment of the Indebtedness of Debtor
or any part thereof.
-2-
"Commitment" means the agreement by each Bank to make Revolving
Loans in accordance with the provisions of Article II hereof in
an aggregate principal amount at any one time outstanding not to
exceed said Bank's Pro Rata Share of the Commitment Amount and
the term "Commitments" means the aggregate amount of Commitments
of all Banks.
"Commitment Amount" means the principal amount of $75,000,000.00.
"Competitive Bid Loan" shall mean the portion of the Revolving
Loans made pursuant to the provisions of Section 2.2.4 hereof.
"Competitive Bid Notes" shall mean, collectively, the promissory
notes made by Debtor, evidencing the Competitive Bid Loans, in
the form of Exhibit "A-211 hereto, each in the principal amount
of $75,000,000, together with any and all extensions, renewals,
modifications and substitutions therefor.
"Competitive Bid Rate" means the interest rate applicable to each
Competitive Bid Loan outstanding.
"Continue", "Continuation" and "Continued" shall mean the
continuation pursuant to Section 2.2.2 hereof of the LIBOR Rate
accruing on the Revolving Notes from one Interest Period to the
next Interest Period.
"Contract Rate" shall mean, at any time, the rate of interest
then borne by the Notes after giving effect to any fluctuations
in the Base Rate or Libor Rate, but without giving any effect to
the application of any default rate of interest imposed by Agent
or Banks under the terms of the Notes. The Contract Rate shall
be as follows:
a) With respect to Base Rate Loans, the Base Rate from time to
time in effect.
b) With respect to LIBOR Rate Loans, the Applicable Margin plus
the Libor Rate from time to time in effect.
c) With respect to each Competitive Bid Loan, the applicable
Competitive Bid Rate.
"Convert", "Conversion" and "Converted" shall mean a conversion
pursuant to Section 2.2.2 hereof of the
-3-
interest rate then accruing on any Revolving Note to the LIBOR
Rate or to the Base Rate.
"Current Maturities of Long-Term Debt and Capital Leases" shall
mean principal payments an Debt for borrowed money and rental
payments on capitalized leases, in each case becoming due within
twelve (12) months after the last day of the quarter for which
the determination is made.
"Debt" shall mean any and all amounts and/or liabilities owing
from time to time by Debtor to any Person, including the Banks,
direct or indirect, liquidated or contingent, now existing or
hereafter arising, including without limitation (i) indebtedness
for borrowed money; (ii) unfunded portions of commitments for
money to be borrowed; (iii) the amounts of all standby and
commercial letters of credit and bankers acceptances, matured or
unmatured, issued on behalf of Debtor; (iv) guaranties of the
obligations of any other Person not previously included in the
calculation of Debt hereunder, whether direct or indirect,
whether by agreement to purchase the indebtedness of any other
Person or by agreement for the furnishing of funds to any other
Person through the purchase or lease of goods, supplies or
services (or by way of stock purchase, capital contribution,
advance or loan) for the purpose of paying or discharging the
indebtedness of any other Person, or otherwise; (v) the present
value of all obligations for the payment of rent or hire of
property of any kind (real or personal) under leases or lease
agreements required to be capitalized under GAAP, and (vi) trade
payables and operating leases incurred in the ordinary course of
business or otherwise.
"Debtor" shall mean Delchamps, Inc.
"Default" shall mean an event which with the giving of notice or
the lapse of time (or both) would constitute an Event of Default
hereunder.
"Dollars" and "$'' shall mean lawful money of the United States
of America.
"Encumbrances" shall mean individually, collectively and
interchangeably any and all presently existing and/or future
mortgages, liens, privileges, servitudes, rights of-way and other
contractual and/or statutory security interests and rights of
every nature and kind that, now
-4-
and/or in the future may affect the property of Debtor or
Guarantor or any part or parts thereof.
"Environmental Claim" means any third party (including
governmental authorities and employees) action, lawsuit, claim
or proceeding (including claims or proceedings at common law or
under the Occupational Safety & Health Act or similar laws
relating to safety of employees) which seeks to impose liability
for (i) noise; (ii) pollution or contamination of the air,
surface water, ground water or land or the clean-up of such
pollution or contamination; (iii) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or
transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture,
processing, distribution in commerce or use of Hazardous
Substances. An "Environmental Claim" includes, but is not
limited to, a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit, or to adopt
or amend a regulation to the extent that such a proceeding
attempts to redress violations of an applicable permit, license
or regulation as alleged by any governmental authority.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, et seq. ("CERCIA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery
Act, 49 U.S.C. Section 6901, et seq., the Louisiana
Environmental Affairs Act, La. R.S. 30:2001 et seq., or other
applicable Governmental Requirements or regulations adopted
pursuant to any of the foregoing.
"Environmental Liabilities" includes all liabilities arising
from any Environmental Claim, Environmental Permit or
Environmental Law under any theory of recovery, at law or in
equity, and whether based on negligence, strict liability or
otherwise, including but not limited to: remedial, removal,
response, abatement, investigative, monitoring, personal injury
and damage to property or injuries to persons, and any other
related costs, expenses, losses, damages, penalties, fines,
liabilities and obligations, and all costs and expenses
necessary to cause the issuance, reissuance or renewal of any
Environmental Permit, including reasonable attorney's fees and
court costs.
-5-
"Environmental Permit" shall mean any permit, license, approval
or other authorization under any applicable Environmental Law
relating to pollution or protection of health or the environment,
including laws, regulations or other requirements relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants or Hazardous Substances or toxic
materials or waste into ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Liabilities" shall have the meaning assigned to
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
ViEurodollar Rate Reserve Percentage of each Bank for any
Interest Period means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall
be so applicable, the daily average of such percentages for
those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from
time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for member
banks of the Federal Reserve System with deposits exceeding
$1,000,000,000 with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities having a term equal to
such Interest Period.
"Event of Default" shall mean individually, collectively and
interchangeably any of the Events of Default set forth below in
Section 8.1 hereof.
"Fixed Charge Coverage Ratio" shall mean, as of any day, the
ratio of Cash Available for Fixed Charges to Fixed Charges.
"Fixed Charges" shall mean the sum of (i) operating lease
expenses payable during such period, (ii) interest expense for
such period and (iii) Current Maturities of Long-Term Debt and
Capital Leases for such period.
-6-
"GAAP" shall mean, at any time, accounting principles generally
accepted in the United States as then in effect.
"General Intangibles" shall mean (i) all general intangibles,
including any intangible personal property other than goods,
accounts, chattel paper, documents,, instruments and money, and
including all contractual rights and obligations or indebtedness
owed to Debtor (other than accounts) from whatever source
arising, but specifically excluding ___________; (ii) all things
and actions, rights represented by judgements and claims arising
out of tort and other claims related to the Collateral, including
the right to assert and otherwise be the proper party of interest
to commence and prosecute actions.
"Governmental Requirement" shall mean any applicable state,
federal or local law, statute, ordinance, code, rule, regulation,
order or decree.
"Guaranty" shall refer to that certain Continuing Guaranty dated
of even date herewith executed by Guarantor as security for the
Indebtedness of the Debtor.
"Guarantor" shall mean Supermarket Cigarette Sales, Inc.
"Hazardous Substance" shall mean any hazardous waste or substance
as those terms are defined in the Environmental Laws.
"Indebtedness" shall mean, at any time, the indebtedness of
Debtor evidenced by the Notes executed by Debtor pursuant to this
Agreement, in principal, interest, costs, expenses and reasonable
attorneys' fees and all other fees and charges, commitment fees
and other indebtedness and costs and expenses for which Debtor is
responsible under this Agreement or under any of the Related
Documents.
"Inventory" shall mean all inventory of Debtor, whether now owned
or hereafter acquired by Debtor, wherever located, including
goods held for sale or lease or to be furnished under contracts
of service and all raw materials, work in process or materials
used or consumed in a business.
-7-
"Interest Period" shall mean: (a) with respect to a LIBOR Rate
Loan, each period commencing on the date the Revolving Loan is
made (if the LIBOR Rate is initially selected by Debtor) or the
date the interest rate is Converted by Debtor from the Base Rate
or the day following the last day of the immediately preceding
Interest Period for which the LIBOR Rate is applicable and is
continued and ending on the numerically corresponding day in the
first, third, or sixth calendar month thereafter, as Debtor may
select as provided in Section 2.2.2 hereof, except that each
Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent
calendar month; and (b) with respect to a Competitive Bid Loan,
each period commencing on the date a Competitive Bid Rate Loan is
made and ending on the date Debtor selects as provided in Section
2.2.4 hereof, provided that in no event shall said date be
greater than thirty (30) days after the date the Competitive Bid
Loan was made. Notwithstanding the foregoing: (i) if any
Interest Period would otherwise commence before and end after the
Maturity Date, such Interest Period shall end on the Maturity
Date; (ii) each Interest Period which would otherwise end on a
day which is not a Business Day shall end on the next succeeding
Business Day, unless such next succeeding Business Day falls in
the next succeeding calendar month, then on the next preceding
Business Day.
"LIBOR Event" shall have the meaning specified in Section
2.2.3(b)(2) hereof.
"LIBOR Rate" shall mean with respect to the applicable Interest
Period in effect, the average of interbank offered rates for
Dollar deposits in the London market, as reported in the Wall
Street Journal, or, if the Wall Street Journal discontinues its
publication of said average of interbank offered rates, the per
annum rate of interest equal to the annual rate of interest
(rounded upward to the nearest whole multiple of 1/100 of 1%, if
such average is not such a multiple) determined by Agent, at or
before 11:00 a.m. New Orleans, Louisiana Time on the first day of
such Interest Period, to be the annual rate of interest at which
deposits of Dollars are offered by prime banks in whatever London
interbank market may be selected by Agent in its sole discretion,
acting in good faith, at the time of determination and in
accordance with the
-8-
then existing practice in such market for delivery on the first
day of such Interest Period in immediately available funds and
having a maturity equal to such Interest Period in an amount
equal (or as nearly equal as may be) to the applicable LIBOR Rate
Loan.
"LIBOR Rate Loan" shall mean the portion of the Revolving Loans
bearing interest calculated on the basis of the LIBOR Rate.
"Loan Documents" shall mean this Agreement, the Notes, the
Collateral Documents and any other Related Documents.
"Majority Banks" shall mean Banks whose combined Pro Rata Share is
greater than or equal to sixty-six and two-thirds percent (66 2/3%)
of the aggregate amount of Commitments.
"Material Adverse Change" shall mean, with respect to any Person,
an event which causes a material adverse effect on the business,
assets, operations or condition (financial or otherwise) of such
Person, or which otherwise changes in a materially adverse way
any other facts, circumstances or conditions which Bank has
relied upon or utilized in making its Commitments hereunder.
"Maturity Date" shall mean _________, 1998.
"Net Income" shall mean, for any period, the amount of net income
(or net deficit) of Debtor or its Subsidiaries for such period,
determined in accordance with GAAP consistently applied.
"Net Worth" shall mean, for the Debtor and its Subsidiaries, as
of any date of determination thereof, the sum of the following
determined (without duplication) in accordance with GAAP: (a) the
amount of capital stock, plus (b) additional paid-in-capital,
plus (c) the amount of surplus and retained earnings (or in the
case of a surplus or retained earnings deficit, minus the amount
of such deficit).
"Notes" shall mean, collectively, the Revolving Notes and the
Competitive Bid Notes.
"Permitted Encumbrances" shall have the meaning ascribed to such
term in Section 7.4 hereof.
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"Person" shall mean an individual or a corporation, partnership,
trust, joint venture, incorporated or unincorporated association,
joint stock company, government, or an agency or political
subdivision thereof, or other entity of any kind.
"Post Default Rate" shall mean two percent (2%) in excess of the
then highest Contract Rate then in effect applicable to any of
the Revolving Loans.
"Principal office" shall mean the principal office of Agent,
presently located at 313 Carondelet Street, New Orleans,
Louisiana 70130.
"Pro Rata Share" means with respect to each Bank, the percentage
obtained by dividing (x) the Commitment of that Bank by (y) the
aggregate Commitments of all Banks, as such percentage may be
adjusted by assignments permitted pursuant to Subsection 10.8.
The initial Pro Rata Share of each Bank is set forth opposite the
name of that Bank in Schedule 2 annexed hereto.
"Related Documents" shall mean and include individually,
collectively, interchangeably and without limitation all
promissory notes, credit agreements, loan agreements, guaranties,
security agreements, mortgages, collateral mortgages, deeds of
trust, and all other instruments and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
"Revolving Loans" shall mean loans made by the Banks under the
Notes to Debtor in accordance with and subject to the terms of
the Agreement.
"Revolving Notes" shall mean, collectively, the promissory notes
made by Debtor, evidencing the Revolving Loans other than
Competitive Bid Loans, in the form of Exhibit "A-1" hereto,
together with any and all extensions, renewals, modifications and
substitutions therefor.
"Security Agreement" shall mean (i) that certain Commercial
Security Agreement by Debtor in favor of Agent, for the benefit
of Banks, affecting Debtor's Accounts, General Intangibles and
Inventory, and (ii) the UCC-1 financing statement, and all
related documents required by the Banks in connection with the
-10-
foregoing Security Agreements, and as the same may be
amended or modified from time to time.
"Subsidiaries" shall mean at any date with respect to any
Person all the corporations of which such Person at such
date, directly or indirectly, owns 50% or more of the
outstanding capital stock, and "Subsidiary" means any one of
the Subsidiaries.
"Termination Date" shall mean the earlier to occur of (i)
June ________, 1998, or (ii) the date of termination of the
Commitment pursuant to Article VII hereof.
"Total Capitalization" shall mean the sum of Debt and Net
Worth.
"UCC" shall mean the Uniform Commercial Code, Commercial
Laws-Secured Transactions (La. R.S. 10-9-101 et seq.) in
the State of Louisiana, as amended from time to time,
provided that if by reason of mandatory provisions of law,
the perfection or effect of perfection or nonperfection of
the the Bank's Encumbrances against the Collateral is
governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Louisiana "UCC" means
the Uniform Commercial Code as in effect in such other
jurisdiction.
Section 1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP, and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with GAAP.
ARTICLE II
REVOLVING LOANS
Section 2.1. Revolving Loan Commitments. Subject to the
terms and conditions of this Agreement, each Bank agrees to make
Revolving Loans to each Debtor from time to time during the
period from the date hereof to and including the Termination
Date; provided, however, that (1) no such Revolving Loan shall
exceed an amount which, when added to the aggregate principal
amount of all Revolving Loans (other than Competitive Bid Loans)
made by such Bank to Debtor at such time outstanding, exceeds
said Banks' Pro Rata Share of the Commitment Amount and (2) the
aggregate principal amount of all Revolving Loans outstanding
(including Competitive Bid Loans) shall not exceed the Commitment
Amount. Within the limits set forth herein, Debtor may borrow
from Bank hereunder, repay any and all such Revolving Loans as
hereinafter
-11-
provided and reborrow hereunder. Debtor's obligation to repay
the Revolving Loans made by each Bank (other than the Competitive
Bid Loans) shall be evidenced by a promissory note of Debtor
(said promissory notes herein collectively referred to as the
"Revolving Notes") payable to the order of said Bank, in the
principal sum of said Bank's Pro Rata Share of the Commitments,
in substantially the form attached hereto as Exhibit A-1.
Debtor's obligation to repay the Competitive Bid Loans made by
each Bank shall be evidenced by a promissory note of Debtor (said
promissory notes herein collectively referred to as the
"Competitive Bid Notes") payable to the order of said Bank, in
the principal sum of $75,000,000, in substantially the form
attached hereto as Exhibit "A-2" (the Revolving Notes and the
Competitive Bid Notes are hereinafter collectively referred to as
the "Notes"). Interest on each of the Revolving Notes shall be
payable on the first day of each calendar quarter commencing July
1, 1995 and on the Termination Date. Interest on LIBOR Rate
loans shall also be payable at the end of each applicable
Interest Period. Simple interest under the Notes will be
assessed utilizing a 360-day daily interest factor over the
number of days in the actual calendar year (365 days or 366 days
in a leap year).
Section 2.2. Interest.
Section 2.2.1. Interest Rate. Debtor will pay when due
to Agent, for the benefit of Banks, or directly to the
applicable Bank in the case of Competitive Bid Loans, interest
on the unpaid principal amount of the Revolving Loans for the
period from and including the date hereof to the date the
Revolving Loans shall be paid in full, at the following rates
per annum:
(a) during each period a portion of the Revolving Loans is
subject to a Base Rate election by Debtor, at the Base Rate from
time to time in effect computed on the outstanding balance of
such portion;
(b) during each period a portion of the Revolving Loans is
subject to a LIBOR Rate election by Debtor, the LIBOR Rate for
such Interest Period plus the Applicable Margin computed on the
outstanding balance of such portion; and
(c) during each period a portion of the Revolving Loans is
subject to a Competitive Bid Rate, the applicable Competitive
Bid Rate for said Revolving Loan.
Notwithstanding the foregoing, Debtor will pay to Agent, for the
benefit of Banks, interest at the applicable Post-Default Rate
on any principal of the Revolving Loans, or on any other amount
payable by Debtor hereunder to Agent, for the benefit of Banks,
or to Banks which shall not be paid in full when due (whether at
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stated maturity, by acceleration or otherwise), for the period
from and including the due date thereof to the date the same is
paid in full, which interest shall be due and payable on demand.
Section 2.2.2. Interest Elections.
(a) on the Closing Date Debtor shall provide Agent with a
written notice specifying the Base Rate or the LIBOR Rate as the
applicable interest rate to accrue under portions of the
Revolving Loans, for sums of not less than $1,000,000.00, or in
increments of at least $250,000 in excess thereof. In the event
Agent chooses the LIBOR Rate, it shall also designate the
applicable Interest Period of one, three, or six months. If the
Base Rate is chosen at any time prior to the Maturity Date, the
Base Rate Loan shall accrue interest thereafter at the Base Rate
until such time that Debtor notifies Agent in writing of its
election to Convert the applicable interest rate. If for any
reason Debtor fails to select an interest rate for all or any
portion of the Revolving Loans or fails to continue the LIBOR
Rate beyond the Interest Period selected, such portion or
portions shall bear interest at the Base Rate from time to time
in effect.
(b) From time to time, Debtor shall have the right to
Convert to the LIBOR Rate, provided (i) Debtor may not select an
Interest Period having a maturity as of the date of Conversion
later than the Maturity Date, and (ii) the LIBOR Rate shall
remain in effect, and may not be Converted, until the end of the
applicable Interest Period selected.
(c) After the Closing Date, notices by Debtor to Agent of
Conversions and Continuations and of the duration of Interest
Periods shall be irrevocable and binding on Debtor and shall be
effective only if received by Agent not later than 11:00 a.m.
(New Orleans, Louisiana Time) on the date of the relevant
Conversion, Continuation or the first day of such Interest
Period. Each such Notice of Conversion or Continuation shall
specify (a) the Dollar amount of the portion of the Revolving
Loans (which shall be not less than $1,000,000.00 or increments
of at least in $250,000.00 in excess thereof) to be Converted or
Continued; (b) whether the applicable interest rate on such
portion of the Revolving Loans is to be Converted or Continued at
the Base Rate or the LIBOR Rate; (c) the effective date of
Conversion or Continuation (which shall be a Business Day); and
(d) the Interest Period, if the LIBOR Rate is chosen. In the
event that Debtor fails to properly or timely Convert or
Continue, the Revolving Loan will be automatically Converted to
the Base Rate at the end of the then current Interest Period (if
LIBOR Rate is in effect).
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Section 2.2.3. LIBOR Rate Loan Provisions.
(a) Additional Interest at LIBOR Rate. Debtor shall pay to
each Bank, so long as said Bank shall be required under
regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional
interest on the unpaid principal amount of the LIBOR Rate Loans
made by said Bank, which shall be determined based on reserves
actually maintained by Bank pursuant to the requirements imposed
by Regulation D of such Board of Governors with respect to
"Eurocurrency Liabilities," from the effective date of the LIBOR
Rate Loans as long as the LIBOR Rate is in effect, at an interest
rate per annum equal at all times to the remainder obtained by
subtracting (i) the LIBOR Rate for the Interest Period in effect
from (ii) the rate obtained by dividing such LIBOR Rate by a
percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of said Bank for such Interest Period, payable
promptly, and in any event within 10 Business Days after Debtor
receives notice of such additional interest from Bank as provided
below. Such additional interest payable to each Bank shall be
determined by each Bank after the end of each Interest Period and
Bank shall notify Debtor (with a copy to Agent) of such
additional amount (such notice to include the calculation of such
additional interest, which calculation shall be conclusive in the
absence of manifest error).
(b) LIBOR Rate Loan; Increased Costs; Etc.
(1) Notice Re Suspension of LIBOR Rate. Anything in
this Agreement to the contrary notwithstanding, if
any Bank shall notify Debtor (with a copy to
Agent, who shall thereafter provide a copy to the
other Banks) that the introduction of, or any
change in the interpretation of, any law or
regulation makes it unlawful, or that any
governmental authority asserts that it is unlawful
for said Bank to perform its obligations hereunder
to fund or maintain the LIBOR Rate Loans (whether
or not such assertion carries the force of law),
the obligation of said Bank to Continue or Convert
to the LIBOR Rate shall be suspended as to said
Bank's Pro Rata Share of the Revolving Loans until
said Bank shall notify Debtor that the
circumstances causing such suspension no longer
exist, and said Banks' Pro Rata Share of Revolving
Loans shall thereafter bear interest at the Base
Rate. Further, if any Bank shall notify Debtor
(with a copy to Agent who shall thereafter provide
a copy to the other Banks) that the LIBOR Rate
will not adequately reflect the cost
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to said Bank of maintaining the LIBOR Rate Loan, the right
of Debtor to select, to Continue or to Convert to the LIBOR
Rate shall be suspended as to said Bank's Pro Rata Share of
the Revolving Loans until said Bank shall notify Debtor that
the circumstances causing such suspension no longer exists.
(2) Change of Law. If at any time any Bank determines in good
faith (which determination shall be conclusive absent
manifest error and shall be made only after consultation
with Agent) that any change in any applicable law, rule or
regulation, or in the interpretation, application or
administration thereof, makes it unlawful, or any
governmental authority asserts that it is unlawful, for said
Bank to fund or maintain the LIBOR Rate Loans (any of the
foregoing determinations being a "LIBOR Event"), then, the
obligation of said Bank hereunder to fund or maintain the
LIBOR Rate Loan shall be suspended as long as such LIBOR
Event shall continue. Upon the occurrence of any LIBOR
Event, and at any time thereafter so long as such LIBOR
Event shall continue, said Bank may exercise its aforesaid
option by giving written notice thereof to Debtor and Agent
(who shall provide notice to the other Banks), and the
applicable portions of the Revolving Loans shall thereafter
bear interest at the Base Rate.
(3) Increased Costs.
(A) If, due to either (i) the introduction of, or any change
in or in the interpretation of, any law or regulation,
or (ii) the compliance with any guideline or request
from any governmental authority (whether or not having
the force of law), there shall be any increase in the
cost to any Bank of agreeing to fund or maintain its Pro
Rata Share of the LIBOR Rate Loan, then Debtor shall
from time to time, upon demand by said Bank, pay said
Bank such additional amounts sufficient to compensate
said Bank for such increased cost or Convert said Bank's
Pro Rata Share of the LIBOR Rate Loan to a Base Rate
Loan. In the event such an election to Convert is made
during an Interest Period, Debtor shall remain
responsible for any funding losses. Any request for
payment under this Section
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2.2.4 (b) will be submitted to Debtor by said Bank
identifying with reasonable specificity the basis for
and the amount of such interest cost, which information
shall be conclusive and binding for all purposes, absent
manifest error. Copies of said requests shall be
delivered to Agent who shall thereafter provide copies
to the other Banks.
(B) Any Bank claiming any additional amounts pursuant to
this Section 2.2.3 (b) shall use its best efforts
(consistent with its internal policies and legal and
regulatory
restrictions) to avoid or minimize any additional
amounts that otherwise would be payable pursuant to this
Section 2.2.3 (b); provided that no change or action
shall be required to be made or taken if, in the
reasonable judgment of said Bank, such change would be
disadvantageous to said Bank. Any obligation of said
Bank hereunder to fund or continue the LIBOR Rate
applicable portion of its Pro Rata Share of the
Revolving Loans shall be suspended as long as the events
giving rise to such increased costs shall continue, and
the applicable portion of its Pro Rata Share of the
Revolving Loans shall thereafter bear interest at the
Base Rate.
(4) Funding Losses. (1) Debtor will indemnify each Bank
against, and reimburse each Bank on demand for, any loss,
cost or expense incurred or sustained by said Bank
(including, without limitation, any loss or expense incurred
by reason of the liquidation or reemployment of deposits or
other funds acquired by said Bank to fund or maintain the
LIBOR Rate Loan) as a result of any payment, prepayment or
Conversion (whether authorized or required hereunder or
otherwise) of all or a portion of the LIBOR Rate Loan on a
day other than the last day of an Interest Period. (2) Any
Bank demanding payment under this section 2.2.3 (b) shall
deliver to Debtor a statement reasonably setting forth the
amount and manner of determining such loss, cost or expense,
which statement shall be conclusive and binding for all
purposes, absent manifest error. Debtor shall provide copies
of said statements to Agent who shall send copies of said
statements to the other Banks.
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Section 2.2.4 Competitive Bid Loans.
(a) At any time prior to the Termination Date during which
the conditions set forth in this Section 2.2.4 are satisfied, the
Debtor may, as set forth in this Section 2.2.4, request the Banks
to make offers to make Competitive Bid Loans to the Debtor in
Dollars. The Banks may, but shall have no obligation to, make
such offers and the Debtor may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section
2.2.4. There may be no more than six (6) different Interest
Periods for Base Rate Loans, LIBOR Rate Loans and Competitive Bid
Loans outstanding at the same time (for which purpose the
Interest Period for each LIBOR Rate Loan and each Competitive Bid
Loan shall be deemed to be different Interest Periods even if
they are co-terminus). The aggregate principal amount of all
Competitive Bid Loans, together with the sum of all other
outstanding Indebtedness, shall not exceed the Commitment Amount
at any time.
(b) Competitive Bid Loans shall only be available to the
Debtor under this Section 2.2.4 commencing on the earlier of (i)
the date one year after the Closing Date, or (ii) the date on
which the Commitment of each of the Banks listed on Schedule 2
has been reduced to $15,000,000 or less, as a result of
assignments made pursuant to Section 10.8 hereof.
(c) When the Debtor wishes to request offers to make
Competitive Bid Loans, it shall give the Agent (which shall
promptly notify the Banks) a request (a "Competitive Bid Quote
Request") to be delivered no later than 11:00 a.m. New Orleans,
Louisiana time on the Business Day next preceding the date of
borrowing proposed therein (or such other time and date as the
Debtor and the Agent, with the consent of the Majority Banks may
agree). The Debtor may request offers to make Competitive Bid
Loans for up to two (2) different Interest Periods in a single
request; provided that the request for each separate Interest
Period shall be deemed to be a separate Competitive Bid Quote
Request for a separate borrowing (a "Competitive Bid Borrowing")
and there shall not be outstanding at any one time more than four
(4) Competitive Bid Borrowings. Each such Competitive Bid Quote
Request shall be substantially in the form of Exhibit B attached
hereto and incorporated herein by reference and shall specify as
to each Competitive Bid Borrowing:
(1) the proposed day of such borrowing, which shall be
a Business Day;
(2) the aggregate amount of such Competitive Bid
Borrowing, which shall be at least $1,000,000 (or
in increments of $250,000 in excess thereof) but
-17-
shall not cause the limits specified in Section
2.2.4 (a) hereof t o be violated;
(3) the duration of the Interest Period applicable
thereto which shall not exceed thirty (30,) days;
and
(4) the date on which the Competitive Bid Quotes are
to be submitted if it is before the proposed date
of borrowing (the date on which such Competitive
Bid Quotes are to be submitted is called the
"Quotation Date").
Except as otherwise provided in this Section 2.2.4 (c), no
Competitive Bid Quote Request shall be given within five (5)
Business Days (or such other number of days as the Debtor and the
Agent, with the consent of the Majority Banks, may agree) of any
other Competitive Bid Quote Request.
(d) (1)Each Bank may submit one or more Competitive
Bid Quotes, each containing an offer to make a
Competitive Bid Loan in response to any
Competitive Bid Quote Request provided that, if
the Debtor's request under Section 2.2.4 (c)
hereof specified more than one Interest Period,
such Bank may make a single submission, containing
one or more Competitive Bid Quotes for each such
Interest Period. Each Competitive Bid Quote must
be submitted to the Debtor not later than 10:00
a.m. New Orleans, Louisiana time on the Quotation
Date (or such other time and date as the Debtor
and the Agent, with the consent of the Majority
Banks, may agree).
(2) Each Competitive Bid Quote shall be substantially
in the form of Exhibit C attached hereto and
incorporated herein by the reference and shall
specify:
(A) The proposed date of borrowing and the
Interest Period therefore;
(B) The principal amount of the Competitive Bid
Loan for which each such offer is being made,
which principal amount shall be at least
$1,000,000 (or in increments of $250,000 in
excess thereof); provided that the aggregate
principal amount of all Competitive Bid Loans
for which a Bank submits Competitive Bid
Quotes may not exceed the principal amount of
-18-
the Competitive Bid Borrowing for a
particular Interest Period for which offers
were requested;
(C) The rate of interest per annum (rounded
upwards, if necessary, to the nearest
1/10,000 of 1%) offered for each such
Competitive Bid Loan (the "Absolute Rate");
and
(D) The identity of the quoting Bank.
Unless otherwise agreed by the Agent and the Debtor, no
Competitive Bid Quote shall contain qualifying, conditional or
similar language or proposed terms other than or in addition to
those set forth in the applicable Competitive Bid Quote Request
and, in particular, no Competitive Bid Quote may be conditioned
upon acceptance by the Debtor of all (or some specified minimum)
of the principal amount of the Competitive Bid Loan for which
such Competitive Bid Quote is being made. Any subsequent
Competitive Bid Quote submitted by Bank that amends, modifies or
is otherwise inconsistent with a previous Competitive Bid Quote
submitted by such Bank with respect to the same Competitive Bid
Quote Request shall be disregarded by the Debtor unless such
subsequent competitive Bid Quote is submitted solely to correct a
manifest error in such former Competitive Bid Quote.
(e) Not later than 11:00 a.m. New Orleans, Louisiana time
on the Quotation Date (or such other time and date as Debtor and
the Agent, with the consent of the Majority Banks, may agree),
the Debtor shall notify the Agent of its acceptance or non-
acceptance of the Competitive Bid Quotes provided to it pursuant
to Section 2.2.4 (d) hereof (and the failure of the Debtor to
give such notice by such time shall constitute non-acceptance)
and the Agent shall promptly notify each affected Bank. In the
case of acceptance, such notice shall specify the aggregate
principal amount of offers for each Interest Period that are
accepted. The Debtor may accept any competitive Bid Quote in
whole or in part (provided that any competitive Bid Quote
accepted in part shall be at least $1,000,000 or in increments of
$250,000 in excess thereof); provided that:
(1) the aggregate principal amount of each Competitive
Bid Borrowing may not exceed the applicable amount
set forth in the related Competitive Bid Quote
Request;
(2) the aggregate principal amount of each
Competitive Bid Borrowing shall be at least
$1,000,000 (or in increments of $250,000 in
excess thereof) but shall
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not cause the limit specified in Section 2.2.4 (a)
hereof to be violated;
(3) acceptance of Competitive Bid Quotes may be made
only in ascending order of Absolute Rates beginning
with the lowest rate so offered; and
(4) the Debtor may not accept any Competitive Bid
Quote where such Competitive Bid Quote fails to
comply with Section 2.2.4 (d) (2) hereof or
otherwise fails to comply with the requirements of
this Agreement (including, without limitation,
Section 2.2.4 (a) hereof.
If Competitive Bid Quotes are made by two or more Banks
with the same Absolute Rates for a greater aggregate principal
amount than the amount in respect of which Competitive Bid
Quotes are accepted for the related Interest Period after the
acceptance of all Competitive Bid Quotes, if any, of all lower
Absolute Rates offered by any Bank for such related Interest
Period, the principal amount of Competitive Bid Loans in respect
of which such Competitive Bid Quotes are accepted shall be
allocated by the Debtor among such Banks as nearly as possible
(in amounts of at least $300,000 or in increments of at least
$50,000 in excess thereof) in proportion to the aggregate
principal amount of such Competitive Bid Quotes. Determinations
by the Debtor of the amounts of Competitive Bid Loans and the
lowest bid shall be conclusive in the absence of manifest error.
(f) Any Bank whose offer to make any Competitive Bid Loan
has been accepted shall, not later than 1:00 p.m. New Orleans,
Louisiana time on the date specified for the making of such
Revolving Loan, make the amount of such Revolving Loan available
to Debtor in Dollars, in immediately available funds, in
accordance with Debtor's instructions.
(g) Competitive Bid Loans made by any Bank shall not reduce
said Bank's obligation to lend its Pro Rata Share of the
remaining unused Commitment.
(h) All outstanding principal and interest under
Competitive Bid Loans shall be due and payable on the earlier of
i) the expiration of the applicable Interest Period or ii) the
occurrence of an Event of Default hereunder (hereinafter the
"Competitive Bid Loan Due Date") and shall be paid directly to
the applicable Bank and not the Agent. In the event that all
outstanding principal and interest on Competitive Bid Loans is
not paid when due, then said amounts due shall be paid on the
next Business Day by Banks making Revolving Loans in accordance
with their Pro Rata Shares for the account of Debtor in an
amount sufficient to repay all
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amounts due under the Competitive Bid Loans. In such instances,
Debtor is obligated to request said Revolving Loans and Banks are
obligated to fund their Pro Rata Shares of such Revolving Loans
notwithstanding the existence of any Event of Default hereunder.
(i) Competitive Bid Loans may not be repaid prior to their
Competitive Bid Loan Due Date, unleas the applicable Bank
consents thereto.
Section 2.3. Manner and Notice of Borrowing Under the
Commitment.
Section 2.3.1. Requests for Advances.
Requests for advances of Revolving Loans (other than Competitive
Bid Loans) shall be made by Debtor in writing, utilizing the form
of Request for Advance attached hereto as Exhibit D, delivered to
Agent in accordance with the provisions of Section 10.2 hereof
and such requests shall be fully authorized by Debtor if made by
any one of the following: __________, __________, or any one of
any other persons designated by Debtor in writing to Agent.
Requests for advances must be received by Agent not later than
3:00 p.m. (New Orleans, Louisiana Time) on the date that is on
day prior to the proposed advance date (the "Advance Date").
Promptly after receipt of such request by Agent, Agent shall
notify each Bank of the proposed borrowing. Each Bank will make
the amount of its Pro Rata Share of the Revolving Loans requested
available to Agent not later than 3:00 p.m. (New Orleans,
Louisiana Time) on the Advance Date, in each case in same day
funds in Dollars at the Agent's office located at 313 Carondelet
Street, New Orleans, Louisiana, 70130. Agent shall make the
proceeds of such Revolving Loans available to Debtor on the
applicable Advance Date by wire transfer to Debtor's account no.
70120001 with Delchamps, Inc. Credit Union ABA No. 265176054 and
the resulting therefrom shall be mailed to Debtor. Agent's copy
of such ____________ indicating such deposit to the account of
Debtor shall be deemed conclusive evidence of Debtor's
indebtedness to the Banks in connection with such borrowings.
The aggregate outstanding amount of principal and interest due by
any Debtor at any given time under the Commitments to each Bank
(other than the principal and interest due on Competitive Bid
Loans) shall be and constitute the indebtedness of Debtor to said
Bank under the Revolving Note made by Debtor payable to said
Bank. The aggregate outstanding amount of principal and interest
due by any Debtor at any given time under a Competitive Bid Loan
shall be and constitute the indebtedness of Debtor to said Bank
under the Competitive Bid Note made by Debtor payable to said
Bank. When each advance is made by Agent to Debtor hereunder,
other than advances made under Competitive Bid Loans, Debtor
shall be deemed to have renewed and reissued each of its
Revolving Notes for the
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amount of the payee Bank's Pro Rata Share of the advance received
plus all amounts due by Debtor to said Bank under its Commitment
immediately prior to such advance. When each advance is made by
a Bank to Debtor under any Competitive Bid Loan, Debtor shall be
deemed to have renewed and reissued its Competitive Bid Note to
said Bank for the amount of the advance made plus all amounts
remaining outstanding under Competitive Bid Loans due to said
Bank prior to such advance.
Section 2.3.2 Non-Receipt of Funds by the Agent. Unless
Agent shall have been notified by a Bank or the Debtor (the
"Payor") prior to the Advance Date of any Revolving Loans or the
date Debtor is to make a payment to the Agent for the account of
one or more of the Banks, as the case may be (such payment being
herein called the "Required Payment"), that the Payor does not
intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in
reliance upon such assumption, (but shall not be obligated to),
make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on
demand, pay to the Agent the amount made available by Agent
together with interest thereon, for each day commencing on the
date such amount was so made available by Agent until the date
such amount is paid to Agent, at the Federal Funds Rate for such
period, or, if the recipient is the Debtor, at the Post Default
Rate.
Section 2.3.3. Several Obligations. The failure of any
Bank to make any Revolving Loan to be made by it on the date
specified therefor shall not relieve any other Bank of its
obligation to make its Revolving Loan on such date, but neither
the Agent nor any Bank shall be responsible or liable for the
failure of any other Bank to make a Revolving Loan to be made by
such other Bank. Notwithstanding anything contained herein to
the contrary, (a) no Bank shall be required to make or maintain
Revolving Loans at any time outstanding if, as a result, the
total Revolving Loans made by such Bank (excluding outstanding
balances on Competitive Bid Loans) shall exceed such Bank's Pro
Rata Share of the Commitment Amount and (b) if a Bank fails to
make a Revolving Loan as and when required hereunder, then upon
such subsequent event which would otherwise result in funds being
repaid to the defaulting Bank, the amount which would have been
paid to the defaulting Bank shall be divided among the non-
defaulting Banks ratably according to their respective Pro Rata
Shares of Revolving Loans (excluding outstanding balances on
Competitive Bid Loans) until the Indebtedness (excluding
outstanding balances on Competitive Bid Loans) of each Bank
(including the defaulting Bank) are equal to such Bank's Pro Rata
Share of the total Revolving Loan
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indebtedness (excluding outstanding balances on Competitive Bid
Loans).
Section 2.4. Borrowings Under the Commitments. Within the
limits of the Commitment of each Bank hereunder and subject to
the terms and conditions of this Agreement, each Bank shall only
be obligated to lend Debtor an amount which will not cause all
Revolving Loans (including Competitive Bid Loans) to Debtor to
exceed $75,000,000.00. During the period of the Commitments,
Debtor may use its Commitment by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions of
this Agreement.
Section 2.5. Payment of the Revolving Notes Under the
Commitments.
Section 2.5.1. Payment Schedule. Interest on the unpaid
principal balance of the Revolving Notes shall be payable
quarterly on the first day of each calendar quarter commencing
July 1, 1995, and continuing through the Termination Date, and at
the end of the applicable Interest Period with respect to LIBOR
Rate Loans. Outstanding principal and all accrued and unpaid
interest shall be payable on the Termination Date. Debtor may
prepay the Revolving Loans (other than the Competitive Bid Loans)
at any time provided that said payments are in amounts of at
least $1,000,000 or in increments of at least $250,000 in excess
thereof. All payments by Debtor of principal, interest, fees and
other obligations hereunder and under the Notes, if any, shall be
made in Dollars in same day funds without defense, set-off or
counterclaim, free of any restriction or condition and, with the
exception of payments on Competitive Bid Loans, delivered to
Agent not later than 10:00 a.m. (New Orleans, Louisiana Time) on
the date due at its Principal Office for the account of Banks.
Funds received by Agent after that time on such due date shall be
deemed to have been paid by Debtor on the next succeeding
Business Day. Debtor hereby authorizes Agent to charge its
accounts with Agent in order to cause timely payment to be made
to Agent of all principal, interest, fees, expenses and other
amounts due hereunder (subject to sufficient funds being
available in this account for that purpose). All payments of
accrued interest plus principal on Competitive Bid Loans shall be
made by Debtor directly to the applicable Bank and not to Agent
and shall be due on the applicable Competitive Bid Loan Due Date.
Section 2.5.2. Apportionment of Payments.
(a) Aggregate principal and interest payments on Revolving
Loans (other than Competitive Bid Loans) shall be apportioned
among all outstanding Revolving Loans (other than Competitive Bid
Loans) to which such payments relate, in each case
proportionately
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to each Bank's respective Pro Rata Share. Agent shall promptly
distribute to each Bank, at its address set forth in Section 10.2
hereof or at such other address as such Bank may request in
writing, its Pro Rata Share of all payments received by Agent and
the commitment fees of such Bank when received by Agent pursuant
to Section 2.6. Notwithstanding the foregoing provisions of this
Section 2.5.2 if (i) pursuant to the provisions of Section 2.2.3,
any notice of Conversion/Continuation is; withdrawn as to any
Bank, or (ii) any Bank makes Base Rate Loans in lieu of its Pro
Rata Share of any LIBOR Rate Loans, then Agent shall give effect
thereto in apportioning payments received thereafter.
(b) If a Bank shall obtain payment of any principal of or
interest on any Revolving Loans made by it under this Agreement,
or on other Indebtedness then due to Bank hereunder, through the
exercise of any right of set-off (including, without limitation,
any right of set-off or lien granted under Section 10.5 hereof),
banker's lien, counterclaim or similar right, or otherwise, it
shall promptly purchase from the other Bank's participations in
the Revolving Loans made or other Indebtedness held by the other
Banks in such amounts, and make such other adjustments from time
to time as shall be equitable to the end that all the Banks shall
share the benefit of such payment (net of any expenses which may
be incurred by such Bank in obtaining or preserving such benefit)
pro rata in accordance with the unpaid principal and interest on
the Indebtedness (other than any Competitive Bid Loans) then due
to each of them. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or
must otherwise be restored. The Debtor agrees, to the fullest
extent it may effectively do so under applicable law, that any
Bank so purchasing a participation in the Revolving Loans made or
other Indebtedness held by other Banks may exercise all rights of
setoff, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Bank were a
direct holder of Revolving Loans or other Indebtedness in the
amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the
right of any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness
or obligation of the Debtor.
Section 2.5.3. Payments on Other Than Business Days.
Whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, such payment shall be
due on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of
interest hereunder, or of the commitment fees hereunder, as the
case may be.
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Section 2.5.4. Notation of Principal. Each Bank agrees that
before disposing of any Revolving Note held by it, or any part
thereof (other than by granting participations therein), the
Bank will make a notation thereon of all Revolving Loans
evidenced by that Revolving Note and all principal payments
previously made thereon and of the date to which interest
thereon has been paid; provided that the failure to make (or any
error in the making of) a notation of any Revolving Loan made
under such Revolving Note shall not limit or otherwise effect
the obligations of Debtor hereunder or under such Revolving Note
with respect to any Revolving Loan or any payments of principal
or interest on such Revolving Note.
Section 2.6. Fees. The Debtor shall pay the following
fees:
Section 2.6.1. Agency Fee. Debtor shall pay Agent, for its
own account, the Agency Fee on or prior to the Closing Date.
Section 2.6.2. Fees on Unused Portion of the Commitment. Debtor
shall pay Agent, on behalf of Banks, a fee equal to the
percentage set forth on the schedule attached hereto as Schedule
1 of the unused portion of the Commitments, payable quarterly in
arrears, commencing __________, 1995, and on the Termination
Date. The unused portion the Commitments shall be determined on
a daily basis by subtracting from $75,000,000.00 the amount of
all Revolving Loans outstanding under all of the Commitments,
and by averaging said daily amounts for the period for which the
fee is to be determined.
Section 2.7. Use of Proceeds. Debtor shall use the proceeds
of the Commitments solely for working capital and its own
business and commercial purposes.
Section 2.8. Additional Cost of Revolving Loans and Credits.
If any legislative authority, other governmental authority,
court, central bank or any other authority to which any Bank is
subject, shall at any time impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board
of Governors of the Federal Reserve System), special deposit,
capital adequacy or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any
Bank, or shall impose on any Bank any law, regulation, rule,
directive, instruction, guideline, requirement, judgment,
decision or condition of any type or kind whatsoever affecting
the Loan Agreement, the Indebtedness or the obligation of said
Bank to make a Revolving Loan; and the result of any of the
foregoing is to increase, directly or indirectly, the cost to
said Bank of making or maintaining the Revolving Loans to
Debtor, or to reduce, directly or indirectly, the amount of the
sum received or receivable by said Bank under this Agreement, or
under the Notes,
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and said increased cost or reduction in the sum received or
receivable is not already provided for under Section 2.2.3
hereof, then Debtor shall become obligated to said Bank, for the
account of said Bank, for all such amounts as will compensate
said Bank for such increased cost or reduction in revenues
incurred as a result thereof. Said Bank will promptly notify
Debtor of any event of which it has knowledge, occurring after
the date hereof which will entitle said Bank to compensation
pursuant to this Section 2.8. A certificate of said Bank claiming
compensation under this Section 2.8 and setting forth the
additional amount or amounts to be paid to it hereunder and the
reasons therefor shall be conclusive in the absence of error, and
copies of said certificate shall be furnished to Agent who shall
thereafter send copies to the other Banks. Thereafter, Debtor
shall pay said Bank upon demand from time to time any amounts
necessary to compensate said Bank for such increased cost or
reduction in revenues incurred as a result of any such events.
Section 2.9. Termination of Commitments. The Commitments
of the Banks under this Agreement shall terminate on the
Termination Date or earlier as provided herein. Any termination
of the Commitments may not be reinstated without the written
approval of the Agent and all of the Banks.
ARTICLE III
SECURITY FOR THE INDEBTEDNESS
Section 3.1. Security. The Indebtedness of Debtor shall be
secured by the following:
(a) the Security Agreement executed by Debtor affecting
Debtor's General Intangibles, Accounts and Inventory; and
(b) the Guaranties by each of the Subsidiaries of Debtor.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Revolving Loans and
Credits. The obligation of Banks to make Revolving Loans
hereunder shall be subject to the satisfaction and the continued
satisfaction of the following conditions precedent:
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(a) Debtor shall have executed and delivered to Agent, on
behalf of Banks, this Agreement, the Collateral Documents, the
Notes and all other documents required by this Agreement, all in
form and substance satisfactory to Agent and in such number of
counterparts as may be required by Agent;
(b) The representations and warranties of Debtor as set
forth herein, or in any Loan Document furnished to Agent or any
Bank in connection herewith, shall be and remain true and
correct;
(c) Agent shall have received a favorable legal opinion of
counsel to Debtor and Guarantor, in form, scope and substance
satisfactory to Agent;
(d) Agent shall have received certified resolutions of
Debtor and Guarantor authorizing the execution of all documents
contemplated hereby;
(e) Agent and Banks shall have received all fees, charges
and expenses which are due and payable as specified in this
Agreement or any Related Document;
(f) No Default or Event of Default shall exist or shall
result from the making of a Revolving Loan;
(g) Debtor shall have provided Agent with all financial
statements, reports and certificates required by this Agreement;
(h) Agent shall have received the financial statement of
Debtor and its Subsidiaries dated as of June 3, 1995, and shall
have found such statement satisfactory in its sole discretion;
(i) Agent's counsel shall have reviewed the corporate
structure and articles of incorporation, by-laws, good standing
certificates and certificates of incumbency, of Debtor and its
Subsidiaries, and shall be satisfied with the validity, due
authorization and enforceability of all Loan Documents;
(j) There shall have been no change to the corporate
structure of Debtor and its Subsidiaries than from what has been
previously represented to Banks or any Material Adverse Change;
(k) Agent shall have received evidence acceptable to Agent
and its counsel that the Encumbrances affecting the Collateral
shall have a first priority position, subject only to Permitted
Encumbrances;
(1) Debtor shall have delivered to Agent i) copies of all
reports obtained by, or in the possession of, Debtor regarding
the presence or absence of Hazardous Substances on any of its
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properties, and ii) information with respect to Debtor's
procedures regarding the testing for, and handling of, Hazardous
Substances, all in form and substance satisfactory to Agent; and
(m) Debtor shall have terminated its existing bid line
arrangements with Hibernia National Bank, AmSouth Bank of
Alabama, and First Alabama Bank.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Agent and Banks as
follows:
Section 5.1. Corporate Authority. Debtor and Guarantor are
corporations duly created, validly existing and in good standing
under the laws of their respective states of incorporation, and
are duly qualified and in good standing as foreign corporations
in all other jurisdictions where the failure to qualify would
have an adverse effect upon the ability of either of them to
perform their obligations under this Agreement and all Related
Documents. Debtor has the power to enter into this Agreement,
issue the Notes, and mortgage and grant security interests in
the Collateral in the manner and for the purposes contemplated
by the Collateral Documents. Guarantor has the power to enter
into this Agreement and to execute and deliver its Guaranty.
Debtor and Guarantor each have the corporate power to perform
its obligations hereunder and under the Related Documents. The
making and performance by Debtor of the Loan Documents, and the
making and performance by Guarantor of its Guaranty and any
other Loan Documents to which it may be a party, have all been
duly authorized by all necessary corporate action (including all
necessary shareholder action), and do not and will not violate
any provision of any law, rule, regulation, order, writ,
judgment, decree, determination or award presently in effect
having applicability to Debtor or Guarantor or the articles of
incorporation of Debtor or of Guarantor. The making and
performance by Debtor and the Guarantor of the loan Documents to
which they are a party do not and will not result in a breach of
or constitute a default under any indenture or loan or credit
agreement or any other agreement or instrument to which Debtor
or Guarantor is a party or by which either of them may be bound
or affected, or result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature
(other than as contemplated by the Loan Documents) upon or with
respect to any of the properties now owned or hereafter acquired
by Debtor or Guarantor, and neither Debtor nor Guarantor is in
default under or in violation of any such order, writ, judgment,
decree, determination, award, indenture, agreement or
instrument. Each of
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the Loan Documents to which Debtor is a party constitutes legal,
valid and binding obligations of Debtor, enforceable in
accordance with its terms. The Guaranty constitutes a legal,
valid and binding obligation of Guarantor, enforceable in
accordance with its terms.
Section 5.2. Financial Statements. The consolidated balance
sheet of Debtor and its Subsidiaries at the date thereof and the
related statements of income and retained earnings for the year
then ended, copies of which have been delivered to Agent, are
complete and correct and fairly present the financial condition
of such entities as of the date or dates thereof. The financial
statements were prepared in conformity with GAAP applied on a
basis consistent with the preceding year. No Material Adverse
Change has occurred since said dates in the financial position or
in the results of operations of Debtor and its Subsidiaries in
their businesses taken as a whole.
Section 5.3. Title to Collateral. Debtor has good and
marketable title to the Collateral, free and clear of all
Encumbrances other than Permitted Encumbrances. The Collateral
Documents constitute legal, valid and perfected first
Encumbrances on the property interests covered thereby, subject
only to Permitted Encumbrances.
Section 5.4. Litigation. Other than as has been disclosed
previously to Agent in writing, there are no legal actions, suits
or proceedings pending or threatened against or affecting Debtor
or Guarantor or any of their properties before any court or
administrative agency (federal, state or local), which, if
determined adversely to Debtor or Guarantor would constitute a
Material Adverse Change to either of them, and there are no
judgments or decrees affecting Debtor or Guarantor or their
properties (including, without limitation, the Collateral) which
are or may become an Encumbrance against such properties.
Section 5.5. Approvals. No authorization, consent, approval
or formal exemption of, nor any filing or registration with, any
governmental body or regulatory authority (federal, state or
local), and no vote, consent or approval of the shareholders of
Debtor or Guarantor is or will be required in connection with the
execution and delivery by Debtor and Guarantor of the Loan
Documents or the performance by Debtor and Guarantor of their
respective obligations hereunder and under the other Loan
Documents.
Section 5.6. Licenses. Debtor and Guarantor each possess
adequate franchises, licenses and permits to own its properties
and to carry on its business as presently conducted.
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Section 5.7. Adverse Agreements. Neither Debtor nor
Guarantor is a party to any agreement or instrument, or subject
to any charter or other restriction, materially and adversely
affecting the respective business, properties, assets, or
operations of either of them or their condition (financial or
otherwise), and none of the Debtor nor Guarantor is in default in
the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement
or instrument to which either of them is a party, which default
would constitute a Material Adverse Change to either of them.
Section 5.8. Default or Event of Default. No Default or
Event of Default hereunder has occurred or is continuing or will
occur as a result of the giving effect hereto.
section 5.9. Employee Benefit Plans. Each employee benefit
plan as to which Debtor or Guarantor may have any liability
complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event
(as defined in ERISA) has occurred with respect to any such
plan, (ii) Debtor and Guarantor have not withdrawn from any such
plan or initiated steps to do so, and (iii) no steps have been
taken to terminate any such plan.
Section 5.10. Investment Company Act. Neither the Debtor
nor the Guarantor is an "investment company" or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
Section 5.11. Public Utility Holding Company Act. Neither
the Debtor nor the Guarantor is a "holding company," or a
"subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Section 5.12. Regulations G, T and U. Neither the Debtor
nor the Guarantor is engaged principally, or as one of its
important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of
the Federal Reserve System), and none of the proceeds of the
Revolving Loans will be used for the purpose of purchasing or
carrying such margin stock.
Section 5.13. Location of Debtor's Offices, Records and
Inventory. The chief place of businesses of Debtor, and the
offices where Debtor keeps its records concerning the
Collateral, and the present locations of Inventory, are shown on
Schedule 3 attached hereto.
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Section 5.14. Information. All information heretofore or
contemporaneously herewith furnished by Debtor and Guarantor to
any Bank for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Debtor and Guarantor to
any Bank will be, true and accurate in every material respect on
the date as of which such information is dated or certified; and
none of such information is or will be incomplete by omitting, to
state any material fact necessary to make such information not
misleading.
Section 5.15. Environmental Matters. Except as may have
been disclosed in writing to Banks prior to the date hereof, no
properties of the Debtor or any of its Subsidiaries have ever
been, and ever will be so long as this Agreement remains in
effect, used for the generation, manufacture, storage, treatment,
disposal, release or threatened release of any Hazardous
Substances, except in compliance with such Environmental Laws.
Except as may have been disclosed in writing by Debtor or
Guarantor to Banks, Debtor represents and warrants that each of
Debtor and Guarantor is in compliance with all Environmental Laws
affecting it and its properties, and that Debtor and its
Subsidiaries and their properties, businesses and operations are
not subject to any Environmental Claims or, to the best of their
respective executive officers' knowledge (after making reasonable
inquiry of the personnel records of their respective
corporations), Environmental Liabilities in either case direct or
contingent, arising from or based upon any act, omission, event,
condition or circumstance occurring or existing on or prior to
the date hereof which could reasonably be expected to have a
Material Adverse Affect on the properties, liabilities,
conditions (financial or otherwise), business or operations of
the Debtor or any of its Subsidiaries. None of the officers of
the Debtor or its Subsidiaries has received any notice of any
violation or alleged violation of any Environmental Laws,
Environmental Permit, or any Environmental Claim in connection
with its properties, liabilities, condition (financial or
otherwise), business or operations which could reasonably be
expected to have a Material Adverse Affect on the properties,
liabilities, conditions (financial or otherwise), business or
operations of the Debtor or any of its subsidiaries. The Debtor
does not know of any event or condition with respect to currently
enacted Environmental Laws presently scheduled to become
effective in the future with respect to any of its properties or
any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Affect on the properties, liabilities,
conditions (financial or otherwise), business or operations of
the Debtor or any of its Subsidiaries, for which the Debtor or
the applicable Subsidiary has not made good faith provisions in
its business plan and projections of financial performance.
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Section 5.16. Survival of Representations and Warranties.
Debtor understands and agrees that Banks are relying upon the
above representations and warranties in making the above
referenced loans to Debtor. Debtor further agrees that the
foregoing representations and warranties shall be continuing in
nature and shall remain in full force and effect until such time
as the Indebtedness shall be paid in full, or until this
Agreement shall be terminated, whichever is the last to occur.
ARTICLE VI
AFFIRMATIVE COVENANTS
In addition to the covenants contained in the Collateral
Documents, which covenants are hereby ratified and confirmed by
Debtor, Debtor covenants and agrees as follows:
Section 6.1. Financial Statements. Debtor will furnish or
cause to be furnished to Agent:
(a) As soon as available and in any event within one
hundred twenty (120) days following the close of fiscal year of
Debtor, audited, consolidated and consolidating financial
statements of Debtor and its Subsidiaries consisting of a balance
sheet as at the end of such fiscal year and statement of income,
and statement of cash flow for such fiscal year, setting forth in
each case in comparative form the corresponding figures for the
preceding fiscal year, certified by independent public
accountants of recognized standing acceptable to Agent, and
Debtor's Form 10K.
(b) Within forty-five (45) days of the end of each calendar
quarter a copy of Debtor's Form 10-Q filed with the Securities
and Exchange Commission under the Securities Act of 1934.
(c) Contemporaneously with the delivery of a) and b) above,
a certificate signed by the chief financial officer of Debtor and
Guarantor, in substantially the form attached hereto as Exhibit
E, certifying that they have reviewed this Agreement and to the
best of their knowledge no Default or Event of Default has
occurred, or if such Default or Event of Default has occurred,
specifying the nature and extent thereof, and that all financial
covenants in this Agreement have been met, and providing a
computation of all financial covenants contained herein,
(d) such other necessary financial information concerning the
Guarantor or Debtor as Agent may reasonably request from time to
time.
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Section 6.2. Notice of Default; Litigation; ERISA Matters.
Debtor will give written notice to Agent as soon as reasonably
possible and in no event more than five (5) Business Days after
(i) the occurrence of any Default or Event of Default hereunder
of which it has knowledge or should have knowledge, (ii) the
filing of any actions, suits or proceedings against Debtor or
Guarantor in any court or before any governmental authority or
tribunal of which it has knowledge or should have knowledge which
could cause a Material Adverse Change with respect to Debtor or
Guarantor, (iii) the occurrence of a reportable event under, or
the institution of steps by Debtor or Guarantor to withdraw from,
or the institution of any steps to terminate, any employee
benefit plan as to which Debtor or Guarantor may have liability,
or (iv) the occurrence of any other action, event or condition of
any nature of which it has knowledge which may cause, or lead to,
or result in, any Material Adverse Change to Debtor or Guarantor.
Section 6.3. Maintenance of Corporate Existence, Properties
and Liens. Each of the Debtor and Guarantor will (I) continue
to engage in the business presently being operated by it; (ii)
maintain its corporate existence and good standing in each
jurisdiction in which it is required to be qualified; (iii)
keep and maintain all franchises, licenses and properties
necessary in the conduct of its business in good order and
condition; (iv) duly observe and conform to all material
requirements of any governmental authorities relative to the
conduct of its business or the operation of its properties or
assets; (v) maintain in favor of Agent, for the benefit of
Banks, a first perfected lien and security interest in the
Collateral, subject only to other Permitted Encumbrances; and
(vi) cause the Guaranty to be maintained in full force and
effect.
Section 6.4. Collateral Schedules and Locations. As often
as Agent shall reasonably require, Debtor shall deliver to Agent
schedules of such Collateral, including such information as Agent
may require, including without limitation names and addresses of
account debtors and agings of Accounts and the location of all
Inventory.
Section 6.5. Taxes. Debtor and Guarantor shall each pay or
cause to be paid when due, all taxes, local and special
assessments, and governmental and other charges of every type and
description, that may from time to time be imposed, assessed and
levied against either of them or their properties. Debtor
further agrees to furnish Bank with evidence that such taxes,
assessments, and governmental and other charges due by Debtor or
Guarantor have been paid in full and in a timely manner. Debtor
and Guarantor may withhold any such payment or elect to contest
any lien if Debtor or Guarantor is in good faith conducting an
appropriate
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proceeding to contest the obligation to pay and so long as
Agent's interests in the Collateral are not jeopardized.
Section 6.6. Required Insurance. Debtor and Guarantor
shall maintain insurance with insurance companies in such amounts
and against such risks as is usually carried by owners of similar
businesses and properties in the same general areas in which each
of them operates, and as shall be reasonably satisfactory to
Agent. With respect to the Inventory of the Debtor, Debtor
agrees to provide Agent with the types of insurance coverages
required by the Security Agreement affecting such Inventory.
Debtor and Guarantor agree to provide Agent with originals or
certified copies of such policies of insurance. Debtor and
Guarantor further agree to promptly furnish Agent with copies of
all renewal notices and, if requested by Agent, with copies of
receipts for paid premiums. Debtor and Guarantor shall provide
Agent with originals or certified copies of all renewal or
replacement policies of insurance no later than fifteen (15) days
before any such existing policy or policies should expire. If
Debtor's or Guarantor's insurance policies required hereunder and
renewals thereof are held by another person, Debtor agrees to
supply original or certified copies of the same to Agent within
the time periods required above.
Section 6.7. Performance of Loan Documents. Debtor and
Guarantor shall duly and punctually pay and perform each of their
respective obligations under the Notes, under this Agreement (as
the same may at any time be amended or modified and in effect)
and under each of the Loan Documents to which they are a party,
in accordance with the terms hereof and thereof.
Section 6.8 Environmental Matters.
Section 6.8.1. Compliance with Environmental Laws. Debtor
and Guarantor shall comply with and shall cause all of their
employees, agents, invitees or sublesses to comply with all
Environmental Laws with respect to the disposal of industrial
refuse or waste, and/or the discharge, processing, treatment,
removal, transportation, storage and handling of Hazardous
Substances, and pay immediately when due the cost of removal of
any such Hazardous Substances from, and keep their properties
free of any lien imposed pursuant to any such laws, rules,
regulations or orders.
Section 6.8.2. Environmental Notices. Debtor shall give
notice to Agent as soon as reasonably possible and in no event
more than five (5) days after it receives any compliance orders,
environmental citations, or other notices from any governmental
entity relating to any environmental condition relating to its
properties or the properties of Guarantor or elsewhere for which
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Debtor or Guarantor may have legal responsibility with a full
description thereof; Debtor agrees to take any and all reasonable
steps, and to perform any and all reasonable actions necessary or
appropriate to promptly comply with any such citations,
compliance orders or Environmental Laws requiring Debtor or
Guarantor to remove, treat or dispose of such Hazardous
Substances or conditions at the sole expense of Debtor or
Guarantor, to provide Agent with satisfactory evidence of such
compliance, and to cause Guarantor to do all of the foregoing in
a similar manner; provided, however, that nothing contained
herein shall preclude Debtor and Guarantor from contesting any
such compliance orders or citations if such contest is made in
good faith, appropriate reserves are established for the payment
for the cost of compliance therewith, and Agent's security
interest in any such property affected thereby (or the priority
thereof) is not jeopardized.
Section 6.8.3 Release and Indemnity. Regardless of whether
any Event of Default hereunder shall have occurred and be
continuing, Debtor (i) releases and waives any present or future
claims against Agent or any Bank for indemnity or contribution in
the event Debtor or Guarantor become liable for remediation costs
under any Environmental Laws, and (ii) agrees to defend,
indemnify and hold harmless Agent and each Bank from any and all
liabilities (including strict liability), actions, demands,
penalties, losses, costs or expenses (including, without
limitation, reasonable attorneys fees and remedial costs), suits,
administrative orders, agency demand letters, costs of any
settlement or judgment and claims of any and every kind
whatsoever which may now or in the future (whether before or
after the termination of this Agreement) be paid, incurred, or
suffered by, or asserted against Agent or such Bank by any person
or entity or governmental agency for, with respect to, or as a
direct or indirect result of, the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, or
release from or onto the property of either the Debtor or
Guarantor of any Hazardous Substances or conditions regulated by
any Environmental Laws, contamination resulting therefrom, or
arising out of, or resulting from, the environmental condition of
such property or the applicability of any Environmental Laws
relating to Hazardous Substances (including, without limitation,
CERCLA or any so called federal, state or local "super fund" or
"super lien" laws, statute, ordinance, code, rule, regulation,
order or decree) regardless of whether or not caused by or within
the control of said Agent, Bank or Banks (the costs and/or
liabilities described in (i) and (ii) above being hereinafter
referred to as the "Liabilities"). The covenants and indemnities
contained in this Section 6.8 shall survive termination of this
Agreement.
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Section 6.9. Further Assurances. Debtor will, at any time
and from time to time, execute and deliver (and cause Guarantor
to execute and deliver) such further instruments and take such
further action as may reasonably be requested by Agent, in order
to cure any defects in the execution and delivery of, or to
comply with or accomplish the covenants and agreements contained
in this Agreement or the Collateral Documents.
Section 6.10. Financial Covenants. Debtor and its
Subsidiaries shall comply with the following covenants and
ratios:
(a) Debtor and its Subsidiaries shall maintain on a
consolidated basis a Fixed Charge Coverage Ratio of greater than
1.00:1 for periods during 1995, 1.10:1 for periods during 1996,
and 1.25:1 thereafter, calculated as of the end of each fiscal
quarter over the preceding four quarter period.
(b) Debtor and its Subsidiaries shall maintain a ratio of
Debt to Total Capitalization of no greater than .75:1 calculated
as of the end of each fiscal quarter.
(c) Debtor and its Subsidiaries shall not incur capital
expenditures during any fiscal year (on a non-cumulative basis)
in excess of $30,000,000. For purposes hereof, "capital
expenditures" shall mean expenditures for capital assets that are
subject to depreciation, depletion or amortization under GAAP;
capital expenditures shall be deemed to have been incurred when
required to be recorded on the financial statements of the Debtor
and/or its Subsidiaries in accordance with GAAP.
Section 6.11. Operations. Debtor shall conduct its
business affairs in a reasonable and prudent manner and in
compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties,
charters, businesses and operations, including compliance with
all minimum funding standards and other requirements of ERISA of
1974, and other laws applicable to any employee benefit plans
which it may have, and shall cause Guarantor to do likewise.
Section 6.12. Change of Location. Debtor shall, within
ten (10) Business Days prior to any such addition or change,
notify Agent in writing of any proposed additions to or changes
in the location of its Inventory or businesses or the businesses
of Guarantor.
Section 6.13. Employee Benefit Plans. So long as this
Agreement remains in effect, Debtor will maintain each employee
benefit plan as to which it may have any liability, in compliance
with all applicable requirements of law and regulations, and
shall cause Guarantor to do likewise.
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ARTICLE VII
NEGATIVE COVENANTS
In addition to the negative covenants contained in the
Collateral Documents, which covenants are hereby ratified and
confirmed by Debtor, Debtor covenants and agrees as follows:
Section 7.1. Limitations on Fundamental Changes. Debtor
and Guarantor shall not change the nature of their businesses,
grant credit terms to their customers on terms different than
those presently granted to customers, or form any subsidiary, nor
shall they enter into any transaction of merger or consolidation,
or liquidate or dissolve themselves (or suffer any liquidation or
dissolution).
Section 7.2. Disposition of Assets. Debtor and Guarantor
shall not convey, sell, lease, assign, transfer or otherwise
dispose of, any of its property, business or assets whether now
owned or hereafter acquired except i) property disposed of in
the ordinary course of business, provided that, if such property
is to be replaced, the net cash proceeds of each such transaction
are applied to obtain a replacement item or items within 30 days
of the disposition thereof; ii) the property and assets listed
on Schedule 4 attached hereto; iii) property whose book value and
whose sales price does not exceed $1,000,000.00; iv) property
whose book value or whose sales price is greater than
$1,000,000.00 but does not exceed $5,000,000.00, if notice of
such disposition is provided to Agent; and v) with the consent of
Agent, property whose book value or sales price exceeds
$5,000,000.00.
Section 7.3. Restricted Payments. Debtor and Guarantor
shall not declare or make (or set aside reserves for payment of)
any distributions to shareholders other than dividends, make any
shareholder/affiliate loans make any affiliated lease payments,
pay excessive shareholder compensation or enter into any similar
transactions with the shareholders of Debtor, other than as set
forth on Schedule 5 attached hereto.
Section 7.4. Encumbrances. Debtor and Guarantor shall not
create, incur, assume or permit to exist any Encumbrances on any
of their property now owned or hereafter acquired, except for the
following (hereinafter referred to as the "Permitted
Encumbrances"):
(a) Encumbrances for taxes, assessments, or other
governmental charges not yet due or which are being contested in
good faith by appropriate action promptly initiated and
diligently
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conducted, if such reserves as shall be required by GAAP shall
have been made therefor.
(b) Encumbrances of landlords, vendors, carriers,
warehousemen, mechanics, laborers and material men arising by law
in the ordinary course of business for sums either not yet due or
being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such Encumbrances are
inferior to the security interests granted in favor of Agent, on
behalf of Banks, to secure the Indebtedness of Debtor to Banks,
and such reserve as shall be required by generally accepted
accounting principles shall have been made therefor.
(c) Inchoate liens arising under ERISA to secure the
contingent liabilities, if any, permitted by this Agreement.
(d) The pledge of the Collateral and any other liens in
favor of Agent, on behalf of Banks, to secure the Indebtedness of
the Debtor to Banks.
(e) Liens affecting equipment securing purchase money Debt
existing as of the date hereof or incurred in connection with
capital expenditures permitted under Section 6.10(c) hereof.
(f) Filings made in connection with consignments.
(g) Filings made in connection with Capital Lease
transactions.
Section 7.5. Debts, Guaranties and Other Obligations. Debtor
and Guarantor will not incur, create, assume or in any manner
become or be liable in respect of any Debt direct or contingent,
except for:
(a) The Indebtedness to the Banks under this Agreement.
(b) Trade payables or operating and facility leases from
time to time incurred in the ordinary course of business.
(c) Taxes, assessments or other government charges which
are not yet due or are being contested in good faith by
appropriate action promptly initiated and diligently conducted,
if such reserve as shall be required by generally accepted
accounting principles shall have been made therefor.
(d) Purchase money term Debt existing as of the date hereof
or incurred in connection with capital expenditures permitted
under Section 6.10(c) hereof; provided, however, that such Debt
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shall not exceed, with respect to Debtor and its Subsidiaries on
a consolidated basis,
[INSERT OTHER EXCEPTIONS IF NEEDED.]
Section 7.6. Investments, Loans and Advances. The Debtor
will not make or permit to remain outstanding any loans or
advances to or investments in any Person, except for:
(a) Investments in direct obligations of the United States
of America or any agency thereof.
(b) Investments in either certificates of deposit of
maturities less than one year, issued by any Bank, or if any Bank
is not substantially competitive (in terms of certificate of
deposit interest rate for comparable amounts) with other banks
(having a credit rating acceptable to the Agent) certificates of
deposit of maturities less than one year, issued by one or more
of
such other banks.
(c) Investments in commercial paper of maturities less than
one year with the best rating by Standard & Poors, Moody's
Investors Service, Inc., or any other rating agency satisfactory
to the Agent.
(d) Routine advances to employees made in the ordinary
course of business.
Section 7.7. Changes in Management and Control. Debtor
shall not change its management so that David Morrow and Timothy
Kullman are no longer executive officers of Debtor. Debtor shall
not cease to own 100% of the stock of Guarantor, free and clear
of
any Encumbrances.
Section 7.8. Other Agreements. Debtor will not enter
into any agreement containing any provision which would be
violated or breached by the performance of its obligations
hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
Section 7.9. Transactions with Affiliates. Debtor will
not enter into any agreement with any of its Subsidiaries except
to the extent that such agreements are commercially reasonable
which provide for terms which would normally be obtainable in an
arm's length transaction with an unrelated third party.
Section 7.10. Inventory Locations. Debtor shall not allow
any Inventory to be-removed from its existing locations described
in Section 5.13 without the prior written consent of Agent, and
in no instance shall any Inventory of the Debtor be located on
any
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leased locations (outside the States of Louisiana or Mississippi)
without first providing Agent with a subordination of the
lessor's lien, on terms and conditions satisfactory to Agent, in
its sole discretion.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. The occurrence of any one
or more of the following shall constitute an Event of Default:
Section 8.1.1 Default under the Indebtedness. Should
Debtor default in the payment of principal or interest under the
Indebtedness and such default shall not be cured within ten days
of the occurrence thereof.
Section 8.1.2 Default under this Agreement. Should Debtor
violate or fail to comply fully with any of the terms and
conditions of, or default under, this Agreement, or should
Guarantor violate or fail to comply fully with any of the terms
and conditions of this Agreement which pertain to Guarantor and
such default not be cured within 30 days of the occurrence
thereof or, in the case of any default that could not be cured
within a thirty-day period, should Debtor fail to commence to
cure said default within 30 days or fail to proceed diligently to
cure said default thereafter (provided, however, that no cure
period shall be available for a default in the obligation to
maintain the insurance coverage's required hereby or for a
default related to violations of the financial covenants
contained in Section 6.10 hereof).
Section 8.1.3 Default Under Other Agreements. Should any
event of default occur or exist under any of the Related
Documents or should Debtor or Guarantor violate, or fail to
comply fully with, any terms and conditions of any of the
Collateral Documents or Related Documents, or should Guarantor
violate, or fail to comply fully with, any terms and conditions
of the Guaranty or any of their respective obligations contained
in the Related Documents and such default not be cured within ten
days of the occurrence thereof (provided, however, that no cure
period shall be available for a default in the obligation to
maintain insurance coverage's
required thereby).
Section 8.1.4 Default in Favor of Third Parties. Should
Debtor or Guarantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person related to
any
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Debt in excess of $5,000,000 and fail to cure same in accordance
with any applicable cure periods.
Section 8.1.5 Insolvency. The following occurrences, in
addition to the failure or suspension of any Debtor or
Guarantor, shall constitute an Event of Default hereunder:
(a) Filing by Debtor or Guarantor of a voluntary petition
or any answer seeking reorganization, arrangement, readjustment
of its debts or for any other relief under any applicable
bankruptcy act or law, or under any other insolvency act or law,
now or hereafter existing, or any action by Debtor or Guarantor
consenting to, approving of, or acquiescing in, any such
petition or proceeding; the application by Debtor or Guarantor
for, or the appointment by consent or acquiescence of, a
receiver or trustee of Debtor or Guarantor for all or a
substantial part of the property of any such person; the making
by Debtor or Guarantor of an assignment for the benefit of
creditors; the inability of Debtor or Guarantor, or the
admission by Debtor or Guarantor in writing of its or their
inability, to pay its or their debts as they mature (the term
"acquiescence" means the failure to file a petition or motion in
opposition to such petition or proceeding or to vacate or
discharge any order, judgment or decree providing for such
appointment within sixty (60) days after the appointment of a
receiver or trustee); or
(b) Filing of an involuntary petition against Debtor or
Guarantor in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under any
applicable bankruptcy act or law, or under any other insolvency
act or law, now or hereafter existing and such petition remains
undismissed or unanswered for a period of sixty (60) days from
such filing; or the insolvency appointment of a receiver or
trustee of the Debtor or Guarantor for all or a substantial part
of the property of any such Person and such appointment remains
unvacated or unopposed for a period of sixty (60) days from such
appointment, execution or similar process against any
substantial part of the property of Debtor or Guarantor and such
warrant remains unbonded or undismissed for a period of sixty
(60) days from notice to Debtor or Guarantor of its issuance.
Section 8.1.6 Dissolution Proceedings. Should proceedings
for the dissolution or appointment of a liquidator of Debtor or
Guarantor be commenced.
Section 8.1.7 False Statements. Should any representation
or warranty of Debtor made in connection with the Indebtedness
(or by Guarantor made in the Guaranty or in any of the Loan
Documents) prove to be incorrect or misleading in any material
respect when made or reaffirmed.
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Section 8.1.8 Material Adverse Change. Should a Material
Adverse Change with respect to Debtor or Guarantor occur at any
time and not be cured within ten days of the occurrence thereof.
Section 8.1.9 Defective Collateralization. Should this
Agreement or any of the Related Documents cease to be in full
force and effect (including failure of any Collateral Document to
create a valid and perfected security interest or lien) at any
time and for any reason.
Section 8.2 Remedies. Upon the occurrence of an Event of
Default, Agent may (and at the direction of the Majority Banks
shall) do all or any of the following: 1) without notice to
Debtor, declare the Commitments terminated (whereupon the
Commitments shall be terminated) and/or accelerate the
Termination Date to a date as early as the date of termination of
the Commitments; 2) declare the principal amount then
outstanding of and the unpaid accrued interest on the Revolving
Loans and all Indebtedness and all fees and all other amounts
payable hereunder, under the Notes and other Loan Documents to be
immediately due and payable, all without notice of any kind to
Debtor, except that in the case of an Event of Default of the
type described in Section 8.1.5 above, such acceleration shall be
automatic and not optional; 3) proceed to realize upon the
collateral under the terms of the Collateral Documents; and 4)
exercise any other rights and remedies available to Agent or any
of the Banks under the Loan Documents, at law or in equity. No
remedy, right or power conferred upon the Agent or any Bank is
intended to be exclusive of any other remedy, right or power
given hereunder or now or hereafter existing at law, in equity,
or otherwise, and all such remedies, rights and power shall be
cumulative.
Section 8.3. Waivers by Debtor. Except as otherwise
provided for in this Agreement and by applicable law, Debtor
waives (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by
Agent or Banks on which Debtor may in any way be liable and
hereby ratify and confirm whatever Banks may do in this regard,
(ii) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevy, attachment or
levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Agent to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal
and exemption laws. Debtor acknowledges that it has been advised
by counsel of its choice with respect to this Agreement, the
other Collateral
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Documents, and the transactions evidenced by this Agreement and
the other Collateral Documents.
ARTICLE IX
THE AGENT
Section 9.1. Appointment, Powers and Immunities. Each
Bank hereby irrevocably appoints and authorizes the Agent to act
as its agent hereunder and under the other Loan Documents with
such powers as are specifically delegated to the Agent by the
terms hereof and thereof, together with such other powers as are
reasonably incidental thereto. The Agent (the "Agent" as used in
this Section 9 shall include reference to its officers,
shareholders, directors, employees and agents) (a) shall not
have any duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents and shall
not by reason of this Agreement or any other Loan Document be a
trustee or fiduciary for any Bank; (b) shall not be responsible
to any Bank for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan
Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement
or any other Loan Document, or the value, validity,
effectiveness, genuineness, enforceability, execution, filing,
registration, collectibility, recording, perfection, existence or
sufficiency of this Agreement or any other Loan Document or any
other document referred to or provided for herein or therein or
any property covered thereby or for any failure by any Person to
perform any of its obligations hereunder or thereunder, and shall
not have any duty to inquire into or pass on any of the foregoing
matters; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder or under any other
Loan Document except to the extent requested by the Majority
Bank; (d) shall not be responsible for any mistake of law or
fact or any action taken or omitted to be taken hereunder or
under any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection
herewith or therewith, including, without limitation, pursuant to
its own negligence, except for its own gross negligence or wilful
misconduct; (e) shall not be bound by or obligated to recognize
any agreement among or between the Debtor and any Bank,
regardless of whether the Agent has knowledge of the existence of
any such agreement or the terms and provisions thereof; (f)
shall not be charged with notice or knowledge of any fact or
information not herein set out or provided to the Agent in
accordance with the terms of this Agreement or any other Loan
Documents; (g) shall not be responsible for any delay, error,
omission or default of any mail, telegraph, cable or wireless
agency or operator; and (h) shall not
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be responsible for the acts or edicts of any governmental
authority. The Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it with
reasonable care. In any foreclosure proceeding concerning any
Collateral, each holder of a Note or Indebtedness if bidding for
its own account and the accounts of other Banks is prohibited
from including in the amount of its bid the amount to be applied
as a credit against said Indebtedness held by it or the
Indebtedness held by the other Bank; instead, such holder must
bid in cash only. However, in any such foreclosure proceeding
the Agent may (but shall not be obligated to) submit a bid for
all Banks (including itself) in a form of a credit against the
Indebtedness, and the Agent or its designee may (but shall not
be obligated to) accept such title to such Collateral for and on
behalf of all Banks.
Section 9.2 Reliance. The Agent shall be entitled to
rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (which may be
counsel for the Debtor), independent accountants and other
experts selected by the Agent. The Agent shall not be required
in any way to determine the identity or authority of any Person
delivering or executing the same. As to any matters not
expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and thereunder,
and in accordance with instructions of the Majority Banks, and
any action taken or failure to act pursuant thereto shall be
binding on all of the Banks. Pursuant to instructions of the
Majority Banks, the Agent shall have the authority to execute
releases of the Security Documents on behalf of the Banks
without the joinder of any Bank. If any order, writ, judgment
or decree shall be made or entered by any court affecting the
rights, duties and obligations of the Agent under this Agreement
or any other Loan Document, then and in any of such events the
Agent is authorized, in its sole discretion, to rely upon and
comply with such order, writ, judgment or decree which it is
advised by legal counsel of its own choosing is binding upon it
under the terms of this Agreement, the relevant loan document or
otherwise; and if the Agent complies with any such order, writ,
judgment or decree, then it shall not be liable to any Bank or
to any other Person by reason of such compliance even though
such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, satisfied or vacated.
Section 9.3. Defaults. The Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the
non-
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payment of principal or interest on Revolving Loans) unless it
has received notice from a Bank or Debtor specifying such
Default and stating that such notice is a "Notice of Default".
In the event that the Agent receives such a Notice of Default,
the Agent shall give prompt notice thereof to the Banks (and
shall give each Bank prompt notice of each such non-payment).
The Agent shall (subject to Section 9.7 hereof) take such action
with respect to such Notice of Default as shall be directed by
the Majority Banks and within its rights under the Loan
Documents and at law or in equity, provided that, unless and
until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain
from taking such action, permitted hereby with respect to such
Notice of Default as it shall deem advisable in the best
interest of the Banks and within its rights under the loan
documents, at law or in equity.
Section 9.4 Rights as a Bank. With respect to its
Commitment and the Revolving Loans made, Hibernia National Bank,
in its capacity as a Bank hereunder shall have the same rights
and powers hereunder as any other Bank and may exercise the same
as though it were not acting in its agency capacity, and the
term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. The
Agent may (without having to account therefor to any Bank)
accept deposits from, send money to and generally engage in any
kind of banking, trust, letter of credit, agency or other
business with the Debtor (and any of its affiliates) as if it
were not acting as Agent, and the Agent may accept fees and
other considerations from the Debtor (in addition to the fees
heretofore agreed to between the Debtor and the Agent) for
services in connection with this Agreement or otherwise without
having to account for the same to the Bank.
Section 9.5 Indemnification. The Banks agree to
indemnify the Agent, each (to the extent not reimbursed under
Sections 2.2.4, 6.8.3 and 10.4 hereof, but without limiting the
obligations of the Debtor under said Sections 2.2.4, 6.8.3 and
10.4) ratably, in accordance with the sum of the Bank's
respective Commitment, for any and all expenses, obligations,
losses, damages, penalties, actions, judgments, suits, expenses
or disbursements of any kind and nature whatsoever, regardless
of whether caused in whole or in part by negligence of Agent,
which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or
any other Loan Document or any other documents contemplated by
or referred to herein or therein or the transactions
contemplated hereby or thereby (including, but without
limitation, the costs and expenses which the Debtor is obligated
to pay under Sections 2.2.4, 6.8.3 and 10.4 hereof, interest,
penalties, attorney's fees and amounts paid in settlement, but
excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to
-45-
the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such
other documents; provided that no Bank shall be liable for any of
the foregoing to the extent they arise from the gross negligence
or wilful misconduct of the Agent. The obligations of the Banks
under this Section 9.5 shall survive the termination of this
Agreement and the repayment of the Indebtedness.
Section 9.6 Non-Reliance on Agent and Other Banks. Each
Bank agrees that it has received current financial information
with respect to the Debtor and that it has, independently and
without reliance on the Agent or any other Bank and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Debtor and decision to enter into this
Agreement and that it will, independently and without reliance
upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Loan Documents.
The Agent shall not be required to keep itself informed as to the
performance or observance by any Person of this Agreement or any
of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the properties or
books of the Debtor or any Person. Except for notices, reports
and other documents and information expressly required to be
furnished to the Bank by the Agent hereunder or under the other
Loan Documents, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of the Debtor or any other Person (or any of their
affiliates) which may come into the possession of the Agent.
Section 9.7 Failure to Act. Except for action expressly
required by the Agent hereunder or under the other Loan
Documents, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder or thereunder unless it
shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under Section 9.5
hereof against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any
such action.
Section 9.8 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice
thereof to the Banks and the Debtor, and the Agent may be
removed at any time with cause by the Majority Banks. Upon any
such resignation or removal, (i) the Majority Banks without the
consent of the Debtor shall have the right to appoint a
successor Agent so long as such successor Agent is also a Bank
at the time of such appointment and
(ii) the Majority Banks shall have the right to appoint a
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successor Agent that is not a Bank at the time of such
appointment so long as the Debtor consents to such appointment
(which consent shall not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Majority
Banks and accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation or
the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor
Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder and under any other Loan Documents. After
any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section 9 shall continue in effect for
its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Agent.
Section 9.9 No Partnership. Neither the execution and
delivery of this Agreement nor any of the other Loan Documents
nor any interest the Banks, the Agent or any of them may now or
hereafter have in all or any part of the Indebtedness shall
create or be construed as creating a partnership, joint venture
or other joint enterprise between the Banks or among the Banks
and the Agent. The relationship between the Banks, on the one
hand, and the Agent, on the other, is and shall be that of
principals and Agent only, and nothing in this Agreement or any
of the other Loan Documents shall be construed to constitute the
Agent as Trustee or other fiduciary for any Bank or to impose
upon the Agent any duty, responsibility or obligation other than
those expressly provided for herein and therein.
ARTICLE X
MISCELLANEOUS
Section 10.1. No Waiver; Modification in Writing. No
failure or delay on the part of Agent or Banks in exercising any
right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy
hereunder. No amendment, modification or waiver of any
provision of this Agreement or of the Notes, nor consent to any
departure by Debtor therefrom, shall in any event be effective
unless the same shall be agreed or consented to in writing by
the Majority Banks and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment,
modification, waiver or consent
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shall, unless in writing and signed by each Bank affected
thereby, do any of the following: a) increase any Commitment of
the Banks or subject the Banks to any additional obligations; b)
reduce the principal of, or interest on, any Revolving Loan or
fee hereunder; c) postpone or extend the Maturity Date, the
Termination Date or any scheduled date fixed for any payment of
principal of, or interest on, any Revolving Loan, fee or other
sum to be paid hereunder or waive any Event of Default; d) change
the percentage of any Commitment or the aggregate unpaid
principal amount of the Revolving Loan, or the number of Banks,
which shall be required for the Banks or any of them to take any
action under this Agreement; e) change any provision contained in
Sections 2.8, 6.8.3, 9.5 and 10.4; or f) release all or
substantially all security for the Indebtedness. To the extent
that the Agent requests in writing any Bank to agree or consent
in writing to a proposed amendment, modification or waiver of any
provision of this Agreement, Note, or any Loan Document or to
consent to any departure by the Debtor therefrom, such Bank shall
have fifteen (15) Business Days from the date of the Agent's
giving of such request in accordance with Section 10.3 hereof to
give to the Agent its approval or disapproval in writing of such
proposed amendment, modification, waiver or consent. If such
Bank does not give to the Agent such approval or disapproval
within such fifteen (15) Business Days, then such Bank shall be
deemed for all purposes to have irrevocably signed a writing
approving such proposed amendment, modification, waiver or
consent so that it is effective against such Bank to the extent
that the Majority Banks shall have agreed or consented to it in
writing. Notwithstanding anything in this Section 10.1 to the
contrary, no amendment, modification, waiver or consent shall be
made with respect to Article IX without the consent of the Agent
to the extent it affects the Agent. No notice to or demand on
Debtor in any case shall entitle Debtor to any other or further
notice or demand in similar or other circumstances.
Section 10.2. Notices. All notices and communications
provided for hereunder shall be in writing and, shall be mailed,
by certified mail, return receipt requested, or delivered by
overnight mail or delivery service or in person, or transmitted
by telecopier as set forth below unless any person named below
shall notify the others in writing of another address, in which
case notices and communications shall be mailed, by certified
mail, return receipt requested, or delivered to such other
address.
If to Agent:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Attention: National Division
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Fax: (504)
If to Banks:
Fax:
If to Debtor:
Fax:
Except as otherwise provided in this Agreement, all such notices
shall be deemed to have been duly given when (i) transmitted by
telecopier, (ii) personally delivered (iii) one Business Day
after deposited with an overnight mail or delivery service,
postage prepaid or (iv) three Business Days after deposited in a
receptacle maintained by the United States Postal Service,
postage prepaid, registered or certified mail, return receipt
requested.
Section 10.4. Fees and Expenses. Debtor agrees to pay all
fees, costs and expenses of Agent in connection with the
preparation, execution and delivery of this Agreement, and all
Related Documents to be executed in connection herewith and all
fees, costs and expenses of Agent and Banks in connection with
subsequent modifications or amendments to any of the foregoing,
including without limitation, the reasonable fees and
disbursements of counsel to Agent and Banks, and to pay all
costs and expenses of Agent and Banks in connection with the
enforcement of this Agreement, the Notes or the other Loan
Documents, including reasonable legal fees and disbursements
arising in connection therewith. Debtor also agrees to pay, and
to save Agent and Banks harmless from any delay in paying stamp
and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and
delivery of this Agreement, the Notes, the other Loan Documents,
or any modification thereof.
Section 10.5. Security Interest and Right of Set-off.
Agent and Bank shall have a continuing security interest in, as
well as the right to set-off the obligations of Debtor hereunder
against, all funds which Debtor may maintain on deposit with
Banks (with the exception of funds deposited in Debtor's
accounts in trust for third parties or funds deposited in
pension accounts, IRA'S, Keogh accounts and All Saver
Certificates), and Agent and Banks shall have a lien upon and a
security interest in all property of Debtor in Agent's or any
Bank's possession or control which shall secure
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the Indebtedness of Debtor. Should the right of any Bank to
realize funds in any manner set forth hereinabove be challenged
and any application of such funds be reversed, whether by court
order or otherwise, the Banks shall make restitution or refund
to the Debtor pro rata in accordance with their Pro Rata Share.
Each Bank agrees to promptly notify the Debtor and the Agent
after any such set-off and application, provided that the
failure to give such notice will not affect the validity of such
set-off and application. The rights of the Agent and the Banks
under this Section are in addition to all other rights and
remedies (including without limitation, other rights of set-off)
which the Agent or the Banks may have. This Section is subject
to the terms and provisions of Sections 2.5.2 and 10.9 hereof.
Section 10.6. Waiver of Marshalling. Debtor shall not at
any time hereafter assert any right under any law pertaining to
marshalling (whether of assets or liens) and Debtor expressly
agrees that Agent may execute or foreclose upon the Collateral
in such order and manner as Agent, in its sole discretion, deems
appropriate.
Section 10.7. Governing Law. This Agreement and the Notes
shall be deemed to be contracts made under the laws of the State
of Louisiana and for all purposes shall be construed in
accordance with the laws of said State.
Section 10.8. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the Debtor, the Agent and the Banks and their
respective successors and assigns; provided, however, that the
Debtor may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of all
of the Banks, and any such assignment or transfer without such a
consent shall be null and void. Each Bank may sell
participations to any Person in all or any part of any Revolving
Loans,, or all or any part of its Notes or Commitment, to
another bank or other entity, in which event, without limiting
the foregoing, the provisions of the Loan Documents shall inure
to the benefit of each purchaser of a participation; provided,
however, the pro rata treatment of payments, as described in
Section 2.5.2 hereof, shall be determined as if such Bank had
not sold such participation. Any Bank that sells one or more
participations to any Person shall not be relieved by virtue of
such participations from any of its obligations to Debtor under
this Agreement relating to the Revolving Loans. In the event
any Bank shall sell any participation, such Bank shall retain
the sole right and responsibility to enforce the obligations of
the Debtor relating to the Revolving Loans, including, without
limitation, the right to approve any amendment, modification or
waiver of any provision
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of this Agreement, other than amendments, modifications or
waivers with respect to i) any fees payable hereunder to the
Banks, ii) the amount of principal or the rate of interest
payable on, or the dates fixed for the scheduled payment of
principal of, the Revolving Loans and iii) the release of the
Liens on all or substantially all of the Collateral.
(b) Each Original Bank may assign to one other Bank or
Person, and, if an Event of Default exists, each Bank may assign
to one or more Banks or any other Person, all or a
portion of its interest, rights and obligations under this
Agreement; provided, however, that i) the aggregate amount of the
Commitments and the Revolving Loans assigned pursuant to each
such assignment shall in no event be less than $5,000,000; ii)
other than in the case of an assignment to another Bank (that is,
at the time of the assignment, a party hereto) or to an affiliate
of such Bank, the Agent and Debtor must give prior written
consent, which written consent shall not be unreasonably
withheld; iii) the parties to each such assignment shall execute
and deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit F hereto (each an "Assigrment
and Acceptance") with blanks appropriately completed, together
with any Revolving Note or Revolving Notes subject to such
assignment and an administrative fee of $3,000 paid by the
assignee (for which the Debtor will have no liability); and (iv)
each such assignment shall be of a constant, and not of a
varying, percentage of all of the assigning Banks' rights and
obligations (including Participations but excluding outstanding
Competitive Bid Loans) under this Agreement. Upon such
execution, delivery and acceptance, from and after the Effective
Date specified in each Assignment and Acceptance, (a) the
assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and
obligations of the Bank hereunder and (b) the Bank hereunder
shall, to the extent provided in such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all of the
remaining portion of an assigning Bank's rights and obligations
under this Agreement, such Bank shall cease to be a party
hereto). Notwithstanding anything contained in this Agreement to
the contrary, any Bank may at any time assign all or any portion
of its rights under this Agreement and the Notes issued to it as
Collateral to a Federal Reserve Bank; provided that no such
assignment shall release such Bank from any of its obligations
hereunder.
(c) By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the
interest
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being assigned thereby free and clear of any adverse claim, such
Bank assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or
any of the other Loan Documents or the execution, legality,
validity enforceability, genuineness, sufficiency or value of
this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such Bank
assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the
Debtor or the performance or observance by the Debtor of any of
its obligations under this Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant
hereto; (iii) such assicmee confirms that it has received a copy
of this Agreement, together with copies of the financial
statements referred to in Section 5.2 hereof and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will independently
and without reliance upon the Agent, such Bank assignor and any
other Bank, based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and
the other Loan Documents; (v) such assignee appoints and
authorizes the Agent to take such action as Agent on its behalf
and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto;
and (vi) such assignee agrees that it will perform in accordance
with their terms all obligations set by the terms of this
Agreement and the other Loan Documents as are required to be
performed by it as Bank.
(d) The entries in the records of the Agent as to each
Assignment and Acceptance delivered to it and the names and
addresses of the Banks and Commitments of, and principal amount
of the Revolving Loans owing to, each Bank from time to time
shall be conclusive, in the absence of manifest error, and the
Debtor, the Agent and the Banks may treat each Person, the name
of which is recorded in the books and records of Agent as the
Bank hereunder for all purposes of this Agreement and the other
Loan Documents.
(e) Upon the Agent's receipt of an Assignment and
Acceptance
executed by an assigning Bank and the assignee thereunder,
together with any Revolving Note or Notes subject to such
assignment, and the written consent of Debtor and Agent to such
assignment, if required, the Agent shall, if such Assignment and
Acceptance has been completed with blanks appropriately filled,
(i) accept such Assignment and Acceptance, (ii) record the inf
ormation contained therein in its records and (iii) give prompt
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notice thereof to the Debtor. Within five (5) Business Days
after receipt of Notice, the Debtor, at its own expense, shall
execute and deliver to the Agent, in exchange for the surrendered
Revolving Note, new Revolving Notes to the order of such assignee
in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Bank has
retained Commitments hereunder, new Revolving Notes to the order
of the assigning Bank in an amount equal to the Commitment
retained by it hereunder. Such new Revolving Notes shall be in
an aggregate principal amount equal to the aggregate principal
amount of such surrendered Revolving Notes, shall be dated the
effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the respective
Revolving Notes. Thereafter, such surrendered Revolving Notes
shall be marked renewed and substituted and the originals thereof
delivered to the Debtor (with copies, certified by the Debtor as
true, correct and complete, to be retained by the Agent).
Further, within five (5) Business Days after receipt of Notice,
the Debtor, at its own expense, shall execute and deliver to the
assignee Bank a Competitive Bid Note, in the principal amount of
$75,000,000, which shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially
the form of the Competitive Bid Note attached hereto as Exhibit
"A-2".
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to
this Section 10.8, disclose to the assignee or participant or
proposed assignee or participant any information relating to the
Debtor furnished to such Bank by or on behalf of the Debtor.
Section 10.9 Limitation of Interest. The Debtor and Banks
intend to strictly comply with all applicable federal and
Louisiana laws, including applicable usury laws (or the usury
laws of any jurisdiction whose usury laws are deemed to apply to
the Notes or any other Loan Documents despite the intention and
desire of the parties to apply the usury laws of the State of
Louisiana). Accordingly, the provisions of this Section 10.9
shall govern and control over every other provision of this
Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest"
includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law,
provided that, to the maximum extent permitted by applicable law,
(a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use,
forbearance or detention of money and not as interest, and (b)
all interest at any time contracted for, reserved, charged or
received shall be amortized, pro rated, allocated and spread, in
equal parts during the full term of the Indebtedness. In no
event shall the Debtor or any
-53-
other Person be obligated to pay, or any Bank have any right or
privilege to reserve, receive or retain, any interest in excess
of the maximum amount of non-usury interest permitted under the
laws of the State of Louisiana or the applicable laws (if any) of
the United States or of any other state (the "Ceiling Rate"). On
each day, if any, that the interest rate (the "Stated Rate")
called for under this Agreement or any other Loan Document
exceeds the Ceiling Rate, the rate at which interest shall accrue
shall automatically be fixed by operation of this sentence at the
Ceiling Rate for that day, and shall remain fixed at the Ceiling
Rate for each day thereafter, until the total amount of interest
accrued equals the total amount of interest which would have
accrued if there were no such Ceiling Rate imposed by this
sentence. Thereafter, interest shall accrue at the Stated Rate
unless and until the Stated Rate again exceeds the Ceiling Rate,
in which case, the provisions of the immediately preceding
sentence shall automatically operate to limit the interest
accrual rate to the Ceiling Rate. Daily interest rates to be
used in calculating interest at the Ceiling Rate shall be
determined by dividing the applicable Ceiling Rate per annum by
the number of days in the calendar year for which such
calculation is being made. None of the terms and provisions
contained in this Agreement or in any other Loan Document
(including, without limitation, Section 8.1 hereof) which
directly or indirectly relate to interest shall ever be construed
without reference to this Section 10.9, or be construed to create
a contract to pay for the use, forbearance or detention of money
an interest rate in excess of the Ceiling Rate. If the term of
any Indebtedness is shortened by reason of acceleration of
maturity as the result of any Default or by any other cause, or
by reason of any required or permitted prepayment, and if for
that (or any other) reason any Bank at any time, including but
not limited to, the Maturity Date is owed or receives (and/or has
received) interest in excess of interest calculated at the
Ceiling Rate, then in any such event all of such excess interest
shall be cancelled automatically as of the date of such
acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to such Bank,
it shall be credited pro tonto against the then outstanding
principal balance of the Debtor's Indebtedness to such Bank,
effective as of the date or dates when the event occurs which
causes it to be excess interest, until such excess is exhausted
or all of such principal has been fully paid and satisfied,
whichever occurs first, and any remaining balance of such excess
shall promptly be refunded to its payor.
Section 10.10. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH DEBTOR AND AGENT OR BANKS MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (I) THE NOTES, (ii)
THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE
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COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CIAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING C AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE DEBTOR, AND THE
DEBTOR HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF
TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
DEBTOR REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE DEBTOR HEREBY IRREVOCABLY CONSENTS TO THE
JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL
COURTS IN LOUISIANA AND AGREES THAT ANY ACTION OR PROCEEDING
ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE NOTES,
THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN
ANY COURT HAVING SUBJECT MATTER JURISDICTION.
Section 10.10 Severabilitv. If a court of competent
jurisdiction finds any provision of this Agreement to be invalid
or unenforceable as to any person or circumstance, such finding
shall not render that provision invalid or unenforceable as to
any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects
shall remain valid and enforceable.
Section 10.11. Headings. Article and Section headings used
in this Agreement are for convenience only and shall not affect
the construction of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective-officers thereunto duly
authorized, as of the date first above written.
DELCHAMPS, INC.
By: __________________________________
Title:
HIBERNIA NATIONAL BANK,
INDIVIDUALLY AND AS AGENT
By: __________________________________
Title:
AMSOUTH BANK OF ALABAMA
By: __________________________________
Title:
FIRST ALABAMA BANK
By: __________________________________
Title:
SCHEDULE 1 - Applicable Margin and Commitment Fee on
Unused Portion
SCHEDULE 2 - Initial Pro Rata Share
SCHEDULE 3 - Locations of Inventory
SCHEDULE 4 - List of Property and Assets That Can Be Sold
Without
Notice or Consent
SCHEDULE 5 - Permitted Payments and Distributions
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Competitive Bid Note
EXHIBIT B - Form of Competitive Bid Quote Request
EXHIBIT C - Form of Competitive Bid Quote
EXHIBIT D - Form of Request for Advance
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F - Form of Assignment and Acceptance
