<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9031
SUNBELT NURSERY GROUP, INC.
(Exact name of registrant as specified in it charter)
DELAWARE 75-1932993
(State of incorporation) (I.R. Employer
Identification No.)
500 TERMINAL ROAD, FORT WORTH, TEXAS 76106
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 817 / 624-7253
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 preceeding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No _____
-----
As of November 13, 1996, the Registrant had 8,500,000 common shares,
$.01par value, outstanding.
================================================================================
<PAGE>
SUNBELT NURSERY GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Part I. Financial Information Page
- ------------------------------ ----
<S> <C>
Consolidated Statement of Operations for the Three Months
Ended September 29, 1996 and October 1, 1995.............................. 3
Consolidated Balance Sheet as of September 29, 1996 and
June 30, 1996........... ................................................ 4
Consolidated Statement of Cash Flows for the Three Months
Ended September 29, 1996 and October 1, 1995.............................. 5
Notes to Consolidated Financial Statements.................................... 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................................ 9
Part II. Other Information
- ---------------------------
Legal Proceedings .......................................................... 12
Exhibits.................................................................... 13
Signatures.................................................................. 16
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
SUNBELT NURSERY GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 29, OCTOBER 1,
1996 1995
-------------- -----------
<S> <C> <C>
Net sales $18,243 $22,168
Cost of goods sold 11,097 13,724
-------------- -----------
Gross profit 7,146 8,444
General, administrative and
selling expense 9,700 11,370
Depreciation and amortization 674 938
Interest / other income (730) (23)
Interest expense 262 450
-------------- -----------
Loss before provision for income taxes (2,760) (4,291)
Provision for income taxes - -
-------------- -----------
Net loss ($2,760) ($4,291)
============== ===========
Net loss per share ($0.32) ($0.50)
============== ===========
Average common shares outstanding 8,500 8,500
============== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SUNBELT NURSERY GROUP, INC
CONSOLIDATED BALANCE SHEET
(unaudited, in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 29, June 30,
1996 1996
------------- -------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $1,599 $2,058
Cash - restricted 1,371 1,352
Accounts receivable, net 423 577
Inventories 17,122 18,847
Other current assets 241 281
-------------- -------------
Total current assets 20,756 23,115
-------------- -------------
Property and equipment, at cost 26,233 27,189
Less accumulated depreciation 16,308 16,481
-------------- -------------
Net property and equipment 9,925 10,708
Other assets 147 175
-------------- -------------
Total assets $30,828 $33,998
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $11,931 $11,699
Accrued compensation 1,535 1,846
Current portion of long-term debt and
capital leases 6,846 6,863
Other current liabilities 5,716 5,637
-------------- -------------
Total current liabilities 26,028 26,045
Long-term debt and capital leases 2,730 3,037
Reserve for store closings 59 102
Other long-term liabilities 1,595 1,638
-------------- -------------
Total liabilities 30,412 30,822
-------------- -------------
Shareholders' equity:
Common stock, $.01 par value, 25 million shares
authorized, 8,500,000 issued and outstanding 85 85
Additional paid-in capital 45,151 45,151
Retained deficit (44,770) (42,010)
Subscriptions receivable from officer (50) (50)
-------------- -------------
Total shareholders' equity 416 3,176
-------------- -------------
Total liabilities and shareholders' equity $30,828 $33,998
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SUNBELT NURSERY GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 29, October 1,
1996 1995
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($2,760) ($4,291)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization 674 938
Gain on sale of fixed assets (587) 29
Payment of store closing costs included in
provision for store closings (43) (291)
Changes in operating assets and liabilities:
Inventories 1,481 1,816
Accounts receivable and other assets 222 279
Accounts payable 232 (1,708)
Accrued compensation (311) (295)
Other liabilities 26 606
------------- ------------
NET CASH USED FOR OPERATING ACTIVITIES (1,066) (2,917)
------------- ------------
INVESTING ACTIVITIES:
Purchase of property and equipment (92) (43)
Sale of property and equipment 889 -
------------- ------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 797 (43)
------------- ------------
FINANCING ACTIVITIES:
Additions to line of credit 20,860 27,450
Principal payments of line of credit and
capital lease obligations (21,031) (25,754)
Loan from officer - 600
Restricted cash for outstanding letters of credit (19) (323)
------------- ------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (190) (1,973)
------------- ------------
Increase (decrease) in cash and cash equivalents (459) (987)
Cash and cash equivalents at beginning of period 2,058 3,388
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,599 $2,401
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SUNBELT NURSERY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. BASIS OF FINANCIAL STATEMENTS
- --------------------------------------
Sunbelt Nursery Group, Inc. (the "Company") is a specialty retailer of nursery
and garden products with 74 stores operating under three prominent retail trade
names: Wolfe Nursery in Texas and Oklahoma, Nurseryland Garden Centers in
California, and Tip Top Nurseries in Arizona.
The accompanying unaudited consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K and Form 10-K\A-1 for
the year ended January 28, 1996. On August 1, 1996, the Board of Directors of
the Company approved a change in the Company's fiscal year end from the Sunday
nearest to January 31 to the Sunday nearest to June 30. As a result the Company
filed a transition report on Form 10-Q for the five months ended June 30, 1996.
All adjustments are, in the opinion of management, necessary to present fairly
the Company's financial position as of September 29, 1996 and October 1, 1995,
and its results of operations and cash flow for the periods then ended. All
such adjustments are of a normal recurring nature. The results of operations
for the three months ended September 29, 1996 and October 1, 1995 are not
indicative of the results to be expected for the fiscal year due to the highly
seasonal nature of the nursery industry.
NOTE 2. LIQUIDITY, CONTINGENCIES AND OPERATING LOSSES
- ------------------------------------------------------
LIQUIDITY - As of October 19, 1994, the Company and its subsidiaries entered
into a Loan and Security Agreement with a commercial bank ("Bank") providing a
line of revolving credit (the "Loan Agreement") which matures in October 1997.
The amount that may be borrowed under the Loan Agreement is dependent upon an
inventory borrowing base for each operating subsidiary determined on a monthly
basis, and the aggregate principal amount outstanding may not exceed $9.25
million. The interest rate on the outstanding loans is currently 9.75%. The
borrowing base and amounts borrowed pursuant to the Loan Agreement amounted to
$8.2 million and $6.3 million, respectively, at September 29, 1996.
On October 24, 1996, the Bank issued waivers of certain defaults of provisions
in the Loan Agreement and amended the debt service coverage covenant; eliminated
the earnings before interest expense, income taxes and depreciation and
amortization covenant (EBITDA) and established a gross margin dollar covenant.
These waivers of the specified default conditions were necessary because as of
July 28, 1996, the Company was in default of the provisions of the Loan
Agreement relating to (i) EBITDA, and (ii) the debt service coverage ratio, both
of which were below the requirements established by the Loan Agreement.
Effective July 31, 1995, the Company restructured thirteen subleases and other
guarantees of leases with Pier 1 Imports (the "Agreement of Settlement") which
provides six-month lease terms renewable at Pier 1 Import's ("Pier 1") option
through June 30, 1998, after which the Company must consent to any further
extensions. The initial term ended December 31, 1995 and Pier 1 has since
granted two options ending June 30, 1996 and December 31, 1996. Rent is
calculated as a percentage of gross sales, subject to minimum levels. Pier 1 is
actively marketing the facilities for sale and the Company has no purchase
obligation. The Company may make an offer to purchase any of these properties,
but Pier 1 is not obligated to accept the offer. As of September 29, 1996, five
of the properties had been sold to third parties and the Company has negotiated
new lease agreements with two of these purchasers, and are currently in
discussion with the purchasers of the other three properties. Also, as of June
30, 1996, the Company closed three of the properties and recorded a liability of
$831,000 in non-cancelable future minimum lease payments on these stores
pursuant to the Agreement of Settlement. The subleases have been accounted for
as operating leases subsequent to July 31, 1995.
6
<PAGE>
SUNBELT NURSERY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Aggregate sales and gross profit for the remaining five locations are listed
below:
<TABLE>
<CAPTION>
3 months 3 months
ended ended
<S> <C> <C>
(in millions) 9/29/96 10/1/95
------- -------
Sales $1.2 $1.5
Gross Profit $ .5 $ .5
</TABLE>
The Agreement of Settlement also fixes a $14.7 million claim against the
Company in favor of Pier 1. The claim is secured up to $6.0 million by
substantially all of the Company's assets, subordinate to the rights of the
Bank, and comprised of (i) a promissory note for $8.0 million (the "Earn-out
Claim") and (ii) the remaining portion of the claim (the "Residual Claim")
which is a non-interest bearing claim payable only in the event of non-
performance under the Agreement of Settlement. The Earn-out Claim is payable in
annual installments ("Cash Flow Payments"), subject to certain minimum financial
requirements pursuant to the Agreement of Settlement and the Loan Agreement, or
may be fully satisfied by aggregate payments of $2.0 million by May 1, 1996,
$4.0 million by May 1, 1997, or $6.0 million by May 1, 1998. The Residual Claim
will be fully discharged by the satisfaction of the Earn-out Claim and the
termination, without liability to Pier 1, of the eight subleases and other
leases guaranteed by Pier 1.
Due to covenants in the Loan Agreement, the Company was prohibited from
satisfying the Earn-out Claim with a prepayment of $2.0 million on May 1, 1996.
As a result, the $2.0 million present value of the $8.0 million in deferred Cash
Flow Payments has been recorded as a long-term liability in the accompanying
consolidated balance sheet. Factors used to estimate the present value included
a discount rate of 10%, annual sales increases of 1% and overall gross margins
of 41.5%.
OPERATING LOSSES - The Company continues to report declining sales on a
comparable store basis, however there has been some slowing of the margin
erosion which the Company had experienced in prior periods. The declining sales
reflect the intensified competition in key market areas, inclement weather which
kept the consumer out of the stores, shifts in management's marketing strategies
and working capital management decisions. During fiscal 1997, management has
addressed these issues as well as others in its continuing efforts to return the
Company to profitability. Management's plans for fiscal 1997 include:
improvements in product mix, display, quality, pricing and advertising;
reductions in store operating and general and administrative expenses; and the
sale or closure of additional underperforming stores.
Management has not yet completed its strategic analysis of other
underperforming stores and their respective positions in the Company's and the
overall lawn and garden competitive environment. Upon completion, identified
underperforming stores may require the accrual of closure expenses for
severance, rent buyouts and/or other costs associated with store closing. These
expenses will be accrued in the period in which management adopts a formal plan
of store closure for such underperforming stores.
Management has taken additional actions that will be applicable to future
periods, including: comprehensive associate training programs, implementation of
product quality standards, an inventory control philosophy, changes in
management personnel and implementation of a new control/analysis system.
These plans are designed to improve cash flow and return the Company to
profitability. However, there can be no assurance that such profitability will
be achieved, and, if not, the Company may be required to close additional
stores, liquidate inventories, sell certain assets or take other measures to
meet working capital needs.
7
<PAGE>
SUNBELT NURSERY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 3. CASH - RESTRICTED
- --------------------------
As of September 29, 1996, the Company had restricted cash of $1.4 million
established to segregate proceeds from the sale of properties per the Loan
Agreement.
NOTE 4. INCOME TAXES
- ---------------------
No provision for income taxes has been recognized in the accompanying
financial statements, as management does not currently expect the Company to
have taxable income during the applicable tax year.
NOTE 5. LEGAL PROCEEDINGS
- --------------------------
LITIGATION - The Company, the Company's Chief Executive Officer (the "CEO"), a
company owned by the CEO, and General Host Corporation (a former 49.5%
shareholder of the Company) are defendants in a suit filed by a brokerage firm
(the "Plaintiffs") with regard to breach of contract of an agreement the
Plaintiffs had with the Company to raise financing. The Plaintiffs allege that
they are due payment under the agreement. They also allege that the Company's
CEO and/or the company owned by the CEO along with defendant General Host
Corporation intentionally interfered with the agreement between the Plaintiffs
and the Company. The Plaintiffs seek $700,000 in actual damages against the
Company under the agreement and an unspecified amount for quantum meruit as well
as attorney's fees. The Company believes that it proceeded properly under the
agreement and accordingly denies that any payments are due to the Plaintiffs.
The Company is vigorously defending itself against any claims by the Plaintiffs.
There are various claims, lawsuits, investigations and pending actions against
the Company and its subsidiaries incident to the operations of its business.
Liability of the Company and its subsidiaries, if any, associated with these
matters is not determinable at September 29, 1996. While settlement of these
lawsuits may impact the Company's results of operations and liquidity in the
year of settlement or resolution, it is the opinion of management that the
ultimate resolution of such litigation will not have a material adverse effect
on the Company's financial position.
ENVIRONMENTAL CONTINGENCIES - In connection with a possible sale-leaseback
transaction, which was not completed, the Company authorized a third party to
undertake environmental assessments of two owned, non-retail properties. The
results indicated potential contamination at the two sites. The extent and
nature of the contamination is not clear. It is also not clear whether the
Company has an obligation to remediate whatever contamination is ultimately
found to exist. If an obligation does exist, it is not presently possible to
estimate the potential range of costs involved.
NOTE 6. GAIN OF SALE OF OPERATING ASSETS
- -----------------------------------------
In August 1996, the Company recorded a gain of $710,000 from the sale of
operating assets. Concurrent with the sale of certain stores during this
period, the Company assigned to the purchaser the leases on two stores and, as a
result, the Company remains secondarily liable as a guarantor. These non-
cancelable leases expire in October 1999 and December 2003 and the remaining
non-cancelable minimum lease commitments due as of September 29, 1996 are
$701,000.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
With the exception of historical information, the matters discussed herein are
forward-looking statements that involve risks and uncertainties including, but
not limited to, economic conditions, weather conditions in the Company's market
areas, interest rate fluctuations, product demand, competitors' merchandise mix,
service and pricing, availability of merchandise, the regulatory and trade
environment, real estate market fluctuations and other risks indicated in
filing, with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
- ---------------------
During the quarter ended September 29, 1996, the Company lost $2.8 million
which represented a $1.5 million improvement over the $4.3 million deficit
incurred in the same period last year. While sales for the quarter were down
$3.9 million from those achieved last year, approximately $ 2.2 million of this
sales decline was attributed to the sixteen stores the Company closed or sold
during the year.
Gross margins improved from 38.1% to 39.2% during the first quarter of fiscal
1997. This improvement is substantially due to the Company's operational
improvements at the store level as well as the elimination of the less
profitable stores included in the comparative period in fiscal 1996. Same store
sales for the first quarter of fiscal 1997 decreased by 8.8% compared to the
same period in fiscal 1996 reflecting increased competitive pressure in specific
marketing areas and reduction of excess inventory positions reflected in the
1996 results.
General, administrative and selling expenses for the three month period ended
September 29, 1996 were down 14.7% or $1.7 million primarily resulting from the
reduction in the number of stores operated by the company as well as the ongoing
efforts of the Company's announced reductions in general and administrative
expenses. The Company's reorganization of store management has begun to have
the desired effect of reducing expenditures in the costs of personnel,
advertising and store occupancy. The sale of operating assets during the period
resulted in the recording of a $710,000 gain, which was a significant factor in
the increase reflected in the Company's other income operating statement
classification.
Other significant improvements realized during the quarter included a 42%
reduction in the Company's interest expense when compared to the same period
last year. The principal contributory factor to this cost reduction was the
$3.3 million reduction in the Company's working capital borrowings under the
Loan Agreement, which resulted primarily from the 34% decline in the Company's
inventory position. Management's efforts to reduce its inventory investment and
the related costs to carry this investment, when combined with the reduction in
the number of stores, accounts for the majority of this change.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the quarter, $1.1 million cash was used for operations. Investing
activities provided $.8 million in cash and the Company repaid a net of $.2
million on an asset based revolving loan from a bank.
LIQUIDITY - As of October 19, 1994, the Company and its subsidiaries entered
into a Loan and Security Agreement with a commercial bank ("Bank") providing a
line of revolving credit (the "Loan Agreement") which matures in October 1997.
The amount that may be borrowed under the Loan Agreement is dependent upon an
inventory borrowing base for each operating subsidiary determined on a monthly
basis, and the aggregate principal amount outstanding may not exceed $9.25
million. The interest rate on the outstanding loans is currently 9.75%. The
borrowing base and amounts borrowed pursuant to the Loan Agreement amounted to
$8.2 million and $6.3 million, respectively, at September 29, 1996.
On October 24, 1996, the Bank issued waivers of certain defaults of provisions
in the Loan Agreement and amended the debt service coverage covenant, eliminated
the earnings before interest expense, income taxes and depreciation and
amortization covenant (EBITDA) and established a gross margin dollar covenant.
These waivers of the specified default conditions were necessary because as of
July 28, 1996, the Company was in default of the provisions of the Loan
Agreement relating to (i) EBITDA, and (ii) the debt service coverage ratio, both
of which were below the requirements established by the Loan Agreement.
9
<PAGE>
Effective July 31, 1995, the Company restructured thirteen subleases and other
guarantees of leases with Pier 1 Imports (the "Agreement of Settlement") which
provides six-month lease terms renewable at Pier 1 Import's ("Pier 1") option
through June 30, 1998, after which the Company must consent to any further
extensions. The initial term ended December 31, 1995 and Pier 1 has since
granted two options ending June 30, 1996 and December 31, 1996. Rent is
calculated as a percentage of gross sales, subject to minimum levels. Pier 1 is
actively marketing the facilities for sale and the Company has no purchase
obligation. The Company may make an offer to purchase any of these properties,
but Pier 1 is not obligated to accept the offer. As of September 29, 1996, five
of the properties had been sold to third parties and the Company has negotiated
new lease agreements with two of these purchasers and are currently in
discussion with the purchasers of the other three properties. Also, as of June
30, 1996, the Company closed three of the properties and recorded a liability of
$831,000 in non-cancelable future minimum lease payments on these stores
pursuant to the Agreement of Settlement. The subleases have been accounted for
as operating leases subsequent to July 31, 1995.
Aggregate sales and gross profit for the remaining five locations are listed
below:
<TABLE>
<CAPTION>
3 months 3 months
ended ended
<S> <C> <C>
(in millions) 9/29/96 10/1/95
------- -------
Sales $1.2 $1.5
Gross Profit $ .5 $ .5
</TABLE>
The Agreement of Settlement also fixes a $14.7 million claim against the
Company in favor of Pier 1. The claim is secured up to $6.0 million by
substantially all of the Company's assets, subordinate to the rights of the
Bank, and comprised of (i) a promissory note for $8.0 million (the "Earn-out
Claim") and (ii) the remaining portion of the claim (the "Residual Claim")
which is a non-interest bearing claim payable only in the event of non-
performance under the Agreement of Settlement. The Earn-out Claim is payable in
annual installments ("Cash Flow Payments"), subject to certain minimum financial
requirements pursuant to the Agreement of Settlement and the Loan Agreement, or
may be fully satisfied by aggregate payments of $2.0 million by May 1, 1996,
$4.0 million by May 1, 1997, or $6.0 million by May 1, 1998. The Residual Claim
will be fully discharged by the satisfaction of the Earn-out Claim and the
termination, without liability to Pier 1, of the eight subleases and other
leases guaranteed by Pier 1.
Due to covenants in the Loan Agreement, the Company was prohibited from
satisfying the Earn-out Claim with a prepayment of $2.0 million on May 1, 1996.
As a result, the $2.0 million present value of the $8.0 million in deferred Cash
Flow Payments has been recorded as a long-term liability in the accompanying
consolidated balance sheet. Factors used to estimate the present value included
a discount rate of 10%, annual sales increases of 1% and overall gross margins
of 41.5%.
OPERATING LOSSES - The Company continues to report declining sales on a
comparable store basis, however there has been some slowing of the margin
erosion which the company had experienced in prior periods. The declining sales
reflect the intensified competition in key market areas, inclement weather which
kept the consumer out of the stores, shifts in management's marketing strategies
and working capital management decisions. During fiscal 1997, management has
addressed these issues as well as others in its continuing efforts to return the
Company to profitability. Management's plans for fiscal 1997 include:
improvements in product mix, display, quality, pricing and advertising;
reductions in store operating and general and administrative expenses; and the
sale or closure of additional underperforming stores.
Management has not yet completed its strategic analysis of other
underperforming stores and their respective positions in the Company's and the
overall lawn and garden competitive environment. Upon completion, identified
underperforming stores may require the accrual of closure expenses for
severance, rent buyouts and/or other costs associated with store closing. These
expenses will be accrued in the period in which management adopts a formal plan
of store closure for such underperforming stores.
10
<PAGE>
Management has taken additional actions that will be applicable to future
periods, including: comprehensive associate training programs, implementation of
product quality standards, an inventory control philosophy, changes in
management personnel and implementation of a new control/analysis system.
These plans are designed to improve cash flow and return the Company to
profitability. However, there can be no assurance that such profitability will
be achieved, and, if not, the Company may be required to close additional
stores, liquidate inventories, sell certain assets or take other measures to
meet working capital needs.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
See Note 5 to the Consolidated Financial Statements.
12
<PAGE>
ITEM 6. EXHIBITS
--------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporated by reference to Exhibit 3.1 to
Incorporation the Company's Registration Statement on Form
S-1 (Reg. No. 33-42292)(the "Registration
Statement"), filed August 16, 1991
3.2 By-Laws Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement
10.1 Form of Post-Employment Incorporated by reference to Exhibit 10.3 of
Consulting Agreement with the Company's Registration Statement
executive officers
10.2 Form of Indemnity Incorporated by reference to Exhibit 10.4 to
Agreement with directors the Company's Registration Statement
and executive officers
10.3 Management Bonus Plan Incorporated by reference to Exhibit 10.5 to
the Company's Annual Report on Form 10-K,
for the fiscal year ended January 31, 1993
10.4 1991 Stock Option Plan Incorporated by reference to Exhibit 10.6 to
Amendment No. 1 to the Company's
Registration Statement, filed September 25,
1991 (the "Amended Registration Statement")
10.5 Executive Officers' Incorporated by reference to Exhibit 10.10
Medical Plan to the Company's Registration Statement
10.6 Executive Officers' Incorporated by reference to Exhibit 10.11
Financial Planning Plan to the Company's Registration Statement
10.7 Credit Facilities Incorporated by reference to Exhibit 10.12
Agreement between the to the Company's Registration Statement
Company and Pier 1 Imports
10.8 Extension Agreement dated Incorporated by reference to Exhibit 10.14
April 25, 1994 between the to the Company's Report on Form 8-K, filed
Company and Pier-SNG, Inc. April 28, 1994
relating to the Credit
Facility Agreement between
the Company and Pier 1
Imports
10.9 Waiver Agreement dated May Incorporated by reference to Exhibit 10.15
13, 1994 between the to the Company's Annual Report on Form 10-K
Company and Pier 1 Imports for the fiscal year ended January 31, 1994
and Pier-SNG, Inc.
relating to the Credit
Facility Agreement between
the Company and Pier 1
Imports
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
10.10 Loan and Security Agreement dated October Incorporated by reference to Exhibit 10.19
14, 1994, among Wolfe Nursery,Inc., Tip to the Company's Report on Form 10-Q for the
Top Nurseries, Inc., Nurseryland Garden nine months ended October 31, 1994
Centers, Inc. as Borrowers, the Registrant,
Sunbelt Nursery Holdings, Inc. and Sunbelt
Management Services, Inc., as Guarantors,
and American National Bank and Trust
Company of Chicago (the "Loan and Security
Agreement")
10.11 Qualified Stock Option Agreement dated Incorporated by reference to Exhibit 10.11 to
October 18, 1994 with an Executive Officer the Company's Report on Form 10-K for the
fiscal year ended January 31, 1995, filed May
15, 1995
10.12 Amended and Restated Credit Facilities Incorporated by reference to Exhibit 10.11 to
Agreement dated October 14, 1994 between the Company's Report on Form 10-K for the
the Company and Pier 1 Imports, Inc. fiscal year ended January 31, 1995, filed May
15, 1995
10.13 Nonqualified Stock Option Agreement dated Incorporated by reference to Exhibit 10.13 to
March 6, 1995 with non-employee Directors the Company's Report on Form 10-K for the
fiscal year ended January 31, 1995, filed May
15, 1995
10.14 First Amendment and Waiver dated April 7, Incorporated by reference to Exhibit 10.14 to
1995 to the Loan and Security Agreement the Company's Report on Form 10-K for the
fiscal year ended January 31, 1995, filed May
15, 1995
10.15 Agreement of Settlement dated July 31, 1995 Incorporated by reference to Exhibit 10.15 to
between Pier Lease, Pier 1 Imports and the Company's Report on Form 10K/A-2 for
Sunbelt Nursery Group, and Timothy R. the fiscal year ended January 31, 1995, filed
Duoos August 11, 1995
10.16 Security Agreement dated July 31, 1995, by Incorporated by reference to Exhibit 10.16 to
Sunbelt Nursery Group, Inc. and Wolfe the Company's Report on Form 10-K/A-2 for
Nursery, Inc. for the benefit of Pier 1 Imports, the fiscal year ended January 31, 1995, filed
Inc., identified as Exhibit A to the Agreement August 11, 1995
of Settlement
10.17 Lease Guaranty Indemnification Agreement Incorporated by reference to Exhibit 10.17 to
dated July 31, 1995, by Sunbelt Nursery the Company's Report on Form 10-K/A-2 for
Group, Inc. and Wolfe Nursery, Inc. for the the fiscal year ended January 31, 1995, filed
benefit of Pier 1 Imports, Inc., identified as August 11, 1995
Exhibit C to the Agreement of Settlement
10.18 Environmental Indemnity dated July 31, 1995 Incorporated by reference to Exhibit 10.18 to
by Sunbelt Nursery Group, Inc. and Wolfe the Company's Report on Form 10-K/A-2 for
Nursery, Inc. for the benefit of Pier 1 Imports, the fiscal year ended January 31, 1995, filed
Inc., identified as Exhibit D to the Agreement August 11, 1995
of Settlement
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
10.19 Duoos Indemnification Agreement dated July Incorporated by reference to Exhibit 10.19 to
31, 1995 by Timothy R. Duoos for the benefit the Company's Report on Form 10-K/A-2 for
of Pier 1 Imports, Inc., identified as Exhibit E the fiscal year ended January 31, 1995, filed
to the Agreement of Settlement August 11, 1995
10.20 Sublease Guaranty dated July 31, 1995, Incorporated by reference to Exhibit 10.20 to
between Sunbelt Nursery Group, Inc. and Pier the Company's Report on Form 10-K/A-2 for
Lease, Inc. identified as Exhibit G to the the fiscal year ended January 31, 1995, filed
Agreement of Settlement August 11, 1995
10.21 Promissory Note dated July 31, 1995, in the Incorporated by reference to Exhibit 10.21 to
principal amount of $8,000,000 by Sunbelt the Company's Report on Form 10-K/A-2 for
Nursery Group, Inc. for the benefit of Pier 1 the fiscal year ended January 31, 1995, filed
Imports, Inc. identified as Exhibit H to the August 11, 1995
Agreement of Settlement
10.22 Note Guaranty dated July 31, 1995, by Wolfe Incorporated by reference to Exhibit 10.22 to
Nursery, Inc. for the benefit of Pier 1 Imports, the Company's Report on Form 10-K/A-2 for
Inc., identified as Exhibit I to the Agreement the fiscal year ended January 31, 1995, filed
of Settlement August 11, 1995
10.23 Second Amendment, Waiver and Consent Incorporated by reference to Exhibit 10.23 to
dated July 31, 1995 to the Loan and Security the Company's Report on Form 10-K/A-2 for
Agreement the fiscal year ended January 31, 1995, filed
August 11, 1995
10.24 Third Amendment dated February 14, 1996 Incorporated by reference to Exhibit 10.24 to
to the Loan and Security Agreement the Company's Annual Report on
Form 10-K, for the fiscal year ended January 28, 1996,
filed May 10, 1996
10.25 Fourth Amendment and Waiver dated May 9, Incorporated by reference to Exhibit 10.25 to
1996 to the Loan and Security Agreement the Company's Annual Report on Form 10-K,
for the fiscal year ended January 28, 1996,
filed May 10, 1996
10.26 Fifth Amendment and Waiver dated October Filed herewith
24, 1996 to the Loan and Security Agreement
21 Subsidiaries of the Company Incorporated by reference to Exhibit 22 to the
Company's Annual Report on Form 10-K, for
the fiscal year ended January 31, 1993
27 Financial Data Schedule Filed herewith
</TABLE>
15
<PAGE>
SUNBELT NURSERY GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sunbelt Nursery Group, Inc.
---------------------------
(Registrant)
Date: November 13, 1996 s/Richard R. Dwyer
----------------------------------------
Richard R. Dwyer
President and Chief Accounting
Officer
16
<PAGE>
EXHIBIT 10.26
FIFTH AMENDMENT, WAIVER AND CONSENT TO
LOAN AND SECURITY AGREEMENT
This Fifth Amendment, Waiver and Consent to Loan and Security
Agreement, dated as of October 24, 1996 (this "Amendment"), is by and among
---------
Wolfe Nursery, Inc., a Delaware corporation, Tip Top Nurseries, Inc., an Arizona
corporation, Nurseryland Garden Centers, Inc., a California corporation, as
borrowers (collectively, the "Borrowers"), Sunbelt Nursery Group, Inc., a
---------
Delaware corporation, Sunbelt Nursery Holdings, Inc., an Arizona corporation,
Sunbelt Management Services, Inc., a Delaware corporation, as guarantors
(collectively, the "Guarantors" and, together with the Borrowers, the "Loan
---------- ----
Parties"), and American National Bank and Trust Company of Chicago, a national
- -------
banking association, as lender (the "Lender"). Capitalized terms used in this
------
Amendment and not otherwise defined have the meanings assigned to such terms in
the Loan Agreement (as defined below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Loan Parties and the Lender are parties to the Loan and
Security Agreement dated as of October 14, 1994 (as such agreement may be
amended, modified, restated or supplemented from time to time, the "Loan
----
Agreement");
- ---------
WHEREAS, the Loan Parties are not in compliance with the financial
covenants set forth in Sections 8.16(A) and 8.16(B) of the Loan Agreement for
the quarter ending July 31, 1996;
WHEREAS, the Loan Parties' noncompliance with the foregoing financial
covenants has given rise to Events of Default under Section 9.1(B) of the Loan
Agreement;
WHEREAS, the existence of such Events of Default entitle the Lender
to, among other things, terminate all further extensions of credit to the Loan
Parties under the Loan Agreement, accelerate all existing Indebtedness and
foreclose on the Collateral of the Loan Parties;
WHEREAS, the Loan Parties have requested that the Lender waive the
foregoing Events of Default;
WHEREAS, the Lender has agreed to waive such Events of Default in
connection with the implementation of certain amendments to the Loan Agreement,
all of which are acceptable to the Loan Parties;
WHEREAS, the Loan Parties and the Lender desire to (i) amend the Loan
Agreement to, among other things, (a) modify certain financial and other
covenants, (b) add a new financial covenant, (c) periodically reduce the Maximum
Revolving Facility
<PAGE>
and the Total Facility and (d) change the interest rate applicable to the
Revolving Loans and (ii) waive certain Events of Default specified in this
Amendment, all on the terms and subject to the conditions of this Amendment;
NOW, THEREFORE, in consideration of the foregoing recitals, the
actions contemplated therein and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties to this Amendment
agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT
----------------------------
On the date this Amendment becomes effective, after completion by the
Loan Parties of the conditions set forth in Section 4 of this Amendment (the
---------
"Closing Date"), the Loan Agreement is amended as follows:
- -------------
1.1 Section 1.1 of the Loan Agreement is amended by deleting the last
-----------
sentence of the definition of "Maximum Revolving Facility" in its entirety and
--------------------------
replacing it as follows:
The Maximum Revolving Facility shall be $9,250,000 through December
10, 1996. Commencing December 11, 1996, the Maximum Revolving
Facility shall be $8,500,000 through December 23, 1996. Commencing
December 24, 1996, the Maximum Revolving Facility shall be $8,000,000.
1.2 Section 1.1 of the Loan Agreement is further amended by deleting
-----------
the definition of "Total Facility" in its entirety and replacing it as follows:
--------------
"Total Facility" shall mean the amount of $9,250,000 through
--------------
December 10, 1996. Commencing December 11, 1996, the Total Facility
shall mean the amount of $8,500,000 through December 23, 1996.
Commencing December 24, 1996, the Total Facility shall mean the amount
of $8,000,000.
1.3 Section 2.1(A) of the Loan Agreement is amended by deleting the
--------------
first sentence of such section in its entirety and replacing it as follows:
Subject to the provisions of Section 4 below, after execution of the
---------
Financing Agreements, Lender shall advance to each Borrower, on a
revolving credit basis, Revolving Loans ("Revolving Loans") in such
---------------
aggregate amounts as such Borrower may from time to time request but
not exceeding at any one time outstanding an amount equal to (i) the
Borrowing Base of such Borrower plus, for the period commencing
----
October 24, 1996, and ending December 8, 1996, $1,000,000, minus (ii)
-----
the aggregate stated amount of all outstanding Letters of Credit;
<PAGE>
provided, however, that Lender shall not be obligated to make any such
-------- -------
advance to any Borrower if, after such advance, the aggregate amount
of all Revolving Loans made to all Borrowers would exceed the Maximum
Revolving Facility minus the aggregate stated amount of all Letters of
-----
Credit for all Borrowers.
1.4 Section 2.5(B) of the Loan Agreement is amended by adding the
--------------
following sentence to such section as follows:
Borrowers shall pay to Lender a fee (the "Amendment Fee") equal to
$25,000, payable in five monthly installments of $5,000 due on the
first day of each month, commencing December 1, 1996. The Amendment
Fee shall be fully earned on the date of the Fifth Amendment, Consent
and Waiver to Loan and Security Agreement among the Loan Parties and
Lender and shall be nonrefundable.
1.5 Section 7 of the Loan Agreement is amended by adding the
---------
following Section 7.18 to such section as follows:
------------
7.18 Appraisals. The Loan Parties shall provide Lender by
----------
January 31, 1997, with an appraisal for each parcel of Mortgaged Real
Property performed by an appraisal firm(s) acceptable to Lender in its
sole discretion.
1.6 Section 8.16(A) of the Loan Agreement is amended by deleting such
---------------
section in its entirety and replacing it as follows:
(A) Debt Service Coverage Ratio. The Loan Parties shall not permit
---------------------------
the Debt Service Coverage Ratio to be less than (i) 2.2:1 for the period
commencing January 27, 1997, and ending March 30, 1997, (ii) 4.5:1 for the
period commencing January 27, 1997, and ending June 29, 1997, and (iii)
2.0:1 for the period commencing January 27, 1997, and ending September 28,
1997.
1.7 Section 8.16(B) of the Loan Agreement is amended by deleting such
---------------
section in its entirety and replacing it as follows:
(B) Gross Profit. The Gross Profit (as defined by GAAP) of the
------------
Loan Parties on a consolidated basis shall not be less than (i)
$4,500,000 for the period commencing August 26, 1996, and ending
October 27, 1996, (ii) $6,000,000 for the period commencing August 26,
1996, and ending November 24, 1996, (iii) $10,500,000 for the period
commencing August 26, 1996, and ending December 29, 1996, (iv)
$11,500,000 for the period commencing August 26, 1996, and ending
<PAGE>
January 26, 1997, and (v) $14,000,000 for the period commencing August
26, 1996, and ending February 23, 1997.
1.8 Section 8.21 of the Loan Agreement is amended by deleting such
------------
section in its entirety.
SECTION 2. WAIVER AND CONSENT
------------------
2.1 Debt Service Coverage Ratio. On the Closing Date, the Lender
---------------------------
waives any Event of Default under Section 9.1(B) of the Loan Agreement due
solely to the Loan Parties' noncompliance during the quarter ending July 31,
1996, with the covenant set forth in Section 8.16(A) of the Loan Agreement.
2.2 EBITDA. On the Closing Date, the Lender waives any Event of
------
Default under Section 9.1(B) of the Loan Agreement due solely to the Loan
Parties' noncompliance during the quarter ending July 31, 1996, with the
covenant set forth in Section 8.16(B) of the Loan Agreement.
2.3 Change in Fiscal Year. On the Closing Date, the Lender consents
---------------------
to the change in the Loan Parties' fiscal year to a twelve month period ending
on or about June 30. The Loan Agreement and other Financing Agreements shall be
deemed automatically amended without further action to reflect such change in
the Loan Parties' fiscal year.
2.4 1996 Financial Statements. On the Closing Date, the Lender
-------------------------
agrees, subject to the conditions set forth below, to accept reviewed (rather
than audited) financial statements solely for the period ending December 31,
1996; provided, however, that the waiver set forth in this Section 2.4 is only
-------- ------- -----------
effective if Price Waterhouse LLP, or some other public accounting firm
acceptable to the Lender, (i) observes the physical inventory count conducted by
the Loan Parties with respect to such period and (ii) provides evidence to
Lender that, as of December 31, 1996, it has performed audit procedures
satisfactory to Lender with respect to cash, liabilities and fixed assets.
2.5 No Other Waiver. Nothing in this Agreement should in any way be
---------------
deemed a (i) waiver of any Event of Default under the Loan Agreement other than
those specifically identified in Sections 2.1 and 2.2 hereof or (ii) an
agreement to forbear from exercising any remedies with respect to any such other
Event of Default.
SECTION 3. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lender to enter into this Amendment and to extend
further credit under the Loan Agreement, as amended by this Amendment, each Loan
Party severally represents and warrants to the Lender that:
<PAGE>
3.1 Due Authorization, Etc. The execution, delivery and performance
-----------------------
by such Loan Party of this Amendment are within its corporate powers, have been
duly authorized by all necessary corporate action, have received all necessary
governmental, regulatory or other approvals (if any are required), and do not
and will not contravene or conflict with any provision of (i) any law, (ii) any
judgment, decree or order, or (iii) such Loan Party's Certificate of
Incorporation or By-Laws, and do not and will not contravene or conflict with,
or cause any lien to arise under any provision of any agreement or instrument
binding upon such Loan Party or upon any of its property. This Amendment and
the Loan Agreement, as amended by this Amendment, are the legal, valid and
binding obligations of such Loan Party, enforceable against such Loan Party in
accordance with their respective terms.
3.2 No Default, Etc. As of the Closing Date, (i) except as set forth
----------------
in Section 2 of this Amendment, no Event of Default or Default under the Loan
---------
Agreement, as amended by this Amendment, has occurred and is continuing or will
result from the amendments set forth in this Amendment and (ii) the
representations and warranties of such Loan Party contained in the Loan
Agreement are true and correct.
3.3 Litigation. As of the Closing Date, except as previously
----------
disclosed by such Loan Party to the Lender in writing, no claims, litigation
(including, without limitation, derivative actions), arbitration proceedings,
governmental investigations or proceedings or regulatory proceedings are
pending, or to the knowledge of such Loan Party, threatened against it, nor does
such Loan Party know of any basis for the foregoing. In addition, there are no
inquiries, formal or informal, which might give rise to such actions,
proceedings or investigations.
3.4 Pier 1 Agreements. As of the Closing Date, no default exists
-----------------
under any of the Pier 1 Agreements.
3.5 Securities Matters. All filings made by the Loan Parties to the
------------------
Securities and Exchange Commission during the last 12 months have complied with
the Securities Laws and all provisions of such Securities Laws, including any
provision requiring the filing of audited financial statements.
SECTION 4. CONDITIONS TO EFFECTIVENESS
---------------------------
The obligation of the Lender to make the amendments and waivers
contemplated by this Amendment and the effectiveness thereof, are subject to the
following:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Loan Parties contained in this Amendment are true and correct
as of the Closing Date.
<PAGE>
4.2 Documents. The Lender has received all of the following, each
---------
duly executed and dated as of the Closing Date (or such other date as is
satisfactory to the Lender) in form and substance satisfactory to the Lender:
(A) Fifth Amendment. This Amendment;
---------------
(B) Legal Opinion. An opinion of the Loan Parties' legal counsel to
-------------
the effect that (i) the Loan Parties' have the power and authority to
execute, deliver and perform this Amendment and that this Amendment has
been duly authorized and (ii) this Amendment is the legal, valid and
binding obligations of the Loan Parties;
(C) Resolutions. Resolutions of the Board of Directors of each Loan
-----------
Party authorizing or ratifying the execution, delivery and performance of
this Amendment;
(D) Consents, Etc. Certified copies of all documents evidencing any
--------------
necessary corporate action, consents and governmental approvals, if any,
with respect to this Amendment or any other document provided for under
this Amendment; and
(E) Other. Such other documents as the Lender may reasonably request.
-----
SECTION 5. MISCELLANEOUS
-------------
5.1 Captions. The recitals to this Amendment (except for
--------
definitions) and the section captions used in this Amendment are for convenience
only, and do not affect the construction of this Amendment.
5.2 Governing Law; Severability. THIS AMENDMENT IS A CONTRACT MADE
---------------------------
UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. Wherever possible, each provision of this
Amendment must be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment is prohibited by or
invalid under such law, such provision is only ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Amendment.
5.3 Counterparts. This Amendment may be executed in any number of
------------
counterparts and by the different parties on separate counterparts, and each
such counterpart is deemed to be an original, but all such counterparts together
constitute but one and the same Amendment.
5.4 Successors and Assigns. This Amendment is binding upon each Loan
----------------------
Party and the Lender and their respective
<PAGE>
successors and assigns, and inures to the sole benefit of each Loan Party and
the Lender and their successors and assigns. The Loan Parties have no right to
assign their respective rights or delegate their respective duties under this
Amendment.
5.5 References. From and after the Closing Date, each reference in
----------
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or
words of like import, and each reference in any Financing Agreement to the Loan
Agreement or to any term, condition or provision contained "thereunder,"
"thereof," "therein," or words of like import, mean and are a reference to the
Loan Agreement (or such term, condition or provision, as applicable) as amended,
supplemented or otherwise modified by this Amendment.
5.6 Continued Effectiveness. Notwithstanding anything contained in
-----------------------
this Amendment, the terms of this Amendment are not intended to and do not serve
to effect a novation as to the Loan Agreement. The parties to this Amendment
expressly do not intend to extinguish the Loan Agreement. Instead, it is the
express intention of the parties to this Amendment to reaffirm the indebtedness
created by and secured under the Loan Agreement. The Loan Agreement, as amended
by this Amendment, remains in full force and effect.
5.7 Costs, Expenses and Taxes. Each Loan Party affirms and
-------------------------
acknowledges that Section 10.2 and Section 10.3 of the Loan Agreement applies to
this Amendment and the transactions and agreements and documents contemplated
under this Amendment.
5.8 Guarantors Reaffirmation. Each of the Guarantors acknowledges
------------------------
that it has read this Amendment and consents to this Amendment and agrees that
its Guaranty of the Guaranteed Obligations (as defined in such Guaranty)
continues in full force and effect, is valid and enforceable and is not impaired
or otherwise affected by the execution of this Amendment or any other document
or instrument delivered in connection with this Amendment.
* * * * *
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above written.
WOLFE NURSERY, INC.,
as a Borrower
By: /s/ Richard R. Dwyer
_____________________________
Name: Richard R. Dwyer
Title: President
TIP TOP NURSERIES, INC.,
as a Borrower
By: /s/ Richard R. Dwyer
_____________________________
Name: Richard R. Dwyer
Title: President
NURSERYLAND GARDEN CENTERS, INC.,
as a Borrower
By: /s/ Richard R. Dwyer
_____________________________
Name: Richard R. Dwyer
Title: President
SUNBELT NURSERY GROUP, INC.,
as a Guarantor
By: /s/ Richard R. Dwyer
_____________________________
Name: Richard R. Dwyer
Title: President
SUNBELT NURSERY HOLDINGS, INC.,
as a Guarantor
By: /s/ Richard R. Dwyer
_____________________________
Name: Richard R. Dwyer
Title: President
<PAGE>
SUNBELT MANAGEMENT SERVICES, INC.,
as a Guarantor
By: /s/ Richard R. Dwyer
----------------------------
Name: Richard R. Dwyer
Title: President
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By:/s/ Elizabeth J. Limpert
------------------------
Elizabeth J. Limpert
First Vice President
Timothy R. Duoos, guarantor under the Guaranty dated as of October 14,
1994 (the "Duoos Guaranty") made in favor of the Lender, acknowledges that he
--------------
has read this Amendment referenced herein and consents to this Amendment and
agrees that his guarantee of the Guaranteed Obligations (as defined in the Duoos
Guaranty) continues in full force and effect, is valid and enforceable and is
not impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection with this Amendment.
/s/ Timothy R. Duoos
--------------------------------
Timothy R. Duoos
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 2,970
<SECURITIES> 0
<RECEIVABLES> 423
<ALLOWANCES> 0
<INVENTORY> 17,122
<CURRENT-ASSETS> 20,756
<PP&E> 26,233
<DEPRECIATION> 16,308
<TOTAL-ASSETS> 30,828
<CURRENT-LIABILITIES> 26,028
<BONDS> 0
0
0
<COMMON> 85
<OTHER-SE> 331
<TOTAL-LIABILITY-AND-EQUITY> 30,828
<SALES> 18,243
<TOTAL-REVENUES> 18,243
<CGS> 11,097
<TOTAL-COSTS> 21,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262
<INCOME-PRETAX> (2,760)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,760)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,760)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> 0
</TABLE>
