<PAGE> 1
DRAFT 4/29/99
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549-1004
-----------------------
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 March 26, 1999
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-09559
COLORADO PRIME CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-2826129
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 BI-COUNTY BLVD., FARMINGDALE, NEW YORK 11735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516)-694-1111
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes|X| No|_|
At May 7, 1999, 1,000 shares of the registrant's Common Stock were outstanding.
<PAGE> 2
COLORADO PRIME CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
March 26, 1999 and September 25, 1998
Statements of Consolidated Operations 2
Thirteen weeks ended March 26, 1999 and March 27, 1998
Statements of Consolidated Cash Flows 3
Thirteen weeks ended March 26, 1999 and March 27, 1998
Notes to Consolidated Financial Statements 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 6
RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
COLORADO PRIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data))
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
March 26, December 25,
ASSETS 1999 1998
---- ----
<S> <C> <C>
Current Assets:
Cash $ 1,480 $ 994
Accounts receivable-net 52,363 54,237
Inventories 4,579 4,695
Prepaid expenses and other current assets 1,892 1,823
Refundable income tax 501 926
Deferred income tax benefit 9,818 12,419
--------- ---------
Total current assets 70,633 75,094
--------- ---------
Property, Plant and Equipment - Net 9,390 9,354
--------- ---------
Non-current accounts receivable-net 37,301 36,847
--------- ---------
Goodwill 45,203 45,609
--------- ---------
Other assets 7,121 8,055
--------- ---------
TOTAL ASSETS $ 169,648 $ 174,959
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 4,811 $ 4,926
Accrued expenses 20,197 18,772
Income and other taxes payable 248 320
Current portion of capital lease obligations 147 147
--------- ---------
Total current liabilities 25,403 24,165
--------- ---------
Revolver 35,214 30,635
--------- ---------
Senior unsecured notes, net of discount 83,973 98,318
--------- ---------
Long-term portion of capital lease obligations 3,753 3,782
--------- ---------
Other liabilities 2,678 2,746
--------- ---------
STOCKHOLDER'S EQUITY
Common Stock - par value, $.01, per share; 1,000 shares authorized
issued and outstanding -- --
Paid-in capital 25,868 25,868
Accumulated deficit (7,241) (10,555)
--------- ---------
Total stockholder's equity 18,627 15,313
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 169,648 $ 174,959
========= =========
</TABLE>
3
<PAGE> 4
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousand)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
March 26, March 27,
1999 1998
---- ----
<S> <C> <C>
PRODUCT SALES $ 33,226 $ 34,784
FINANCE INCOME EARNED 3,521 3,690
-------- --------
TOTAL REVENUE 36,747 38,474
COST OF GOODS SOLD 12,551 12,993
-------- --------
GROSS MARGIN 24,196 25,481
-------- --------
OTHER COST AND EXPENSES:
Selling, general and administrative 21,153 20,790
Amortization of goodwill 406 383
Interest expense 4,167 3,994
Other expense 148 138
-------- --------
Total cost and expenses 25,874 25,305
-------- --------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM
AND BENEFIT FOR INCOME TAXES (1,678) 176
(BENEFIT) PROVISION FOR INCOME TAXES
(434) 392
-------- --------
NET LOSS BEFORE EXTRAORDINARY ITEM (1,244) (216)
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT-NET OF TAX 4,556 --
-------- --------
NET INCOME (LOSS) $ 3,312 ($ 216)
======== ========
</TABLE>
4
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COLORADO PRIME CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
March 26, March 27,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 3,312 ($ 216)
------- --------
Adjustments to reconcile net income/(loss) to net cash provided by operating
activities:
Depreciation and amortization 1,088 1,048
Extraordinary gain, net (4,556) --
Deferred income taxes (435) --
Provision for doubtful accounts 2,350 1,424
Change in operating assets and liabilities:
Accounts receivable (930) (999)
Inventories 116 (253)
Prepaid expenses and other (69) (144)
Refundable income taxes 425 2,483
Other assets 138 (148)
Accounts payable (115) 1,437
Accrued expenses 1,427 3,142
Other liabilities (68) (65)
Income and other taxes payable (72) 261
------- --------
Total adjustments (701) 8,186
------- --------
Net cash provided by operating activities 2,611 7,970
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities (416) (460)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolver 4,579 (7,295)
Repurchase of senior notes (6,259) --
Decrease in capital lease obligations (29) (69)
------- --------
Net cash used in financing activities (1,709) (7,364)
------- --------
NET INCREASE IN CASH 486 146
CASH, BEGINNING OF PERIOD 994 444
------- --------
CASH, END OF PERIOD $ 1,480 $ 590
======= ========
</TABLE>
5
<PAGE> 6
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Colorado Prime Corporation (the "Company" or "CPC") is a Delaware
corporation and was incorporated in 1986. The Company is a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), formerly KPC
Holdings Corporation ("Holdings"). On May 9, 1997, pursuant to a merger
agreement between Holdings and Thayer Equity Investors III, L.P., a
private equity investment limited partnership ("Thayer"), Colorado
Prime Acquisition Corp. ("CPAC"), a transitory acquisition company
established by Thayer prior to the consummation of the merger, merged
with and into Holdings (the "Merger") following which Holdings was the
surviving corporation and was renamed CPH.
2. Reference is made to the notes to consolidated financial statements
contained within the Company's audited financial statements for the
period ended September 25, 1998 included in the Company's Annual Report
on Form 10-K. In the opinion of management, the interim unaudited
financial statements included herein reflect all adjustments necessary,
consisting of normal recurring adjustments, for a fair presentation of
such data on a basis consistent with that of the audited data presented
therein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
Certain prior period balances have been reclassified to conform with
the current period presentation.
3. The Company has approved a change in its fiscal year from the last
Friday in September to a January through December period. The new 1999
fiscal year began on December 26, 1998 and will end on December 24,
1999. Fiscal 2000 will be a 53 week year and end on December 29, 2000.
4. The consolidated financial statements include the accounts of the
"Company" and its wholly-owned subsidiaries; Kal-Mar Properties Corp.
("Kal-Mar"), Concord Financial Services, Inc. ("Concord") and Prime
Foods Development Corporation ("Prime"). In connection with the Merger
discussed in Note 1, the Company issued $100.0 million of Senior
Unsecured Notes (the "Notes"), which bear interest at 12.5% per annum
and mature in 2004. (See the Company's Annual Report on Form 10-K for a
further discussion of the Notes.) In January 1999, the Company
repurchased in aggregate $14.7 million (face value) of the then
outstanding notes. The Notes are guaranteed on a senior unsecured basis
by all existing subsidiaries (there are no non-guarantor subsidiaries)
and any future U.S. subsidiaries of the Company. The guarantees of the
subsidiaries are full, unconditional, joint and several. Summary
financial data for Kal-Mar, Concord and Prime are as follows:
6
<PAGE> 7
<TABLE>
<CAPTION>
March 26, 1999
(Dollars in Thousands)
Kal-Mar Concord Prime
------- ------- -----
<S> <C> <C> <C>
Current assets $ 14 $ 57,500 $ 12
Non-current assets 981 36,268 --
Current liabilities (2,778) (711)
Non-current liabilities -- (46,643) --
--------- ------- ------
Net assets (liabilities) 995 44,347 (699)
========= ====== ======
</TABLE>
<TABLE>
For the thirteen weeks ended
March 26, 1999
(Dollars in Thousands)
Kal-Mar Concord Prime
------- ------- -----
<S> <C> <C> <C>
Net revenues $40 $4,824 $0
Gross profit 40 4,824 0
Income before provision for income tax 14 1,608 0
</TABLE>
Separate financial statements of the Company's subsidiaries are not presented as
the Company's management has determined that (i) the data presented above
provides meaningful information and (ii) the data in separate financial
statements other than that presented above would not be material to the
investors of the Notes.
5. During the period ended December 25, 1998, management authorized and
committed the Company to undertake three significant restructurings and
recorded a combined restructuring charge of $5.3 million. The
restructuring plan involves (i) outsourcing the production and
fulfillment of its food products to a third party and the closing of
its Farmingdale, New York processing plan, (ii) the consolidation of
certain of its leased facilities and (iii) the involuntary termination
of certain employees at its Farmingdale, New York corporate
headquarters. During the quarter ended March 26, 1999, there have been
no significant changes to the restructuring plan authorized by
management.
6. During January 1999, the Company repurchased in aggregate $14.7 million
(face value ) of its Notes at a cost of $6.3 million. Additionally, the
Company wrote-off approximately $0.8 million of unamortized debt
issuance cost related to the repurchased Notes. The Company realized an
extraordinary gain of $4.6 million which was net of a tax provision of
$3.0 million.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain information set forth herein contains forward-looking statements, as
such term is defined in Section 27A of the Securities Act of 1933, as amended
and Section 21 E of the Securities Exchange Act of 1934. Such statements are
subject to certain risks and uncertainties discussed herein, which could cause
actual results to differ materially from those in the forward-looking
statements.
OVERVIEW
The Company is a leading direct marketer of high quality, value-added food
programs and products related to in-home dining and entertainment. Using a
combination of telemarketing and in-home selling, Colorado Prime Corporation
believes that it is the only company to offer this type of in-home shopping
service on a broad scale, currently serving 32 states through 83 sales offices.
The Company sells individually packaged, top quality meats and poultry, seafood,
assorted pasta dishes and a wide selection of prepared entrees for direct
delivery to consumer households. The Company's food products are of a quality
generally found only in specialty gourmet shops and high-end restaurants and
require simple preparation using a microwave, conventional oven or grill. As a
complement to its food products, the Company also sells food-related and home
entertainment appliances and accessories with unique features not generally
available in traditional retail channels. The purchase of non-food items enables
customers to earn a lifetime discount on food purchases.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 26, 1999 COMPARED TO THIRTEEN WEEKS ENDED MARCH 27,
1998.
Total revenue for the thirteen weeks ended March 26, 1999 decreased by $1.8
million, or 4.5%, to $36.7 million from $38.5 million for the thirteen weeks
ended March 27, 1998. Food revenue for the thirteen weeks ended March 26, 1999
decreased by $2.0 million, or 9.4%, to $19.5 million from $21.5 million for the
thirteen weeks ended and March 27, 1998. Non-food revenue for the thirteen weeks
ended March 26, 1999 increased by $0.5 million, or 3.6%, to $13.7 million from
$13.2 million for the thirteen weeks ended March 27, 1998. The reduction in food
revenue was due to lower food sales to new and existing customers caused in part
by two less food delivery days in the thirteen weeks ended March 26, 1999 as
compared to 1998. The increase in non-food revenue was due to higher sales to
new customers. Finance income for the thirteen weeks ended March 26, 1999
decreased by $0.2 million, or 4.6%, to $3.5 million from $3.7 million for the
thirteen weeks ended March 27, 1998. The decrease resulted from a reduction in
interest eligible non-food accounts.
Gross profit for the thirteen weeks ended March 26, 1999 decreased by $1.3
million, or 5.0%, to $24.2 million from $25.5 million for the thirteen weeks
ended March 27, 1998. The gross profit margin for the thirteen weeks ended March
26, 1999 decreased to 65.8% from 66.2% for the
8
<PAGE> 9
thirteen weeks ended March 27, 1998. The decrease in the gross profit margin was
primarily due to an increase in the average customer discount.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For the thirteen weeks ended March 26,
1999, these expenses increased by $0.4 million, or 1.7%, to $21.2 million from
$20.8 million for the thirteen weeks ended March 27, 1998. The increase was
primarily due to $0.9 million higher bad debt expense and $0.2 million higher
medical insurance cost partially offset by lower administrative payroll and
expense reductions. The amount of bad debt expense for the thirteen weeks ended
March 26, 1999 is consistent with the previous two thirteen week periods.
Interest expense for the thirteen weeks ended March 26, 1999 increased to $4.2
million from $4.0 million for the thirteen weeks ended March 27, 1998. The
increase was attributable to a greater level of borrowing at a higher rate of
interest under the amended revolving credit agreement, fees incurred in
connection with the amended revolving credit agreement and interest incurred in
connection with the new corporate headquarters lease partially offset by reduced
indebtedness resulting from the Senior Note repurchase.
Other expense for the thirteen weeks ended March 26, 1999 and March 27, 1998 was
$0.1 million.
Provision (Benefit) for income taxes for the thirteen weeks ended March 26, 1999
decreased by $0.8 million to a benefit of $0.4 million from a provision of $0.4
million for the thirteen weeks ended March 27, 1998. The decrease was due to
lower pre-tax income.
Extraordinary gain for the thirteen weeks ended March 26, 1999 resulted from the
repurchase of $14.7 million of Senior Notes at a cost of $6.3 million.
Additionally, the Company incurred $0.8 million of non-cash charges related to
the repurchase. The Company realized an extraordinary gain of $4.6 million which
was net of a tax provision of $3.0 million.
Net income for the thirteen weeks ended March 26, 1999 increased to $3.3 million
from a loss of $0.2 million for the thirteen weeks ended March 27, 1998 for the
reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the thirteen weeks ended March 26,
1999 was $2.6 million, primarily comprised of a net income of $3.3 million, non
cash charges of $3.0 million and an increase in accrued expenses of $1.4 million
partially offset by a non cash extraordinary gain of $4.6 million and an
increase in accounts receivable of $1.0 million.
Net cash used in investing activities for the thirteen weeks ended March 26,
1999 of $0.4 million was for capital expenditures.
Net cash used in financing activities for the thirteen weeks ended March 26,
1999 was $1.7 million, comprised of additional borrowings under the revolver to
fund the Senior Note repurchase.
9
<PAGE> 10
The Company had working capital of $45.2 million as of March 26, 1999 compared
to $50.9 million as of December 25, 1998.
The Company has a $50.0 million working capital revolver, with $14.8 million of
unused capacity as of March 26, 1999. The working capital revolver contains
certain covenants requiring the Company to meet certain financial test including
a minimum fixed charge coverage ratio, a maximum leverage ratio, and a
limitation on capital expenditures. The working capital revolver and the senior
unsecured notes impose certain other restrictions on the Company, including
restrictions on its ability to incur indebtedness, pay dividends, make
investments, grant liens, sell its assets and engage in certain other
activities. In addition, the indebtedness of the Company under its working
capital revolver is secured by all of the assets of the Company, including the
Company's real and personal property, inventory, accounts receivable,
intellectual property and other intangibles.
Management believes that cash flow from operations, together with other
available sources of funds including the availability of borrowings under its
working capital revolver will be adequate for at least the next twelve months to
make required payments of principal and interest on the Company's indebtedness
and to fund anticipated capital expenditures and working capital requirements.
The ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent, however, upon the future performance of the
Company which, in turn, will be subject to general economic conditions and to
financial, business and other factors, including factors beyond the Company's
control. Debt outstanding under the working capital revolver will bear interest
at floating rates; therefore, the Company's financial condition is and will
continue to be affected by changes in prevailing interest rates.
During January 1999, the Company repurchased in aggregate $14.7 million (face
value) of its Senior Notes at a cost of $6.3 million. The purchase was funded by
additional borrowings under its working capital revolver and will generate
approximately $1.4 million in annual cash interest savings.
The Company is subject to certain market risk factors related to its fixed rate
senior unsecured notes and its variable rate working capital revolver. The
Company does not believe the interest rate risk to be material and has disclosed
the factors in its Annual Report on Form 10-K for the year ended September 25,
1998.
Inflation
The Company believes that inflation has not had a material impact on its results
of operations for the thirteen weeks ended March 26, 1999.
Other -Year 2000
The Company has developed a comprehensive plan to address Year 2000 issues. The
plan addresses three main areas: (a) information systems; (b) embedded chips;
and (c) supply chain readiness. To oversee the process, the Company has
established an oversight committee which
10
<PAGE> 11
reports to the Board of Directors and the Audit Committee.
The Company has identified potential deficiencies related to Year 2000 in its
information systems, both hardware and software, and is in the process of
addressing them through upgrades and other remediation. The Company expects to
complete remediation and testing of its internal systems by the end of the third
quarter. With respect to other equipment with date-sensitive operating controls
such as manufacturing equipment, HVAC, security and other similar systems, the
Company has completed the process of identifying those items which may require
remediation or replacement. The Company expects to complete remediation or
replacement and testing of these systems by the end of the third quarter. As for
the third parties, the Company has identified and contacted both inventory and
non-inventory suppliers for Year 2000 readiness. For the critical vendors for
which an appropriate response has not been received, the Company has begun to
identify potential alternative suppliers. The Company has the right to terminate
its agreement with its major beef suppliers if documentation as to the
supplier's Year 2000 readiness is not provided.
Based upon the Company's current estimates, incremental out-of-pocket costs of
its Year 2000 program are not expected to be material.
At this stage of the process, the Company believes that it is difficult to
specifically identify the cause of the most reasonable worst case Year 2000
scenario. As with all manufacturers and distributors of products such as those
sold by the Company, a reasonable worst case scenario would be the result of
failures of third parties (including, without limitation, governmental entities
and entities with which the Company has no direct involvement) that continue for
more than several days in various geographic areas where the Company's products
are produced or sold or in areas from which the Company's raw materials and
products are sourced. In connection with the production of products and
suppliers of raw materials the Company is considering various contingency plans.
Continuing failures that limit consumers' ability to purchase would most likely
have a material adverse effect on the Company's results of operations. The
extent of such lost revenue cannot be estimated at this time; however, the
Company is considering contingency plans to limit, to the extent possible, the
effect of such lost revenue on the Company's results of operations. Any such
plans would necessarily be limited to matters over which the Company can
reasonably control.
The Company's Year 2000 efforts are ongoing and its overall plan, as well as the
consideration of contingency plans, will continue to evolve, as new information
becomes available. While the Company anticipates continuity of its business
activities, that continuity will be dependent upon its ability, and the ability
of third parties with whom the company relies on directly, or indirectly, to be
Year 2000 compliant.
11
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
No
10.14.3 Final Amendment No.6 and waiver to Credit Agreement among
CPC, the institutions party thereto as Lenders and Dresdner
AG, New York and Cayman Branches, as the Agents, dated
December 25, 1998.
(b) There were no Forms 8-K filed during the period
12
<PAGE> 13
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 daily authorized.
COLORADO PRIME CORPORATION
(Registrant)
Dated: May 7, 1999 By: /s/ Matthew Burris
---------------------------------------
Chief Financial Officer
13
<PAGE> 1
EXECUTION COPY
AMENDMENT NO. 6
This Amendment No. 6 (this "Amendment") amends that certain Credit
Agreement dated as of May 9, 1997 (as amended, modified and supplemented from
time to time, including pursuant to this Amendment, the "Credit Agreement")
among COLORADO PRIME CORPORATION (the "Borrower"), each institution identified
as a lender on Annex I thereto (each, together with its successors and assigns,
a "Lender"), and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, acting as
agent for itself and the other Lenders ("Agent"), and is entered into as of
April __, 1999 among Borrower, Agent and the Required Lenders.
RECITALS
WHEREAS, the Borrower has requested that the parties hereto adjust certain
components of the Borrowing Base, modify the Applicable Margin, amend the
definition of Monitoring Agent and certain provisions relating thereto, amend or
eliminate certain of the financial covenants in Section 8.1 of the Credit
Agreement, and add an additional Event of Default to Section 9.1(b);
WHEREAS, Agent and the Required Lenders are willing to make such changes on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. Capitalized terms used herein without definition shall have
the meanings assigned to such terms in the Credit Agreement, and the provisions
of Section 1.2 of the Credit Agreement shall apply hereto as if fully set forth
herein.
2. Amendments. Upon the date of effectiveness of this Amendment (the
"Effective Date"), the Credit Agreement is hereby amended as follows:
(a) Borrowing Base.
(i) The definition of "Borrowing Base" in Section 1.1 is amended by:
changing the percentage of Eligible Non-Food Accounts from seventy percent (70%)
to sixty percent (60%).
(ii) Exhibit C to the Credit Agreement is deleted in its entirety
and replaced with the version of Exhibit C attached to this Amendment.
<PAGE> 2
(b) Applicable Margin.
(i) The definition of "Applicable Margin" in Section 1.1 is
deleted in its entirety and replaced with the following:
"'Applicable Margin' means a fluctuating rate of interest per
annum determined based on the Type of Loan and Borrower's ratio of
Consolidated EBITDA to Consolidated Fixed Charges calculated in
accordance with Section 8.1(c), from the table set forth in Annex III;
provided, however, that until Lenders have received all of Borrower's
Financial Statements and other financial information required to be
delivered pursuant to Section 7.1(c) for the first Fiscal Quarter of
Fiscal Year 1999, the Applicable Margin shall be one percent (1%) for
Base Rate Loans and three and one-quarter percent (3.25%) for
Eurodollar Loans."
(ii) To the extent the amendment in clause (i) above changes
the applicable interest rate on any Loan, such change shall be effective as of
the Effective Date.
(iii) Section 4.1(c) of the Credit Agreement is amended by
deleting the phrase "Leverage Ratio and Interest Coverage Ratio" in the two
places where such phrase appears in that subsection and inserting in lieu
thereof the phrase "ratio of Consolidated EBITDA to Consolidated Fixed Charges".
(c) Monitoring Agent.
(i) The definition of "Monitoring Agent" in Section 1.1 is
amended by adding immediately after the phrase "financial institution" the
words, "auditor, appraiser or consultant".
(ii) Section 4.2(c) is amended by: (i) adding immediately
after the word "auditors" the words, "consultant, appraisers and financial
institutions"; (ii) deleting the phrase "Monitoring Bank" and inserting in lieu
thereof the phrase "Monitoring Agent"; and (iii) inserting immediately after
the phrase "to assist in the monitoring" the phrase "and inspecting".
(iii) Section 4.7(a) is amended by inserting the following two
sentences between the third and fourth sentences thereof: "The Monitoring Agent
may employ the services of auditors, appraisers and consultants to assist it in
monitoring the Borrowing Base and related assets of the Credit Parties and in
conducting field exams and appraisals of the Collateral. The Borrower shall pay
all reasonable and customary charges, fees and expenses of such auditors,
appraisers and consultants pursuant to Section 4.2(c) hereof; provided,
however, that Borrower's obligation to pay such reasonable and customary
charges, fees and expenses shall be capped at Twelve Thousand Dollars ($12,000)
per Fiscal Quarter for each Fiscal Quarter during which Borrower is in
compliance with the financial covenants contained in Section 8.1 hereof".
2
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(d) Commitment Fee. Section 4.2(a) of the Credit Agreement is amended by
deleting the phrase "Leverage Ratio and Interest Coverage Ratio" in the two
places where such phrase appears in that subsection and inserting in lieu
thereof the phrase "ratio of Consolidated EBITDA to Consolidated Fixed Charges".
(e) Annex III. Annex III to the Credit Agreement is deleted in its
entirety and replaced with the version of Annex III attached to this Amendment.
(f) Minimum Net Worth.
(i) Paragraph (a) of Section 8.1 is hereby deleted in its entirety.
(ii) The definition of "Consolidated Net Worth" in Section 1.1 is
deleted in its entirety.
(g) Consolidated Interest Coverage Ratio.
(i) Paragraph (b) of Section 8.1 is hereby deleted in its entirety.
(ii) The definition of "Consolidated Interest Expense" in Section 1.1
is deleted in its entirety.
(h) Consolidated EBITDA to Consolidated Fixed Charges Ratio. Clause (c)
of Section 8.1 is hereby amended as follows: (i) by inserting after the phrase
"on a Rolling Four Quarter Basis," the parenthetical "(provided, for each of
the quarters ending during Fiscal Year 1999, Consolidated EBITDA shall be
calculated on an annualized basis for the period from December 27, 1998 through
the applicable Fiscal Quarter end)", and (ii) by deleting the minimum ratios
required for each of the Fiscal Quarters in Fiscal Years 1999, 2000, 2001 and
2002 and inserting in lieu thereof the following numbers:
<TABLE>
<CAPTION>
RATIO (TO 1.00)
----------------------------------
FISCAL QUARTER ENDING DURING
FISCAL YEAR 1st 2nd 3rd 4th
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 0.70 0.70 0.70 0.74
2000 0.75 0.77 0.79 0.82
2001 0.84 0.88 0.92 0.97
Thereafter 0.97 0.97 0.97 0.97
</TABLE>
(i) Leverage Ratio. Clause (d) of Section 8.1 is hereby amended as
follows: (i) by inserting after the phrase "on a Rolling Four Quarter Basis,"
the parenthetical "(provided, for each of the quarters ending during Fiscal
Year 1999, Consolidated EBITDA shall be calculated on an annualized basis for
the period from December 27, 1998 through the applicable Fiscal Quarter end)",
and (ii) by deleting the maximum ratios permitted for each of the Fiscal
Quarters in Fiscal Years 1999, 2000, 2001 and 2002 and inserting in lieu
thereof the following numbers:
3
<PAGE> 4
<TABLE>
<CAPTION>
RATIO (__ TO 1.00)
FISCAL QUARTER ENDING DURING ----------------------------------------
FISCAL YEAR 1ST 2ND 3RD 4TH
- ---------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
1999 9.75 9.75 9.50 9.50
2000 9.25 9.25 9.00 8.75
2001 8.25 8.25 8.00 7.75
Thereafter 7.75 7.75 7.75 7.75
</TABLE>
(j) Events of Default. Section 9.1(b) is amended by deleting the phrase
"7.2 through 7.4, 7.6 through 7.15" and inserting in lieu thereof the phrase
"7.2 through 7.15".
3. Conditions Precedent. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent:
(a) Borrower, Agent and Required Lenders shall have duly executed and
delivered to Agent one or more counterparts of this Amendment; and
(b) Borrower shall have paid to Agent for the account of each Lender
executing this Amendment an amendment fee equal to three-eighths of one percent
(.00375%) multiplied by the Commitment of each such Lender, for a maximum
aggregate fee of One Hundred Eighty Seven Thousand Five Hundred Dollars
($187,500).
4. Representations. To induce the Agent and the Lenders to enter into this
Amendment, the Borrower hereby represents and warrants as follows:
a. Representations and Warranties. All representations and warranties
contained in the Credit Agreement and the other Credit Documents are true and
correct in all material respects on and as of the date hereof as if made on the
date hereof, other than representations and warranties that expressly relate
solely to an earlier date; and
b. No Defaults. No Default or Event of Default has occurred which has
not been expressly waived by the Lenders or Required Lenders, as applicable.
5. Miscellaneous. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document, nor of any affected provision
prior to the Effective Date of this Amendment. This Amendment may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. This Amendment shall be governed by, and construed in accordance
with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWER:
COLORADO PRIME CORPORATION,
a Delaware corporation
By:
---------------------------------
Title: VP-CFO
------------------------------
THE AGENT:
DRESDNER BANK, AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the Agents
By: /s/ Steven S. Karr
---------------------------------
Steven S. Karr
Assistant Treasurer
By: /s/ Ben Marzouk
---------------------------------
Ben Marzouk
Vice President
LENDERS:
DRESDNER BANK, AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: /s/ Steven S. Karr
---------------------------------
Steven S. Karr
Assistant Treasurer
By: /s/ Ben Marzouk
---------------------------------
Ben Marzouk
BANK LEUMI USA, as a Lender
By: /s/ Illegible
---------------------------------
By: /s/ Illegible
---------------------------------
5
<PAGE> 6
BANKBOSTON, N.A., as a Lender
By:
-----------------------------
By:
-----------------------------
IBJ Whitehall Business Credit
Corporation, successor and ??? to
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By: /s/ Robert R. Wallace
-----------------------------
Robert R. Wallace
By:
-----------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-24-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> MAR-26-1999
<CASH> 1,480,000
<SECURITIES> 0
<RECEIVABLES> 98,372,000
<ALLOWANCES> 8,708,000
<INVENTORY> 4,579,000
<CURRENT-ASSETS> 70,633,000
<PP&E> 16,090,000
<DEPRECIATION> 6,700,000
<TOTAL-ASSETS> 169,648,000
<CURRENT-LIABILITIES> 25,403,000
<BONDS> 83,973,000
0
0
<COMMON> 0
<OTHER-SE> 25,868,000
<TOTAL-LIABILITY-AND-EQUITY> 169,648,000
<SALES> 33,226,000
<TOTAL-REVENUES> 3,521,000
<CGS> 12,551,000
<TOTAL-COSTS> 33,704,000
<OTHER-EXPENSES> 554,000
<LOSS-PROVISION> 2,350,000
<INTEREST-EXPENSE> 4,167,000
<INCOME-PRETAX> (1,678,000)
<INCOME-TAX> (434,000)
<INCOME-CONTINUING> (1,244,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,556,000
<CHANGES> 0
<NET-INCOME> 3,312,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1>
<FN>
<F1>The Company does not report EPS as there is no public market for its equity.
The Company does have publicly traded debt.
</FN>
</TABLE>
