Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark One
X Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: March 23, 1996
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file No.: 33-48862
HOMELAND HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1311075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2601 Northwest Expressway
Oil Center-East
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
(405) 879-6600
(Registrant's telephone number, including area code)
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 No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 30, 1996.
Class A Common Stock, including redeemable common stock: 32,599,707 shares
Class B Common Stock: None
HOMELAND HOLDING CORPORATION
FORM 10-Q
FOR THE TWELVE WEEKS ENDED MARCH 23, 1996
INDEX
Page
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS......................... 1
Consolidated Balance Sheets
March 23, 1996 and December 30, 1995........ 1
Consolidated Statements of Operations
Twelve Weeks Ended March 23, 1996
and March 25, 1995.......................... 3
Consolidated Statements of Stockholders
Equity (Deficit)
Twelve Weeks Ended March 23, 1996 and
March 25, 1995............................. 4
Consolidated Statement of Cash Flows
Twelve Weeks Ended March 23, 1996 and
March 25, 1995.............................. 5
Notes to Consolidated Financial Statements
March 23, 1996.............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................. 8
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............. 12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
March 23, December 30,
1996 1995
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,283 $ 6,357
Receivables, net of allowance for uncollectible
accounts of $1,934 and $2,661 6,629 8,051
Inventories 40,477 42,830
Prepaid expenses and other current assets 1,765 2,052
Total current assets 53,154 59,290
Property, plant and equipment:
Land 9,919 9,919
Buildings 22,104 22,101
Fixtures and equipment 44,304 44,616
Land and leasehold improvements 23,726 23,629
Software 2,001 1,991
Leased assets under capital leases 28,966 29,062
Construction in progress 4,194 4,201
135,214 135,519
Less accumulated depreciation
and amortization 64,865 63,827
Net property, plant and equipment 70,349 71,692
Other assets and deferred charges 6,493 6,600
Total assets $129,996 $137,582
Continued
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 23, December 30,
1996 1995
(Unaudited)
Current liabilities:
Accounts payable - trade $ 17,519 $ 17,732
Salaries and wages 1,247 1,609
Taxes 3,559 4,876
Accrued interest payable 5,198 2,891
Other current liabilities 12,446 14,321
Long-term obligations in default classified as current 98,161 100,467
Current portion of obligations under capital
leases 2,746 2,746
Current portion of restructuring reserve 3,062 3,062
Total current liabilities 143,938 147,704
Long-term obligations:
Obligations under capital leases 8,405 9,026
Other noncurrent liabilities 5,289 6,133
Noncurrent restructuring reserve 2,796 2,808
Total long-term obligations 16,490 17,967
Commitments and contingencies - -
Redeemable common stock, Class A, $.01 par value,
1,720,718 shares at March 23, 1996 and at
December 30, 1995, at redemption value 17 17
Stockholders' deficit:
Common stock
Class A, $.01 par value, authorized - 40,500,000
shares, issued - 33,748,482 shares at March 23,
1996 and at December 30, 1995,
outstanding - 30,878,989 shares 337 337
Additional paid-in capital 55,886 55,886
Accumulated deficit (82,531) (80,188)
Minimum pension liability adjustment (1,327) (1,327)
Treasury stock, 2,869,493 shares at March 23, 1996
and at December 30, 1995, at cost (2,814) (2,814)
Total stockholders' deficit (30,449) (28,106)
Total liabilities and stockholders' deficit $129,996 $137,582
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
12 weeks 12 weeks
ended ended
March 23, March 25,
1996 1995
Sales, net $124,350 $178,009
Cost of sales 94,207 135,485
Gross profit 30,143 42,524
Selling and administrative 27,980 39,969
Financial restructuring costs 1,350 -
Operating profit 813 2,555
Interest expense 3,156 4,411
Loss before income taxes (2,343) (1,856)
Income tax expense - -
Net loss $ (2,343) $ (1,856)
Net loss per common share $ (.07) $ (.05)
Weighted average shares outstanding 32,599,707 34,651,117
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)
<TABLE> (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Minimum
Class A Pension Total
Common Stock Paid-in Accumulated Liability Treasury Stock Stockholders'
Shares Amount Capital Deficit Adjustment Shares Amount Equity (Deficit)
Balance, December 31,1994 31,604,989 $316 $53,896 $(48,398) $ - 726,000 $(1,743) $ 4,071
Purchase of treasury stock 455,000 5 224 - - 455,000 229) -
Net loss - - - (1,856) - - - (1,856)
Balance, March 25, 1995 32,059,989 $321 $54,120 $(50,254) $ - 1,181,000 $(1,972) $ 2,215
Balance, December 30,1995 33,748,482 $337 $55,886 $(80,188) $(1,327) 2,869,493 $(2,814) $(28,106)
Net loss - - - (2,343) - - - (2,343)
Balance, March 23, 1996 33,748,482 $337 $55,886 $(82,531) $(1,327) 2,869,493 $(2,814) $(30,449)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
12 weeks 12 weeks
ended ended
March 23, March 25,
1996 1995
Cash flows from operating activities:
Net loss $(2,343) $(1,856)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,658 3,681
Amortization of financing costs 186 334
Gain on disposal of assets (78) (27)
Amortization of beneficial interest in operating
leases 30 60
Change in assets and liabilities:
Decrease in receivables 1,422 4,305
Decrease in receivable for taxes - 719
Decrease in inventories 2,353 9,649
Decrease in prepaid expenses and other current assets 287 1,685
Increase in other assets and deferred charges (117) (51)
Decrease in accounts payable - trade (213) (4,623)
Increase (decrease) in salaries and wages (362) 476
Increase (decrease) in taxes (1,318) 500
Increase (decrease) in accrued interest payable 2,307 (1,912)
Decrease in other current liabilities (1,875) (1,339)
Decrease in noncurrent restructuring reserve (12) (1,459)
Decrease in other noncurrent liabilities (825) (554)
Net cash provided by operating activities 1,100 9,588
Cash flows used in investing activities:
Capital expenditures (307) (98)
Cash received from sale of assets 60 -
Net cash used in investing activities (247) (98)
Cash flows used by financing activities:
Borrowings under revolving credit loans 25,067 20,440
Payments under revolving credit loans (27,373) (25,413)
Net borrowings under swing loans - 25
Principal payments under notes payable - (750)
Principal payments under capital lease obligations (621) (1,258)
Payments to acquire treasury stock - (229)
Net cash used by financing activities (2,927) (7,185)
Net increase (decrease) in cash and cash equivalents (2,074) 2,305
Cash and cash equivalents at beginning of period 6,357 339
Cash and cash equivalents at end of period $ 4,283 $ 2,644
Supplemental information:
Cash paid during the period for interest $ 604 $ 5,990
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Preparation of Consolidated Financial Statements:
The accompanying unaudited consolidated financial statements
of Homeland Holding Corporation ("Holding") and its
Subsidiary, Homeland Stores, Inc. ("Stores" and together
with Holding, the "Company"), reflect all adjustments
consisting only of normal and recurring adjustments which
are, in the opinion of management, necessary to present
fairly the consolidated financial position and the
consolidated results of operations and cash flows for the
periods presented. These unaudited consolidated financial
statements should be read in conjunction with the
consolidated financial statements of the Company for the
period ended December 30, 1995 and the notes thereto.
2. Accounting Policies:
The policies of the Company are summarized in the
consolidated financial statements of the Company for the 52
weeks ended December 30, 1995 and the notes thereto.
3. Operational Restructuring:
On April 21, 1995, the Company sold 29 of its stores and its
distribution center to Associated Wholesale Grocers, Inc.
("AWG"), pursuant to a strategic plan approved by the Board
of Directors in December 1994. In connection with the plan,
the Company closed 14 underperforming stores in 1995 and
sold one store and expects to close two additional stores in
the second quarter of 1996. During the first quarter of
1996, the Company paid expenses associated with the
operational restructuring as follows:
Payments applied
against
operational
Operational restructuring Operational
restructuring reserve for restructuring
reserve at the 12 weeks ended reserve at
December 30, 1995 March 23, 1996 March 23, 1996
Expenses associated with the
planned store closings,
primarily occupancy costs
from closing date to lease
termination or sublease date $4,860 $ (12) $4,848
Expenses associated with the AWG
transaction, primarily service
and equipment contract
cancellation fees 58 - 58
Estimated severance costs
associated with the AWG
transaction 927 - 927
Legal and consulting fees
associated with the
AWG transaction 25 - 25
Operational restructuring
reserve $5,870 $ (12) $5,858
The separately identifiable revenue and store contribution to
operating profit related to the stores sold to AWG or closed
and expenses related to the warehouse facility are as follows:
12 weeks
ended
March 25,
1995
Sales, net $53,354
Store contribution to
operating profit before
allocation of administrative
and advertising expenses 1,808
Warehouse expenses 2,945
4. Subsequent Events:
On May 13, 1996, the Company filed chapter 11 petitions with
the United States Bankruptcy Court for the District of
Delaware. Simultaneous with the filings of such petitions,
the Company filed a plan of reorganization and a disclosure
statement, which sets forth the terms of a proposed
restructuring of the Company.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales for the first quarter ended March 23, 1996
decreased to $124.4 million, a 30.1% decline over the
corresponding period of 1995. The decrease in net sales was due
primarily to the sale of 29 stores to AWG on April 21, 1995 and
the closing of 14 stores in 1995, 5 of which occurred during the
first quarter of 1995 and the remainder over the balance of 1995.
Comparable store sales decreased by 0.2% compared to the
corresponding period of 1995. The decrease in comparable store
sales was primarily due to higher 1995 general merchandise sales
resulting from certain continuity programs that did not recur in
1996.
Gross profit as a percentage of sales increased to
24.2% in the first quarter of 1996 compared with 23.9% in the
first quarter of 1995. The improvement was primarily due to
higher vendor allowances and rebates, which were lower in 1995
due to the pending sale of the Company's distribution center and
29 stores to AWG. The higher vendor allowances and rebates are
somewhat offset by the higher cost of goods purchased through AWG
versus self-supply.
Selling and administrative expenses increased 0.05% to
22.50% in the first quarter of 1996 from 22.45% in the first
quarter of 1995. This increase was due to higher advertising
expenses and a new retail store lighting program implemented
throughout 1995 and continuing in 1996, offset by lower corporate
office and related administrative expenses.
The Company incurred $1.4 million of financial
restructuring expenses in the first quarter of 1996, primarily in
professional fees.
Interest expense for the first quarter of 1996
decreased to $3.2 million from $4.4 million in the first quarter
of 1995, due primarily to the redemption of $25.0 million of
senior secured notes on June 1, 1995.
Liquidity and Capital Resources
The primary sources of liquidity for the Company's
operations have been borrowings under credit facilities and
internally generated funds. In March 1992, the Company
refinanced its indebtedness by entering into an Indenture with
United States Trust Company of New York, as trustee, pursuant to
which the Company has outstanding as of May 30, 1996, $59.4
million of Series C Senior Secured Fixed Rate Notes due 1999,
$26.1 million of Series D Senior Secured Floating Rate Notes due
1997 and $9.5 Series A Senior Secured Floating Rates Notes due
1997 (collectively the "Senior Notes").
On April 21, 1995, the Company entered into a Revolving
Credit Agreement (the "Revolving Credit Agreement") with National
Bank of Canada, ("NBC"), as agent and as lender, Heller
Financial, Inc., and any other lenders thereafter parties
thereto. The Revolving Credit Agreement permits borrowings up to
$25 million, subject to a borrowing base, for working capital
needs including certain letters of credit.
In December 1995, the Company informed the lenders
under the Revolving Credit Agreement and the trustee for the
Senior Notes that it would be unable to comply with certain year-
end financial maintenance covenants (the Consolidated Fixed
Change Coverage Ratio and Debt-to EBITDA Ratio) contained in the
Revolving Credit Agreement and the Indenture. The Revolving
Credit Agreement lenders and the trustee under the Indenture
(acting at the direction of a majority in principal amount of the
Senior Notes then outstanding) waived compliance by the Company
with these financial covenants through the earlier to occur of
April 15, 1996 and the date on which the Company defaulted on any
of its payment obligations with respect to the Senior Notes.
On March 1, 1996, the Company failed to make the
scheduled interest payment on its Senior Notes in the amount of
approximately $4.5 million. This payment default resulted in a
termination of the December 1995 waiver under the indenture.
Notwithstanding such termination, an ad hoc committee (the
"Committee"), representing approximately 80% of the Company's
outstanding Senior Notes, advised the Company that, so long as
restructuring negotiations between the Company and the Committee
were proceeding, the Committee would not exercise any contractual
or other remedies in response to the interest payment default.
Moreover, the lenders under the Revolving Credit Agreement agreed
that their waiver would continue to be effective through May 20,
1996, notwithstanding such payment default.
On May 13, 1996, the Company filed chapter 11 petitions
with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). Simultaneous with the filing
of such petitions, the Company filed a "pre-arranged" plan of
reorganization (the "Plan") and a disclosure statement, which
sets forth the terms of a proposed restructuring of the Company.
The restructuring is designed to reduce substantially the
Company's debt service obligations and labor costs and to create
a capital and cost structure that will allow the Company to
maintain and enhance the competitive position of its business and
operations. The restructuring was negotiated with, and is
supported by, the lenders under the Company's existing revolving
credit facility, the Committee and the Company's labor unions.
As part of the restructuring, the $95 million of
Homeland's outstanding Senior Notes, plus accrued interest of
approximately $6.6 million, will be canceled and such noteholders
will receive (in the aggregate) $60 million face amount of new
senior subordinated notes and $1.5 million in cash. The new
senior subordinated notes will mature in 2003, bear interest
semi-annually at a rate of 10% per annum and will not be secured.
Additionally, it is anticipated that the noteholders and the
Company's general unsecured creditors will receive approximately
60% and 35%, respectively, of the equity of the reorganized
Holding (assuming total unsecured claims of approximately $63
million, including noteholders's unsecured claims). Holding's
existing equity holders will receive 5% of the new equity, plus
five-year warrants to purchase an additional 5% of such equity.
An integral part of the restructuring is the Company's
previously-announced deal with its labor unions to modify certain
elements of the Company's existing collective bargaining
agreements. The modified collective bargaining agreements will
provide for, among other things, wage and benefit modifications,
the buyout of certain employees and the issuance and purchase of
new equity to a trust acting on behalf of the unionized
employees. The modified collective bargaining agreements are
conditioned on, and will become effective upon, the consummation
of the restructuring.
On May 13, 1996, the Company also entered into a
debtor-in possession lending facility ("DIP Facility"), with its
existing bank group to provide up to $27 million of working
capital financing. This facility has been approved by the
Bankruptcy Court on an interim basis, with a stipulation that the
aggregate principal outstanding indebtedness does not exceed
$21.1 million, until a final approval hearing scheduled on June
7, 1996. Management anticipates that the Bankruptcy Court will
approve the DIP Facility at the June 7, 1996 hearing. Management
also believes that the DIP Facility will be adequate to meet the
Company's working capital requirements while it is operating
under the auspices of the Bankruptcy Court.
Upon the final approval of the Bankruptcy Court, the
DIP Facility will permit the Company to borrow up to the lesser
of $27 million and the Borrowing Base. The borrowings under the
DIP Facility bears interest at a rate equal to the prime rate
announced publicly by NBC from time to time in New York, New York
plus two percent. Interest is payable quarterly in arrears on
the last day of March, June, September and December, commencing
on June 30, 1996. The DIP Facility will mature on the earlier of
(1) one year from the date of filing of the Company's voluntary
petition under Chapter 11 of the United States Federal Bankruptcy
Code, and (2) the effective date of the Plan.
The DIP Facility provides that NBC, on behalf of itself
and as agent for the lenders under the DIP Facility, will have
liens on, and security interests in, all of the pre-petition and
post-petition property of the Company (other than the collateral
under the Indenture), which liens and security interests will
have priority over substantially all other liens on, and security
interests in, the Company's property (other than properly
perfected liens and security interests which existed prior to the
date of filing of the Company's voluntary petition under the
Bankruptcy Code).
The DIP Facility includes certain customary restrictive
covenants, including restrictions on acquisitions, asset
dispositions, capital expenditures, consolidations and mergers,
distributions, divestitures, indebtedness, liens and security
interests and transactions with affiliates. The DIP Facility
also requires the Company to comply with certain financial
maintenance and other covenants. At May 30, 1996, the net unused
and available amount under the DIP Facility was $12.1 million
(assuming the Bankruptcy Court approves the DIP Facility).
On the effective date of the Plan (the "Effective
Date") the Company anticipates that it will enter into a new bank
credit agreement or an amendment and restatement of its existing
credit agreement (the "New Credit Agreement"), the general terms
of which must be approved by the Committee. As of the date
hereof, the Company is in discussions with a number of banks
potentially interested in providing this credit facility,
including the lenders under its existing credit facility. There
can be no assurance, however, that any bank or group of banks
will agree to provide a bank credit facility on terms acceptable
to the Company and the Committee.
The Company anticipates that the New Credit Agreement
would provide for up to $37.5 million in borrowings, including
approximately $27.5 million under a revolving credit facility
(subject to borrowing base requirements) and a $10 million term
loan. Proceeds from the term loan would be used primarily to
fund certain obligations under the modified collective bargaining
agreements and to pay certain transaction expenses relating to
the restructuring. The Company expects that its obligations
under the New Credit Agreement would be secured by a security
interest in, and liens on, substantially all of the Company's
assets and would be guaranteed by Holding.
The Company expects to complete the restructuring by
mid-summer 1996. Management believes the restructuring will have
a favorable effect on the Company's liquidity; however, there can
be no assurance that future operating cash flows will yield
positive net cash flows or that the restructuring will be
successful. If the Company is not able to generate positive cash
flows from its operation or if the restructuring is not
consummated successfully, management believes that this could
have a material adverse effect on the Company's business and the
continuing viability of the Company.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed as
part of this report:
Exhibit No. Description
10uu.3 Ratification and Amendment
Agreement to the $27,000,000
Amended and Restated Revolving
Credit Agreement, dated as of May
10, 1996, among Homeland, Holding,
National Bank of Canada, as Agent
and lender, Heller Financial, Inc.
and any other lenders thereafter
parties thereto.
27 Financial Data Schedule.
(b) Report on Form 8-K: The following report on Form
8-K was filed during the quarter ended March 23,
1996.
Date Description
March 8, 1996 Interest Payment Default and
Waiver Agreement.
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.
HOMELAND HOLDING CORPORATION
Date: June 4, 1996 By: /s/ James A. Demme
James A. Demme, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Date: June 4, 1996 By: /s/ Larry W. Kordisch
Larry W. Kordisch, Executive
Vice President/Finance,
Treasurer, Chief Financial
Officer and Secretary
(Principal Financial Officer)
Date: June 4, 1996 By: /s/ Terry M. Marczewski
Terry M. Marczewski, Chief
Accounting Officer, Assistant
Treasurer and Assistant
Secretary (Principal
Accounting Officer)
RATIFICATION AND AMENDMENT AGREEMENT
This RATIFICATION AND AMENDMENT AGREEMENT (this
"Ratification Agreement") is entered into as of May 10, 1996, by
and among the following parties:
(a) HOMELAND STORES, INC., a Delaware corporation
("Borrower"), as Debtor and Debtor-in-Possession;
(b) HOMELAND HOLDING CORPORATION, a Delaware
corporation ("Parent"), as Debtor and Debtor-in-Possession;
(Borrower and Parent are sometimes hereinafter collectively
referred to as "Debtors," and individually, as a "Debtor");
(c) NATIONAL BANK OF CANADA ("NBC");
(d) HELLER FINANCIAL, INC. ("Heller");
(NBC and Heller are sometimes hereinafter collectively
referred to as "Lenders," and individually, as a "Lender");
and
(e) NBC, in its capacity as agent for Lenders
("Agent").
W I T N E S S E T H:
WHEREAS, Debtors have commenced separate cases under Chapter
11 of the Federal Bankruptcy Code (as hereinafter defined), in
the United States Bankruptcy Court for the District of Delaware;
and Debtors have retained possession of their respective assets
and are authorized under the Federal Bankruptcy Code to continue
the operation of their businesses as debtors-in-possession; and
WHEREAS, prior to the commencement of the Cases (as
hereinafter defined), Lenders made loans and advances to Borrower
secured by certain assets and properties of Borrower and
guaranteed by Parent as set forth in the Loan Documents (as
hereinafter defined); and
WHEREAS, the Bankruptcy Court has entered its Interim
Financing Order (as hereinafter defined) for a period of interim
financing to the extent necessary to prevent immediate and
irreparable harm through the date of the effectiveness of the
Final Financing Order (as hereinafter defined), pursuant to which
Lenders may make post-petition loans and advances to Borrower as
set forth in the Interim Financing Order and the Loan Documents;
and
WHEREAS, the Interim Financing Order provides that, as a
condition to the making of such post-petition loans and advances,
Debtors shall execute and deliver this Ratification Agreement;
and
WHEREAS, Debtors desire to reaffirm their respective
obligations pursuant to the Loan Documents and acknowledge their
continuing liabilities to Lenders thereunder in order to induce
Lenders to make such post-petition loans and advances to
Borrower.
NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreements contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Agent, Lenders and Debtors mutually
covenant, warrant and agree as follows:
1. DEFINITIONS.
1.1 Additional Definitions. As used herein, the following
terms shall have the respective meanings given to them below, and
the Loan Documents shall be deemed and are hereby amended to
include, in addition to and not in limitation of, the other
defined terms used therein (except where the definitions set
forth below are identical to defined terms used therein, in which
case the definitions set forth below shall be inserted in place
of the corresponding defined terms therein), each of the
following definitions:
(a) "Agreement" shall mean that certain Amended and
Restated Revolving Credit Agreement, dated as of April 21, 1995,
by and among Borrower, Parent, Lenders and Agent, as amended by
the Ratification Agreement and as further amended, modified,
supplemented or restated from time to time.
(b) "Bankruptcy Court" shall mean the United States
Bankruptcy Court for the District of Delaware.
(c) "Borrower Case" shall mean the Chapter 11 case of
Borrower under the Federal Bankruptcy Code pending in the
Bankruptcy Court and captioned In re Homeland Stores, Inc.
(d) "Cases" shall mean, collectively, the Borrower
Case and the Parent Case.
(e) "Collateral" shall mean, collectively, the Pre-
Petition Collateral and the Post-Petition Collateral.
(f) "Coupons" of any Person shall mean any and all
parts of an advertisement entitling the bearer to certain stated
benefits, at a minimum consisting of a cash refund, now or
hereafter acquired, intended for redemption for cash, by the
issuer of such coupons, in the ordinary course of business of
such Person, of every kind and description.
(g) "Eligible Coupons" shall mean only such Coupons
of Borrower as the Agent, in its reasonable discretion, shall
from time to time elect to consider Eligible Coupons for purposes
of this Agreement. The value of such Coupons (the "Net Amount of
Eligible Coupons") shall be determined at any time by reference
to the then most recent Borrowing Base Certificate delivered
under Section 9.1(k) hereof, which Borrowing Base Certificate
shall reflect the value of such Coupons at their book value
determined in accordance with GAAP (on a basis consistent with
the accounting method used by Borrower as of the Closing Date).
Criteria for eligibility may be fixed and revised from time to
time by the Agent in its reasonable discretion. By way of
example only, and without limiting the discretion of the Agent to
consider any Coupons not to be Eligible Coupons, the Agent may
consider any of the following classes of Coupons not to be
Eligible Coupons:
(i) Coupons subject to any Lien (whether or not
any such Lien is permitted under this Agreement), other than
those granted in favor of the Agent;
(ii) Coupons which are obsolete, damaged, expired,
unredeemable or otherwise unfit for return to the issuer for
redemption for cash in accordance with the face and tenor
thereof;
(iii) Coupons which are prohibited,
restricted, void or taxed under the law of the jurisdiction
that is applicable to the transaction that otherwise would
give rise to an Eligible Coupon;
(iv) Coupons not in the possession and control of
Borrower or the Processing Agent;
(v) Coupons in respect of which the relevant
Security Agreement, after giving effect to the related
filings of financing statements that have then been made, if
any, does not or has ceased to create a valid and perfected
first priority Lien in favor of the Lenders securing the
Lender Debt; and
(vi) Coupons, to the extent such Coupons are
subject to a contractual or statutory Lien (whether or not
such Lien is permitted under this Agreement) in favor of any
third Person.
(h) "Eligible Pharmaceutical Inventory" shall mean
only such Pharmaceutical Inventory of Borrower as the Agent, in
its reasonable discretion, shall from time to time elect to
consider Eligible Pharmaceutical Inventory for purposes of this
Agreement. The value of such Pharmaceutical Inventory (the "Net
Amount of Eligible Pharmaceutical Inventory") shall be determined
at any time by reference to the then most recent Borrowing Base
Certificate delivered under Section 9.1(k) hereof, which
Borrowing Base Certificate shall reflect the value of
Pharmaceutical Inventory at its book value determined in
accordance with GAAP (on a basis consistent with the accounting
method used by Borrower as of the Closing Date, which includes,
without limitation, first-in, first-out inventory reporting).
Criteria for eligibility may be fixed and revised from time to
time by the Agent in its reasonable discretion. By way of
example only, and without limiting the discretion of the Agent to
consider any Pharmaceutical Inventory not to be Eligible
Pharmaceutical Inventory, the Agent may consider any of the
following classes of Pharmaceutical Inventory not to be Eligible
Pharmaceutical Inventory:
(i) Pharmaceutical Inventory subject to any Lien
(whether or not any such Lien is permitted under this
Agreement), other than those granted in favor of the Agent;
(ii) Pharmaceutical Inventory financed by bankers'
acceptances, but only until the payment in full of the
related bankers' acceptances by such Person;
(iii) Pharmaceutical Inventory which is
obsolete, damaged, unsalable or otherwise unfit for use;
(iv) Pharmaceutical Inventory located on any
premises not owned or leased by Borrower;
(v) Pharmaceutical Inventory in respect of which
the relevant Security Agreement, after giving effect to the
related filings of financing statements that have then been
made, if any, does not or has ceased to create a valid and
perfected first priority Lien in favor of the Lenders
securing the Lender Debt;
(vi) Pharmaceutical Inventory comprised of
consigned Pharmaceutical Inventory;
(vii) Pharmaceutical Inventory at a location
leased by Borrower (A) for which Agent has not received, a
waiver in form and substance satisfactory to Agent, in its
sole discretion, duly executed by the landlord of such
location and (B) to the extent such Pharmaceutical Inventory
is subject to a contractual or statutory Lien (whether or
not such Lien is permitted under this Agreement) in favor of
such landlord; and
(viii) Pharmaceutical Inventory comprised of
"narcotics," as such term is defined in the regulations
promulgated by the United States Food and Drug
Administration and codified at 21 C.F.R. 1308.02(f).
(i) "Eligible Pharmaceutical Receivables" shall mean,
at the time of calculation, bona fide outstanding Pharmaceutical
Receivables:
(i) upon which the Agent has a first
priority perfected security interest;
(ii) as to which the obligor thereof has been
directed by Borrower (if so directed to do so by the
Agent) to make payment to a Pharmaceutical Collection
Account;
(iii) which arose in the ordinary course
of Borrower's business; and
(iv) as to which all applicable services have
been duly performed or as to which all goods have been
delivered to the account debtor.
The term "Eligible Pharmaceutical Receivables" shall
not include any Pharmaceutical Receivable:
(a) with respect to which any of the
representations and warranties contained in Section
12.20 hereof are not or have ceased to be true,
complete and correct;
(b) with respect to which, in whole or in part, a
check, promissory note, draft, trade acceptance or
other instrument for the payment of money has been
received, presented for payment and returned
uncollected for any reason;
(c) as to which Borrower has extended the time
for payment without the consent of the Agent;
(d) owed by an account debtor which:
(i) does not maintain its chief executive
office in the United States;
(ii) is not organized under the laws of the
United States or any State thereof; or
(iii) has taken any action, or suffered
any event to occur, of the type described in paragraph
(f) or (g) of Section 11.1 hereof;
(e) owed by an account debtor which is (i) an
Affiliate of a Credit Party, or (ii) except for a
Pharmaceutical Receivable owing from a
Medicare/Medicaid Account Debtor, a federal or state
government or an agency or instrumentality thereof;
(f) except for a Pharmaceutical Receivable owing
from a Medicare/Medicaid Account Debtor, as to which
either the perfection, enforceability, or validity of
the security interest in such Pharmaceutical
Receivable, or the Agent's right or ability to obtain
direct payment to the Agent of the proceeds of such
Pharmaceutical Receivable, is governed by any federal,
state, or local statutory requirements other than those
of the UCC;
(g) except for a Pharmaceutical Receivable owing
from a Medicare/Medicaid Account Debtor, owed by an
account debtor to which Borrower is indebted in any
way, or which is subject to any right of set-off by the
account debtor; or if the account debtor thereon has
disputed liability or acknowledged its inability to pay
or made any claim with respect to any other
Pharmaceutical Receivable due from such account debtor;
but in each such case only to the extent of such
indebtedness, set-off, dispute, or claim;
(h) if such Pharmaceutical Receivable or the sale
or provision of goods or services giving rise thereto
contravenes any applicable law, rule or regulation,
including any law, rule or regulation relating to truth
in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection
practices or privacy;
(i) owed by a Third Party Payor or a
Medicare/Medicaid Account Debtor if such Pharmaceutical
Receivable:
(i) is subject to any limitation which would
make payment by such Third Party Payor or
Medicare/Medicaid Account Debtor conditional, to the
extent the payment of such Pharmaceutical Receivable is
conditional;
(ii) has not been billed or forwarded to such
Third Party Payor or Medicare/Medicaid Account Debtor
for payment in accordance, in all material respects,
with applicable laws and in compliance, in all material
respects, with any and all requisite procedures,
requirements and regulations governing payment by such
Third Party Payor or Medicare/Medicaid Account Debtor,
(iii) if payable by a Third Party Payor,
is not properly payable directly to Borrower or by such
Third Party Payor in accordance with the terms and
conditions of a validly existing and legally binding
certification, participation agreement, provider
agreement or other written contract;
(iv) if payable by a Medicare/Medicaid
Account Debtor, is not properly payable directly to
Borrower or by such Medicare/Medicaid Account Debtor in
accordance with the terms and conditions of any
applicable certification, agreement, contract, law or
regulation, if any; or
(v) remains unpaid for more than 60 days
from the date a claim is properly made to the Third
Party Payor or Medicare/Medicaid Account Debtor;
(j) payable in part (but not in whole) by a Third
Party Payor or Medicare/Medicaid Account Debtor, to the
extent such Pharmaceutical Receivable exceeds the
portion payable by such Third Party Payor or
Medicare/Medicaid Account Debtor;
(k) payable by any individual beneficiary and not
a Third Party Payor or Medicare/Medicaid Account
Debtor, to the extent the portion of such
Pharmaceutical Receivable is payable by the individual
beneficiary; or
(j) if the Agent (A) believes in its reasonable
discretion that the prospect of collection of such
Pharmaceutical Receivable is impaired for any reason or
that the Pharmaceutical Receivable may not be paid by
reason of the account debtor's financial inability to
pay, or (B) is not reasonably satisfied with the credit
standing of the account debtor with respect to the
amount of Pharmaceutical Receivables payable to
Borrower by such account debtor.
(j) "Federal Bankruptcy Code" shall mean the United
States Bankruptcy Code, 11 U.S.C. 101, et seq., in effect as
of the date hereof, together with all rules, regulations and
interpretations thereunder or related thereto, as amended,
modified, supplemented or recodified from time to time.
(k) "Final Financing Order" shall mean the Order
Authorizing Final Financing, Granting Senior Liens and Priority
Administrative Expense Status, Providing for Adequate Protection,
Modifying the Automatic Stay, and Authorizing Debtors to Enter
into Agreements with Lenders and Agent, to be entered by the
Bankruptcy Court subsequent to entry of the Interim Financing
Order, as amended, modified, supplemented or extended from time
to time.
(l) "Financing Orders" shall mean the Interim
Financing Order and the Final Financing Order, as amended,
modified, supplemented or extended from time to time.
(m) "Interim Financing Order" shall mean the Order
Authorizing Interim Financing, Granting Senior Liens and Priority
Administrative Expense Status, Providing for Adequate Protection,
Modifying the Automatic Stay, and Authorizing Debtors to Enter
into Agreements with Lenders and Agent, which the parties
contemplate will be entered by the Bankruptcy Court on or about
May 13, 1996, as amended, modified, supplemented or extended from
time to time.
(n) "Lender Debt" shall mean, collectively, the Pre-
Petition Lender Debt and the Post-Petition Lender Debt.
(o) "Letter Agreement" shall mean that certain Letter
Agreement, dated as of April 26, 1995, by and among Borrower,
Parent and Agent, pertaining to the establishment of a reserve
against availability under the Borrowing Base, as amended by the
Ratification Agreement and as further amended, modified,
supplemented or restated from time to time.
(p) "Loan Documents" shall mean, collectively, the
Agreement, each Security Document, each Guaranty, the Notes, each
Letter of Credit Agreement, each Borrower's Certificate, each
Borrowing Base Certificate, each Landlord's Certificate, each
Collection Account Agreement, each Concentration Account
Agreement, each Lock-Box Agreement, each Asset Sale Account
Agreement, each Pharmaceutical Collection Account Agreement, the
Intercreditor Agreement, the Letter Agreement, the Financing
Orders, and each other document or instrument now or hereafter
delivered to Agent or any Lender by any Credit Party pursuant to
or in connection herewith or therewith including, without
limitation, the agreements listed on Exhibit "A" attached hereto,
as each of the same are amended by, and ratified, assumed and
adopted by Debtors pursuant to the terms of, the Ratification
Agreement and as each of the same are further amended, modified,
supplemented, extended, renewed, restated or replaced from time
to time.
(q) "Medicare/Medicaid Account Debtor" shall mean the
following Persons who are or may become obligated for payment of
any Pharmaceutical Receivables: (i) the United States of America
acting under the Medicare Program established pursuant to the
Social Security Act, (ii) any State acting pursuant to a health
plan adopted pursuant to Title XIX of the Social Security Act, or
(iii) any agent for any of the foregoing.
(r) "Net Amount of Eligible Coupons" shall have the
meaning set forth in the definition of Eligible Coupons.
(s) "Net Amount of Eligible Pharmaceutical Inventory"
shall have the meaning set forth in the definition of Eligible
Pharmaceutical Inventory.
(t) "Net Amount of Eligible Pharmaceutical
Receivables" shall have the meaning set forth in the definition
of Eligible Pharmaceutical Receivables.
(u) "Parent Case" shall mean the Chapter 11 case of
Parent under the Federal Bankruptcy Code pending in the
Bankruptcy Court and captioned In re Homeland Holding
Corporation.
(v) "Petition Date" shall mean the specific time on
this date of the commencement of the Cases, which the parties
contemplate, as of the date of the Ratification Agreement, will
be 4:00 p.m., EST, on Monday, May 13, 1996.
(w) "Pharmaceutical Collection Account" shall mean a
deposit account of Borrower, established pursuant to Section
6.18(g) hereof, into which only cash proceeds of Pharmaceutical
Receivables shall be deposited, all amounts deposited in which
and all claims arising under which have been pledged to the Agent
for the benefit of the Agent and the Lenders pursuant to a
Pharmaceutical Collection Account Agreement; provided, however,
that Borrower shall have access to such account.
(x) "Pharmaceutical Collection Account Agreement"
shall have the meaning set forth in Section 6.18(e) hereof.
(y) "Pharmaceutical Inventory" of any Person shall
mean any and all inventory and stock of prescription products,
now or hereafter acquired, intended for sale or lease or to be
furnished under contracts of service in the ordinary course of
business of such Person, of every kind and description.
(z) "Pharmaceutical Receivables" shall mean and
include all accounts, contract rights, instruments, documents,
chattel paper and general intangibles, whether secured or
unsecured, now existing or hereafter created, of the Credit
Parties, whether or not specifically sold or assigned to the
Agent or the Lenders, and arising from a sale or other
disposition of Pharmaceutical Inventory by Borrower in the
ordinary course of Borrower's business including, without
limitation, all rights to receive payments from Third Party
Payors and Medicare/Medicaid Account Debtors and any and all
contracts related to payment by such Third Party Payors and
Medicare/Medicaid Account Debtors.
(aa) "Post-Petition Collateral" shall mean all property
of Borrower and Parent and their respective bankruptcy estates,
existing on and acquired, created or arising after the Petition
Date (to the extent it is not Pre-Petition Collateral) wherever
located, of any kind or nature, in which a Lien has been granted
to Agent or Lenders as security for the Post-Petition Lender
Debt, or any guarantee thereof, pursuant to the Loan Documents or
either of the Financing Orders or any other order entered or
issued by the Bankruptcy Court, and shall include, without
limitation, the following personal property of Borrower and
Parent and their respective bankruptcy estates, existing on and
acquired, created or arising after the Petition Date (to the
extent it is not Pre-Petition Collateral)and all products and
proceeds thereof (including, without limitation, claims of
Borrower and Parent against third parties for loss or damage to
such property), including all accessions thereto, substitutions
and replacements thereof, and wherever located:
(i) Inventory. All inventory in all of its
forms, wherever located, including but not limited to:
(A) all inventory, raw materials, work in
process and finished products intended for sale or
lease or to be furnished under contracts of service in
the ordinary course of business, of every kind and
description, including, without limitation, all
Pharmaceutical Inventory;
(B) goods in which Borrower has or may
acquire an interest in mass or a joint or other
interest or right of any kind (including, without
limitation, goods in which Borrower has any interest or
right as consignee); and
(C) goods which are returned to or
repossessed by Borrower, and all accessions thereto and
products thereof and documents (including without
limitation, all warehouse receipts, negotiable
documents, bills of lading and other title documents)
therefor (any and all such inventory, accessions,
products and documents being, for the purpose of this
definition of "Post-Petition Collateral," the
"Inventory").
(ii) Accounts. All accounts and contract rights
and other obligations of any kind, whether secured or
unsecured, to the extent arising from the sale or lease of
Inventory or the providing of services by Borrower and
including, without limitation, all Pharmaceutical
Receivables, and any note or other document or instrument
evidencing any such account or contract right or other
obligation (the "Accounts").
(iii) Special Accounts. All of Borrower's
lock-box accounts, collection accounts, concentration
accounts and asset sale accounts containing cash proceeds of
the Post-Petition Collateral, all funds hereafter held
therein, all present or future claims, demands and choses in
action in respect thereof and all certificates and
instruments, if any, from time to time representing or
evidencing such accounts and all investments (other than
investments which constitute Equipment (as defined below),
real estate and fixtures of Borrower) made therefrom and all
securities representing or evidencing such investments (for
the purpose of this definition of "Post-Petition
Collateral," the "Special Accounts").
(iv) Records. All of Borrower's cash registers,
scanning systems, books and records, including, without
limitation, computer records, disks, tapes and other media
on which any information relating to Inventory, inventory
control systems or the Accounts is stored or recorded and
all computer software, management information systems and
other systems and copies of every kind thereof relating to
Inventory, inventory controls or the Accounts and all
customer lists (for the purpose of this definition of "Post-
Petition Collateral," collectively, the "Records and Other
Property").
(v) Proceeds.
(A) All proceeds of every kind or nature
(specifically excluding Equipment (as defined below),
real estate and fixtures of Borrower) of any and all of
the foregoing Post-Petition Collateral (including,
without limitation, all checks, money, drafts,
instruments and other evidences of payment and all
proceeds of such property which constitute property of
the types described in clauses (i), (ii), (iii) or (iv)
above, and property of such type or types acquired with
any such proceeds), and
(B) to the extent not otherwise included,
all (1) payments under insurance or any indemnity,
warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the
foregoing Post-Petition Collateral, and (2) cash
proceeds of the foregoing Post-Petition Collateral
(collectively, the "Proceeds").
(vi) Avoidance Actions. All proceeds of claims of
Borrower or Parent for recovery or avoidance, as the case
may be, of obligations, transfers of property, or interests
in property, offsets, lawful currency or its equivalents,
and other types or kinds of property (or the value thereof)
recoverable or avoidable under Chapter 5 of the Federal
Bankruptcy Code (collectively, the "Avoidance Actions").
(vii) Excluded Collateral. Notwithstanding
the foregoing, the Post-Petition Collateral shall be limited
to Inventory, Accounts, Special Accounts, Records and Other
Property, Proceeds and Avoidance Actions, and shall exclude
all of the following, except to the extent any of the
following constitutes Inventory, Accounts, Special Accounts,
Records and Other Property, Proceeds or Avoidance Actions:
(A) all of Borrower's intellectual property,
including, without limitation, patents, patent
applications, trademarks, trademark applications,
service marks, service mark applications, tradenames,
technical knowledge and processes, formal or informal
licensing arrangements, blueprints, technical
specifications, computer software, copyrights,
copyright applications and other trade secrets, and all
embodiments thereof and rights thereto and all of
Borrower's rights to use the patents, trademarks,
service marks or other property of the aforesaid nature
of other persons now or hereafter licensed to Borrower,
together with the goodwill of the business symbolized
by or connected with Borrower's trademarks, service
marks, licenses and the other rights under this
section;
(B) all of Borrower's general intangibles,
instruments, securities, credits, claims, demands,
documents, letters of credit and letter of credit
proceeds, chattel paper, documents of title,
certificates of title, certificates of deposit,
warehouse receipts, bills of lading, leases which are
permitted to be assigned or pledged, tax refund claims,
contract rights which are permitted to be assigned or
pledged, customer lists, books and records (including,
without limitation, software, data bases, materials,
books, records, magnetic tapes and disks and other
storage media) and other rights (including all rights
to the payment of money);
(C) all of Borrower's equipment, including,
without limitation, machinery, equipment, office
equipment and supplies, computers and related
equipment, cash registers, scanning systems, furniture,
furnishings, tools, tooling, jigs, dies, fixtures,
manufacturing implements, fork lifts, trucks, trailers,
motor vehicles, and other equipment (the foregoing,
excluding cash registers and scanning systems, being
the "Equipment");
(D) all real properties owned or leased by
Borrower which have been mortgaged or pledged to
Trustee as security for the performance of the
obligations of Borrower and Parent under the Indenture
and the related security documents; and
(E) all items described in subsections (A),
(B), (C) and (D) of this clause (vii), whether now
owned or hereafter at any time acquired by Borrower and
wherever located, and includes all replacements,
additions, accessions, substitutions, repairs, proceeds
and products relating thereto or therefrom, and all
documents, ledger sheets and files of Borrower relating
thereto. Proceeds hereunder include (1) whatever is now
or hereafter received by
Borrower upon the sale, exchange, collection or other disposition
of any item of Excluded Collateral; (2) whatever is now
or hereafter acquired by Borrower with any proceeds of
Excluded Collateral hereunder; and (3) any payments
under insurance or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Excluded
Collateral and shall exclude property of the types
described in clauses (i), (ii), (iii) and (vi) above.
(bb) "Post-Petition Lender Debt" shall mean and include
all Advances and all other Indebtedness owing at any time by
Borrower, any one or more of its Subsidiaries or any other Credit
Party to Agent or any one or more of Lenders (including, without
limitation, all principal and interest, Letter of Credit
reimbursement obligations, fees, indemnities, costs, charges and
other amounts payable under the Letter of Credit Agreements or in
respect of the Letters of Credit or under any of the other Loan
Documents), arising on and after the Petition Date and whether
arising on or after the conversion or dismissal of the Cases (or
either of them), or before, during and after the confirmation of
any plan of reorganization in the Cases (or either of them), and
whether arising under or in connection with the Ratification
Agreement, the Financing Orders, or any of the other Loan
Documents, whether absolute or contingent, secured or unsecured,
due or not, and whether arising by operation of law or otherwise,
and all interest and other charges thereon.
(cc) "Pre-Petition Collateral" shall mean all property
and interests therein (tangible and intangible) in which a Lien
has been granted to Agent or Lenders by Borrower, Parent, any
other Credit Parties or any Subsidiary thereof as security for
the Lender Debt or any guarantee thereof, including, without
limitation, any cash collateral for undrawn Letters of Credit
required pursuant to the Agreement or any of the other Loan
Documents, as provided in the Loan Documents immediately prior to
the Petition Date.
(dd) "Pre-Petition Lender Debt" shall mean and include
all Advances and all other Indebtedness owing at any time by
Borrower, any one or more of its Subsidiaries or any other Credit
Party to Agent or any one or more of Lenders (including, without
limitation, all principal and interest, Letter of Credit
reimbursement obligations, fees, indemnities, costs, charges and
other amounts payable under the Letter of Credit Agreements or in
respect of the Letters of Credit or under any of the other Loan
Documents), arising before the Petition Date under or in
connection with any of the Loan Documents, whether absolute or
contingent, secured or unsecured, due or not, and whether arising
by operation of law or otherwise, and all interest and other
charges thereon.
(ee) "Processing Agent" shall mean International Data,
L.L.C., an Indiana limited liability company, Borrower's agent
for processing of Coupons pursuant to the terms of the Processing
Agreement.
(ff) "Processing Agreement" shall mean that certain
Coupon Processing Service Agreement (Cash Advance Program) dated
as of September 18, 1995, between the Processing Agent and
Borrower, as amended, modified, supplemented or restated from
time to time.
(gg) "Ratification Agreement" shall mean that certain
Ratification and Amendment Agreement, dated as of May 10, 1996,
by and among Borrower, Parent, Lenders and Agent.
(hh) "Third Party Payor" shall mean any insurance
company third-party payor or managed care payor that makes
payment for the provision of goods or services related to medical
treatment provided to an individual, including, but not limited
to, any commercial payor, hospital or pharmacy.
1.2 Effect of Additional Definitions.
(a) All references to the term "Agreement" in any of
the Loan Documents are hereby amended to mean the "Agreement" as
defined in this Ratification Agreement.
(b) All references to the term "Collateral" or any
other term referring to the security for the Pre-Petition Lender
Debt in any of the Loan Documents are hereby amended to mean the
"Collateral" as defined in this Ratification Agreement.
(c) All references to the term "Lender Debt" in any of
the Loan Documents are hereby amended to mean the "Lender Debt"
as defined in this Ratification Agreement.
(d) All references to the term "Loan Documents" in any
of the Loan Documents are hereby amended to mean the "Loan
Documents" as defined in this Ratification Agreement.
(e) All references to Borrower in any of the Loan
Documents (including, without limitation, the terms "Borrower,"
"Grantor," "Customer," "Company," "Homeland" or "Debtor") are
hereby amended to mean "Borrower" as defined in the preamble to
this Ratification Agreement, and each of Borrower's successors
and assigns including, without limitation, any trustee or other
fiduciary hereafter appointed as its legal representative or with
respect to the property of Borrower's estate, whether under
Chapter 11 of the Federal Bankruptcy Code or any subsequent
Chapter 7 case, and its successor upon conclusion of the Borrower
Case.
(f) All references to Parent in any of the Loan
Documents (including, without limitation, the terms "Parent,"
"Guarantor," "Holding" or "Debtor") are hereby amended to mean
"Parent" as defined in the preamble to this Ratification
Agreement, and each of Parent's successors and assigns including,
without limitation, any trustee or other fiduciary hereafter
appointed as its legal representative or with respect to the
property of Parent's estate, whether under Chapter 11 of the
Federal Bankruptcy Code or any subsequent Chapter 7 case, and its
successor upon conclusion of the Parent Case.
1.3 Interpretation.
(a) For purposes of this Agreement, all capitalized
terms used and not otherwise defined or amended herein shall have
the respective meanings assigned to such terms in the Agreement.
(b) All references to any term in the singular shall
include the plural and all references to any term in the plural
shall include the singular.
(c) All terms not specifically defined herein which
are defined in the UCC shall have the meaning set forth therein.
2. ACKNOWLEDGMENT.
2.1 Pre-Petition Obligations. Debtors hereby acknowledge,
confirm and agree that Debtors are indebted to Agent and Lenders
for the Pre-Petition Lender Debt, as of May 13, 1996, in respect
of the Advances made pursuant to the Loan Documents in the
principal amount of $14,138,461.98 (approximately $3,781,461.98
representing unpaid principal on borrowings and approximately $
10,357,000.00 representing unfunded obligations under standby
letters of credit and documentary letters of credit), together
with interest accrued and accruing thereon, and costs, expenses,
fees (including attorneys' fees) and other charges now or
hereafter owed by Debtors to Agent and Lenders, all of which are
unconditionally owing by Debtors to Agent and Lenders, without
offset, defense or counterclaim of any kind, nature and
description whatsoever.
2.2 Acknowledgment of Security Interests. Debtors hereby
acknowledge, confirm and agree that Agent and Lenders have and
shall continue to have valid, enforceable and perfected first
priority and senior Liens upon and security interests in all Pre-
Petition Collateral heretofore granted to Agent pursuant to the
Loan Documents as in effect immediately prior to the Petition
Date to secure all of the Lender Debt, as well as valid and
enforceable first priority and senior Liens upon and in all Post-
Petition Collateral granted to Agent and the Lenders under the
Financing Orders or hereunder or under any of the other Loan
Documents or otherwise granted to or held by Agent for the
benefit of itself and Lenders to secure the Post-Petition Lender
Debt.
2.3 Binding Effect of Documents. Each Debtor hereby
acknowledges, confirms and agrees that: (a) each of the Loan
Documents to which such Debtor is a party has been duly executed
and delivered to Agent and Lenders by such Debtor and is in full
force and effect as of the date hereof, (b) the agreements and
obligations of such Debtor contained in the Loan Documents
constitute the legal, valid and binding obligations of such
Debtor, and such Debtor has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (c)
Agent and Lenders are and shall be entitled to all of the rights,
remedies and benefits provided for in the Loan Documents and the
Financing Orders.
3. ADOPTION AND RATIFICATION.
Each Debtor hereby (a) ratifies, assumes, adopts and agrees
to be bound by the Loan Documents, and (b) agrees to pay all of
the Lender Debt in accordance with the terms of the Loan
Documents and the Financing Orders. All of the Loan Documents
are hereby incorporated herein by reference and hereby are and
shall be deemed adopted and assumed in full by each Debtor, as
Debtor and Debtor-in-Possession, and considered as agreements
among Debtors, Agent and Lenders. Each Debtor hereby ratifies,
affirms and confirms all of the terms and conditions of the Loan
Documents, as amended and supplemented pursuant hereto and
pursuant to the Interim Financing Order, and agrees to be fully
bound, as Debtor and Debtor-in-Possession, by the terms of the
Loan Documents to which such Debtor is a party.
4. GRANT OF SECURITY INTEREST.
As security for the prompt performance, observance and
payment in full of all of the Lender Debt, Debtors, as Debtors-in-
Possession, hereby grant, pledge and assign to Agent, for its
benefit and the ratable benefit of Lenders, and also confirm,
reaffirm and restate the prior grant to Agent, for its benefit
and the ratable benefit of Lenders, of, a continuing security
interest in and Liens upon, and rights of setoff against, all of
the Collateral, provided, however, that, in any event, the
Agent's and the Lenders' security interests in and Liens upon the
Pre-Petition Collateral shall secure the Lender Debt, and the
Agent's and the Lenders' security interests in and Liens upon the
Post-Petition Collateral shall secure only the Post-Petition
Lender Debt. All Security Documents and other Loan Documents are
hereby modified and amended as necessary to effectuate the
foregoing grant, pledge and assignment of, and confirmation,
reaffirmation and restatement of, a continuing security interest
in and Liens upon the Collateral and the other modifications
effected herein.
5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
In addition to the continuing representations, warranties
and covenants heretofore and hereafter made by Debtors to Agent
and Lenders, whether pursuant to the Loan Documents or otherwise,
and not in limitation thereof, Debtors hereby represent and
warrant to, and covenant with, Agent and Lenders as follows (all
of which representations, warranties and covenants shall survive
the execution and delivery of this Ratification Agreement and the
material truth and material accuracy of which, or compliance with
which, representations, warranties and covenants shall be a
continuing condition of the making of Advances by Lenders):
5.1 Interim Financing Order. The Interim Financing Order
has been duly entered, is valid, subsisting and continuing, and
has not been vacated, modified, reversed on appeal, or vacated or
modified by any order of the Bankruptcy Court, and is not subject
to any pending appeal or stay.
5.2 Use of Proceeds. All Advances provided by Lenders to
Borrower pursuant to the Financing Orders, the Loan Documents or
otherwise, shall be used by the Borrower for Borrower's working
capital needs and for other general corporate purposes of
Borrower consistent with the terms of the Financing Orders and
the Loan Documents.
5.3 Other Indebtedness. Neither Debtors nor any guarantor,
endorser or other Person liable for the Lender Debt is in default
in the payment of any amounts at any time due on any material
Indebtedness owed by Debtors or in the performance of any other
material terms or covenants of any evidence of such Indebtedness
or of any mortgage, security agreement, indenture, pledge or
other agreement relating thereto or securing such Indebtedness,
except for defaults arising as a result of (i) the failure of
Borrower to make (A) the interest payment on the Senior Notes due
March 1, 1996, (B) the remaining payments due to K-C Computer
Systems, Inc. pursuant to the terms of that certain Agreement
dated October 10, 1991, as amended, between Borrower and K-C
Computer Systems, Inc., or (C) certain rental and tax payments
due with respect to certain store locations as more specifically
described on Exhibit "B" attached hereto; (ii) Borrower's failure
timely to deliver to Agent and Lenders the unqualified audited
year-end financial statements for Fiscal Year 1995 required to be
delivered pursuant to Section 9.1(c) of the Agreement; (iii)
Borrower's failure to comply with certain financial covenants
under the Agreement; or (iv) the filing of the Cases.
5.4 Final Financing Order. Upon entry of the Final
Financing Order, the Final Financing Order will have been duly
entered, and will be valid, subsisting and continuing, and will
not be subject to any pending appeal or stay.
6. CLOSING FEE.
Debtors shall pay to Lenders the following:
(i) a closing fee in an amount equal to $270,000, which
represents an amount equal to 1.00% of the Revolving Credit
Facility Commitment, payable simultaneously with the
execution hereof (to the extent not paid prior to the
execution hereof), which fee was fully earned as of the date
of that certain Commitment Letter among Debtors, Lenders and
the Agent, dated May 10, 1996, plus
(ii) if the effective date of the Debtors' plan of
reorganization shall not have occurred on or before the date
which is one hundred eighty (180) days following the
Petition Date, an additional closing fee in an amount up to
$135,000, which represents an amount equal to .50% of the
Revolving Credit Facility Commitment, payable in six (6)
consecutive monthly installments of $22,500, each, the first
such installment being due and payable on the 181st day
following the Petition Date, and the remaining installments
being due and payable until the earlier of the effective
date of the plan of reorganization of the Cases or until the
$135,000 additional closing fee has been paid in full; it
being acknowledged that if the effective date of the plan of
reorganization of the Cases occurs prior to any of the
scheduled installments for payment of the full $135,000,
then such remaining scheduled installments will not be due.
The foregoing closing fees are in addition to, and not in
substitution of, any fees payable by Debtors pursuant to the
terms of the Agreement, as such terms existed prior to the
effectiveness of this Ratification Agreement, including
specifically, but without limitation, the portion of the closing
fee for the closing of the Agreement that was paid on April 21,
1996, pursuant to Section 3.8 of the Agreement.
7. AMENDMENTS.
7.1 Amendments to Definitions. The definitions set forth
in Section 1.1 of the Agreement are amended as follows:
(a) The definition of "Base Rate Margin" in Section
1.1 of the Agreement is hereby deleted in its entirety and the
following new definition inserted in its place:
"`Base Rate Margin' shall mean two percent
(2.00%)."
(b) The definition of "Borrowing Base" in Section 1.1
of the Agreement is hereby deleted in its entirety and the
following new definition inserted in its place:
"`Borrowing Base' shall mean, as of any time, an amount
equal to the sum of the following:
(a) sixty-five percent (65%) of the Net
Amount of Eligible Inventory,
(b) forty percent (40%) of the Net Amount of
Eligible Pharmaceutical Inventory,
(c) eighty-five percent (85%) of the Net
Amount of Eligible Coupons, and
(d) fifty percent (50%) of the Net Amount of
Eligible Pharmaceutical Receivables,
as determined by reference to and as set forth in the last
Borrowing Base Certificate delivered to the Agent and each
Lender prior to such time pursuant to Section 9.1(k)
hereof."
(c) The definition of "Calendar Month" or
"calendar month" in Section 1.1 of the Agreement is hereby
deleted in its entirety and the following new definition
inserted in its place:
"`Calendar Month' or `calendar month' shall mean (i)
except in the case of Sections 9.1, 9.16 and 10.19 hereof, a
calendar month, and (ii) for the purposes of Sections 9.1,
9.16 and 10.19 one of Borrower's four-week or five-week
accounting periods of which there are 13 in each Fiscal
Year.
(d) The definition of "EBITDA" in Section 1.1 of the
Agreement is hereby deleted in its entirety and the following new
definition inserted in its place:
"`EBITDA' of any Person for any period shall mean the
sum of:
(i) the net income (or net loss) from operations
of such Person and its Subsidiaries on a consolidated basis
(determined in accordance with GAAP) for such period,
without giving effect to any extraordinary or unusual gains
(losses); plus
(ii) to the extent that any of the items referred
to in any of clauses (A) through (C) below were deducted in
calculating such net income:
(A) consolidated interest expense of such
Person and its Subsidiaries for such period;
(B) income tax expense of such Person and
its Subsidiaries with respect to their operations for
such period; and
(C) the amount of all non-cash charges
(including, without limitation, depreciation and
amortization) of such Person and its Subsidiaries for
such period.
provided, however, that in calculating EBITDA of the
Borrower and its Subsidiaries, expenses (including all
reasonable professional fees and expenses) incurred in
connection with the Cases shall be added back to net income
(or net loss) from operations to the extent deducted in
calculating such net income (or net loss); and provided,
further, that, for the purposes of the calculations required
under Section 9.16 hereof, the total amount of all such
expenses added back to net income for any preceding three
(3) Calendar Month period shall not exceed the sum indicated
below as of the preceding (3) Calendar Month period ending
on the respective date indicated below:
Preceding Three Calendar Month Total Amount
Ending on: of Expenses:
May 18, 1996 $2,000,000.00
June 15, 1996 $1,750,000.00
and thereafter $1,350,000.00
(e) The definition of "Letter of Credit Fee" in
Section 1.1 of the Agreement is hereby deleted in its entirety
and the following new definition inserted in its place:
"`Letter of Credit Fee' shall mean three and one-fourth
percent (3.25%) per annum."
(f) The definition of "Maturity Date" in Section 1.1
of the Agreement is hereby deleted in its entirety and the
following new definition inserted in its place:
"`Maturity Date' shall mean the earlier of (a) one year
after the Petition Date or (b) the effective date of the plan of
reorganization in the Cases."
(g) Subclause (C) of clause (i) of the definition of
"Permitted Transaction" in Section 1.1 of the Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(C) to permit Parent to cover its expenses
(including all reasonable professional fees and
expenses) incurred in connection with (1) the Parent
Case, (2) so long as no Default or Event of Default in
payment of principal of or interest on Lender Debt has
occurred and is continuing, public offerings of its
equity securities or debt permitted by the Indenture,
and its obligations to register securities with the
Securities and Exchange Commission (and any government
agency succeeding to its functions) and similar state
agencies or (3) to comply with its reporting
obligations under the federal and state securities
laws;".
(h) The definition of "Revolving Credit Facility
Commitment" in Section 1.1 of the Agreement is hereby deleted in
its entirety and the following new definition inserted in its
place:
"`Revolving Credit Facility Commitment' shall mean
Twenty-Seven Million Dollars ($27,000,000)."
(i) The definition of "Revolving Note" and "Revolving
Notes" in Section 1.1 of the Agreement is hereby deleted in its
entirety and the following new definition inserted in its place
in alphabetical order in Section 1.1:
"`Note' and `Notes' shall have the meanings set
forth in Section 2.3(a) hereof."
7.2 Amendment to Interest Rate on Advances. The last
sentence of Section 2.1(b) of the Agreement is hereby deleted in
its entirety and the following new sentence inserted in its
place:
"Notwithstanding anything else contained herein, each
Advance shall be a Base Rate Advance."
7.3 Termination of Eurodollar Advances. Section 2.1(c) of
the Agreement is hereby deleted in its entirety and the following
new Section 2.1(c) inserted in its place:
"(c) Notwithstanding anything else contained herein,
Borrower shall not be entitled to request, and the Lenders
shall not be obligated to make, any Eurodollar Advance."
7.4 Amendment to Interest Payments. Section 2.6(b) of the
Agreement is hereby deleted in its entirety and the following new
Section 2.6(b) inserted in its place:
"(b) Interest on Base Rate Advances. Except as
provided in Section 2.6(c) hereof, Borrower shall pay
interest on the unpaid principal amount of the Base Rate
Advances made to it hereunder, and, to the extent due and
payable, Additional Indebtedness incurred by it, in each
case, which is outstanding from time to time at an interest
rate per annum equal to the Base Rate in effect from time to
time. Interest on Base Rate Advances shall be payable
quarterly in arrears on the last day of each March, June,
September and December of each calendar year commencing with
June 30, 1996, and at maturity (whether by acceleration or
otherwise) and thereafter on demand. Interest on Additional
Indebtedness shall be payable upon demand."
7.5 Amendment to Commitment Fee. Section 3.5 of the
Agreement is hereby deleted in its entirety and the following new
Section 3.5 inserted in its place:
" 3.5. COMMITMENT FEE. Borrower shall pay to the
Agent for the account of the Lenders a fee which shall
accrue from and after the date of the Ratification Agreement
until the date of the expiration, termination or
cancellation of the Revolving Credit Facility Commitment
payable monthly in arrears beginning on the date one month
after the date of the Ratification Agreement, and on the
same day of every month thereafter (and on the date of
maturity or earlier expiration, termination or cancellation
of the Revolving Credit Facility Commitment), of one-half of
one percent (.50%) per annum on the amount by which
$27,000,000 (as such amount may be reduced upon any
permanent reduction in the Revolving Credit Facility
Commitment) exceeds the aggregate outstanding principal
amount of the Revolving Loan (plus the Letter of Credit
Usage) (calculated daily)."
7.6 Amendment to Agency Fee. Section 3.7 of the Agreement
is hereby deleted in its entirety and the following new Section
3.7 inserted in its place:
" 3.7. AGENCY FEE. On the date of the Ratification
Agreement and monthly in advance on the first Business Day
of each calendar month thereafter, so long as any Advance,
any portion of the Revolving Credit Facility Commitment or
any Letter of Credit remains outstanding, Borrower shall pay
to the Agent for its own account an agency fee of $5,000 per
month."
7.7 Maintenance of Additional Deposit Accounts. Section
6.18 of the Agreement is hereby amended by adding the following
new Subsections:
"(e) Borrower shall have established one or more
Pharmaceutical Collection Accounts and shall have delivered
to the Agent on or before the day of the initial borrowing
following the date of the Ratification Agreement, with
respect to each such Pharmaceutical Collection Account, an
executed pharmaceutical collection account agreement in the
form of Exhibit 6.18(e) hereto (as amended, modified or
supplemented from time to time, a "Pharmaceutical Collection
Account Agreement") duly executed and delivered by Borrower
and duly acknowledged by the bank at which such
Pharmaceutical Collection Account is established."
"(f) Borrower shall have established its general
disbursements account with the Agent on or before the day of
the initial borrowing following the date of the Ratification
Agreement."
7.8 Amendment to Use of Proceeds. Section 8 of the
Agreement is hereby deleted in its entirety and the following new
Section 8 inserted in its place:
"SECTION 8. USE OF PROCEEDS. Proceeds of all
Advances shall be used by Borrower solely (i) to fund its
working capital needs, (ii) to pay expenses of Parent
described in clause (1) of clause (C) of clause (i) of the
definition of Permitted Transaction, and (iii) for other
general corporate purposes consistent with the terms of this
Agreement."
7.9 Quarterly Financial Statements and Other Information.
The final provisions of Section 9.1(a) of the Agreement, which
immediately follow clause (vi) of Section 9.1(a), are hereby
deleted in their entirety and the following new provisions
inserted in their place:
"in each case, as at the end of and for the period
commencing at the end of the previous Fiscal Year and ending
with such quarter just closed and for the period commencing
at the end of the previous quarter and ending with such
quarter just closed, setting forth for each such period in
comparative form (x) the corresponding figures for the
applicable quarter and year to date of the preceding Fiscal
Year and (y) the budgets of Parent and its Subsidiaries for
such quarter and year to date previously delivered under
Section 9.1(m) hereof, all in reasonable detail and
certified by the chief executive or financial officer of
Parent to have been prepared in accordance with GAAP,
subject to normal recurring year-end audit adjustments,
together with a schedule in form satisfactory to the Agent,
(1) setting forth Borrower's EBITDA for such quarter, actual
Net Capital Expenditures made by Borrower and its
Subsidiaries during such quarter and indicating that such
capital expenditures were made in compliance with Section
10.1 hereof, and (2) showing the computations used by Parent
in determining compliance with the covenant contained in
Section 9.16 hereof;"
7.10 Annual Financial Statements and Other Information.
Section 9.1(c) of the Agreement is hereby deleted in its entirety
and the following new Section 9.1(c) inserted in its place:
"(c) as soon as practicable and in any event within one
hundred twenty (120) days after the close of each Fiscal
Year of Parent:
(i) an audited consolidated balance sheet of
Parent and its Subsidiaries;
(ii) from and after the formation of a Subsidiary
of Borrower, an audited consolidating balance sheet of
Parent and its Subsidiaries;
(iii) an audited consolidated statement of
operations of Parent and its Subsidiaries;
(iv) from and after the formation of a Subsidiary
of Borrower, an audited consolidating statement of
operations of Parent and its Subsidiaries;
(v) an audited consolidated statement of cash
flows of Parent and its Subsidiaries; and
(vi) from and after the formation of a Subsidiary
of Borrower, an audited consolidating statement of cash
flows of Parent and its Subsidiaries;
in each case, as at the end of and for the Fiscal Year
just closed, (x) setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and
(y) accompanied by a separate report certified by the
chief financial officer of Parent, which shall not be
subject to the certification or statement of the
accountants set forth below, setting forth the budgets
of Parent and its Subsidiaries for such Fiscal Year
previously delivered under Section 9.1(m) hereof, all
in reasonable detail and (except for such budgets and
comparisons with such budgets) certified (with
qualifications or exceptions deemed acceptable to the
Agent) by independent public accountants selected by
Parent and satisfactory to the Agent; and concurrently
with such financial statements, a certificate, in form
satisfactory to the Agent, signed by such independent
accountants (1) stating that in making the examination
necessary for their certification of such financial
statements, they have not obtained any knowledge of the
existence of any Default or Event of Default or, if
such independent accountants shall have obtained from
such examination any such knowledge, they shall
disclose in such written statement the Default or Event
of Default and the nature thereof, it being understood
that such independent accountants shall be under no
liability, directly or indirectly, to anyone for
failure to obtain knowledge of any such Default or
Event of Default and (2) showing in detail the
calculations supporting such certificate in respect of
compliance with the covenants set forth in Sections
9.16 and 10.1 hereof and setting forth the calculations
(in detail acceptable to the Agent) underlying such
compliance;"
7.11 Annual Budget. Section 9.1(m) of the Agreement is
hereby deleted in its entirety and the following new Section
9.1(m) inserted in its place:
"(m) not later than forty-five (45) days after the
commencement of each Fiscal Year of Parent beginning with
the Fiscal Year commencing on December 31, 1995, a one
Fiscal-Year budget of the financial condition and results of
operations of Parent and its Subsidiaries for such Fiscal
Year (covering in any event balance sheets, statements of
cash flow and of income for each quarter and calendar
month), in all instances in form, scope and substance
reasonably satisfactory to the Agent, and Borrower shall
cause such budget to be updated from time to time as
material changes in the financial condition and results of
operations of Parent and its Subsidiaries necessitate and
shall promptly furnish or cause to be furnished to the Agent
and each Lender a copy of any such updated budget;"
7.12 Additional Financial Information. Section 9.1 of
the Agreement is hereby amended by adding the following new
Subsections:
"(q) promptly upon receipt thereof, copies of any
correspondence received from Medicare/Medicaid Account
Debtors or their agents or any other governmental entity or
any Third Party Payor relating to any audit, investigation
or inquiry relating to Borrower and any Pharmaceutical
Receivable;
(r) not later than Tuesday of each calendar week, a
certificate dated the last day of the calendar week
immediately prior to the just ended calendar week from
Borrower, substantially in the form of Exhibit 9.1(r) hereto
and signed by the chief executive officer, chief financial
officer or chief accounting officer of Borrower, setting
forth (i) the aggregate redemption value of Coupons
forwarded to the Processing Agent for processing during such
week, and (ii) the amount of payments actually received by
Borrower from the Processing Agent during such week for
redemptions of Coupons; Borrower hereby agrees to forward
all Coupons to the Processing Agent for processing, on a
weekly basis, in accordance with the terms of the Processing
Agreement and to deposit or cause to be deposited all
proceeds of Coupons in a Collection Account established
pursuant to Section 6.18(a) hereof or otherwise in
accordance with Agent's written instructions; and
(s) not later than Tuesday of each calendar week, a
certificate dated as of the last day of the calendar week
immediately prior to the just ended calendar week from
Borrower, substantially in the form of Exhibit 9.1(s) hereto
and signed by the chief executive officer, chief financial
officer or chief accounting officer of Borrower, setting
forth (i) the amount of outstanding Pharmaceutical
Receivables as of the beginning of such week, (ii) the
amount of new Pharmaceutical Receivables generated during
such week, (iii) the amount of payments received on
outstanding Pharmaceuticals during such week, and (iv) a
reconciliation of the foregoing."
7.13 Taxes and Claims. Section 9.2 of the Agreement is
hereby deleted in its entirety and the following new Section 9.2
inserted in its place:
" 9.2. TAXES AND CLAIMS. Each of Parent and
Borrower shall, and shall cause each of Borrower's
Subsidiaries, to, pay and discharge when due (except to the
extent that (a) any such taxes, assessments, governmental
charges or claims are diligently contested in good faith by
appropriate proceedings and proper reserves are established
on the books of Parent, Borrower or any such Subsidiary, (b)
any Liens arising from the non-payment thereof when due have
not attached to any of the Collateral in a manner which
could have priority over the Lien of the Agent thereon or
risk the sale of or foreclosure on such Collateral, or (c)
Parent and Borrower are precluded from paying any such
taxes, assessments, governmental charges or claims by
applicable provisions of the Federal Bankruptcy Code or
pursuant to a valid order of the Bankruptcy Court) (i) all
taxes, assessments and governmental charges upon or against
it or its properties or assets prior to the date on which
penalties attach thereto and (ii) all lawful claims, whether
for labor, materials, supplies, services or anything else,
which might or could, if unpaid, become a Lien or charge
upon its properties or assets."
7.14 Notice of Default. Section 9.9 of the Agreement
is hereby amended to insert the following new parenthetical
clause following the word "party" and preceding the comma in the
fifth line thereof:
"(other than any such Defaults, Events of Default or
defaults resulting solely from the filing of the Cases)"
7.15 Minimum EBITDA. Section 9.16 of the Agreement is
hereby deleted in its entirety and the following new Section 9.16
inserted in its place:
" 9.16. FINANCIAL COVENANT. Borrower covenants and
agrees that Borrower shall not permit its EBITDA, for the
three (3) Calendar Month period ending on each date set
forth below, to be less than the amount set forth opposite
such date:
Period Ending EBITDA
May 18, 1996 $1,953,600
June 15, 1996 $1,868,000
July 13, 1996 $1,390,400
August 10, 1996 $1,635,200
September 7, 1996 $1,674,400
October 5, 1996 $2,028,000
November 2, 1996 $2,266,000
November 30, 1996 $2,675,200
December 28, 1996 $3,156,000
January 25, 1997 $2,894,400
February 22, 1997 $2,635,200
March 22, 1997 $2,072,000
April 19, 1997 $2,412,000
7.16 Deposit of Proceeds Into Additional Deposit Accounts.
Section 9.17(a) of the Agreement is hereby deleted in its
entirety and the following new Section 9.17(a) inserted in its
place:
"(a) Borrower shall (i) cause all cash proceeds (as
defined in Article 9 of the UCC of Pledged Accounts) to be
deposited directly by the account debtor thereof into a
Lock-Box Account, (ii) except as otherwise permitted under
subsection (d) or subsection (e) of this Section 9.17,
deposit or cause to be deposited all cash proceeds (as
defined in Article 9 of the UCC) of Inventory and Pledged
Accounts into a Collection Account, (iii) deposit or cause
to be deposited all Gross Proceeds of an Asset Sale
(excluding Gross Proceeds of property which is not
Collateral in respect of which no prepayment is required
under Section 3.1(b) hereof) into an Asset Sale Account,
(iv) deposit or cause to be deposited all cash proceeds (as
defined in Article 9 of the UCC) of Coupons into a
Collection Account, (v) deposit or cause to be deposited all
cash proceeds (as defined in Article 9 of the UCC) of
Pharmaceutical Receivables into a Pharmaceutical Collection
Account, and (vi) on each Business Day, except as otherwise
permitted under subsection (f) of this Section 9.17,
transfer all collected balances from all Collection
Accounts, Lock-Box Accounts and Pharmaceutical Collection
Accounts to the Concentration Account."
7.17 Capital Expenditures. Paragraph (a) of Section 10.1 of
the Agreement is hereby deleted in its entirety and the following
substituted therefor:
"(a) The Borrower shall not suffer or permit Capital
Expenditures of the Borrower and its Subsidiaries to exceed
$5,000,000 in any fiscal year."
7.18 Utility Deposits. Section 10.2(b) of the Agreement is
hereby amended by adding the following new Subsection:
"(viii) deposits, Liens or pledges up to an aggregate
of $1,000,000 to secure payments due to public utilities for
services provided in the ordinary course of business;"
7.19 Change of Business. Section 10.13 of the Agreement
is hereby deleted in its entirety and the following new Section
10.13 inserted in its place:
" 10.13. CHANGE OF BUSINESS. Alter the nature of
its business or engage in any business other than the
supermarket business, except (i) as contemplated in
connection with the AWG Purchase Agreement and the Supply
Agreement, or (ii) changes attendant to any plan of
reorganization in the Cases (or either of them) approved
pursuant to order of the Bankruptcy Court."
7.20 Maximum Inventory. Section 10 of the Agreement is
hereby amended by adding the following new Section 10.18:
" 10.18. MAXIMUM INVENTORY. The Borrower shall not
suffer or permit the Inventory of the Borrower and its
Subsidiaries to exceed, as of each date set forth below, the
amount set forth opposite such date:
Period Ending
Inventory
May 18, 1996 $41,900,000
June 15, 1996 $41,900,000
July 13, 1996 $42,300,000
August 10, 1996 $42,500,000
September 7, 1996 $43,300,000
October 5, 1996 $44,100,000
November 2, 1996 $46,600,000
November 30, 1996 $45,600,000
December 28, 1996 $44,500,000
January 25, 1997 $45,299,000
February 22, 1997 $44,699,000
March 22, 1997 $44,491,000
April 19, 1997 $44,090,000
7.21 Maximum Returned Inventory. Section 10 of the
Agreement is hereby amended by adding the following new Section
10.19:
" 10.19. MAXIMUM RETURNED INVENTORY. The Borrower
shall not suffer or permit the Inventory of the Borrower and
its Subsidiaries that Borrower or its Subsidiaries returns
to AWG, for whatever reason (other than manufacturer
recalls), to exceed $350,000, in the aggregate, during any
calendar month."
7.22 Third Party Payor Agreements. Section 10 of the
Agreement is hereby amended by adding the following new Section
10.20:
" 10.20. THIRD PARTY PAYORS. Borrower shall not
suffer or permit any certificate of need, provider number or
contract listed on Schedule 12.16 to be amended, altered,
suspended, terminated or made provisional, in any material
way, without giving immediate written notice to Agent.
Borrower shall immediately notify Agent in writing of any
new provider number or any execution by Borrower of any
contract with any Third Party Payor. Borrower shall give
immediate written notice to Agent if any existing
certificate of need is amended, altered, suspended or made
provisional, or any new certificate of need or other
governmental consent is applied for by Borrower, if such
amendment, alteration, suspension or being made provisional,
or such new certificate of need or other governmental
consent, would have a material effect on Borrower or Agent
hereafter requests that it be notified of such
circumstances."
7.23 Events of Default. Section 11.1 of the Agreement is
amended as follows:
(i) The first paragraph of Section 11.1 is hereby
deleted in its entirety and the following substituted
therefor:
" 11.1. EVENTS OF DEFAULT. Except for any one
or more of the following events occurring or arising
solely as a result of:
(i) the failure of Borrower to make (A)
the interest payment on the Senior Notes due March
1, 1996 (which failure has been previously waived
by Agent and Lenders), (B) the remaining payments
due to K-C Computer Systems, Inc. pursuant to the
terms of that certain Agreement dated October 10,
1991, as amended, between Borrower and K-C
Computer Systems, Inc., or (C) certain rental and
tax payments due with respect to certain store
locations as more specifically described on
Exhibit "B" attached hereto, or (D) certain tax
payments due with respect to certain store
locations as more specifically described on
Exhibit "C" attached hereto;
(ii) Borrower's failure timely to
deliver to Agent and Lenders the unqualified
audited year-end financial statements for Fiscal
Year 1995 required to be delivered pursuant to
Section 9.1(c) of the Agreement;
(iii) Borrower's failure to comply
with certain financial covenants under the
Agreement; or
(iv) the filing of the Cases;
if any one or more of the following events (herein
called "Events of Default") shall occur for any reason
whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or
governmental body):"
(ii) Section 11.1 of the Agreement is hereby
amended by adding the following new Subsections:
"(l) Borrower or Parent materially violates or
breaches any of the terms of the Financing Orders;
(m) either of the Cases is converted to one under
Chapter 7 of the Federal Bankruptcy Code;
(n) the Bankruptcy Court appoints a Chapter 11
Trustee or examiner in either of the Cases;
(o) there shall occur the reversal, vacation,
stay, amendment, supplementation, or other modification
of either of the Financing Orders in a manner that
would in the sole opinion of the Agent materially and
adversely affect the rights of the Lenders under either
of the Financing Orders or materially and adversely
affect the priority of any or all of the Agent's or the
Lenders' security interests, liens, or claims, or other
protections granted to the Agent or the Lenders under
either of the Financing Orders; or
(p) a materially adverse change, as determined by
the Agent in good faith, occurs in the financial
condition of either Borrower or Parent;"
7.24 Violation of Agreements. The first sentence of
Section 12.3 of the Agreement is hereby deleted in its entirety
and the following substituted therefor:
"None of the Credit Parties is in violation of any
provision of its certificate or articles of incorporation,
as the case may be, or its bylaws or is in default under any
lease, indenture, mortgage, deed of trust, agreement or
other instrument, in any case, involving total payments to
or total payments by, Borrower or Parent of $1,000,000 or
more, to which any of them is a party or by which any of
them may be bound, other than (i) the Weingarten Documents,
(ii) defaults arising as a result of Borrower's failure to
make the interest payment on the Senior Notes due March 1,
1996, (iii) defaults arising as a result of the filing of
the Cases, (iv) defaults arising as a result of Borrower's
failure to make the remaining payments due to K-C Computer
Systems, Inc. pursuant to the terms of that certain
Agreement dated October 10, 1991, as amended, between
Borrower and K-C Computer Systems, Inc., (v) defaults
arising as a result of Borrower's failure to make certain
rental and tax payments due with respect to certain store
locations as more specifically described on Exhibit "B"
attached hereto, and (vi) defaults arising as a result of
Borrower's failure timely to deliver to Agent and Lenders
the unqualified audited year-end financial statements for
Fiscal Year 1995 required to be delivered pursuant to
Section 9.1(c) of the Agreement."
7.25 Litigation. Paragraph (a) of Section 12.4 of the
Agreement is hereby deleted in its entirety and the following
substituted therefor:
"(a) Except for the Cases and as set forth in Schedule
12.4 hereto, there are no actions, suits or proceedings
pending or, to the best knowledge of Borrower, threatened
against any of the Credit Parties or any of their respective
Subsidiaries before any court, arbitrator or governmental or
administrative body or agency which challenge the validity
or propriety of the transactions contemplated under this
Agreement, the other Loan Documents or the documents,
instruments and agreements executed or delivered in
connection herewith, therewith or related thereto, or which,
if adversely determined, could reasonably be expected to
have a Material Adverse Effect."
7.26 Financial Statements and Condition. Section 12.6 of the
Agreement is amended as follows:
(i) Paragraph (a) of Section 12.6 of the
Agreement is hereby deleted in its entirety and the
following substituted therefor:
"(a) The audited financial statements of Parent
and its Subsidiaries for the Fiscal Year ended December
30, 1995, previously delivered to Lenders in connection
with the negotiation of the Ratification Agreement,
present fairly in accordance with GAAP (i) the
financial position of Borrower as of the date of such
financial statements and (ii) the results of operations
of Borrower for such period. Borrower had no direct or
indirect contingent liabilities as of the date of such
financial statements which are not reserved for therein
or which in accordance with GAAP would have to be
included in footnotes thereto, such financial
statements have been prepared in accordance with GAAP
applied on a basis consistently maintained throughout
the period involved (subject to normal year end
adjustments), and, except for the proceedings relating
to the Cases and the existing and anticipated
consequences thereof, there has been no material
adverse change in the business, operations,
liabilities, assets, properties, prospects or condition
(financial or otherwise) of Borrower since December 31,
1995. Except for the proceedings relating to the Cases
and the existing and anticipated consequences thereof,
there has been no material adverse change in the
business, operations, liabilities, assets, properties,
prospects or condition (financial or otherwise) of any
Credit Party since December 31, 1995."
(ii) Section 12.6 of the Agreement is hereby
amended by adding the following new Subsection:
"(c) The budget dated as of May ___, 1996, a copy
of which is attached hereto as Exhibit 12.6(c), is the
budget of the financial condition and results of
operations of Parent and its Subsidiaries for the
Fiscal Year ending December 28, 1996, required to be
delivered pursuant to Section 9.1(m)."
7.27 Medicare/Medicaid and Third Party Payor Agreements.
Section 12.16 of the Agreement is hereby deleted in its entirety
and the following new Section 12.16 inserted in its place:
" 12.16. MEDICARE/MEDICAID AND THIRD PARTY PAYOR
AGREEMENTS. Borrower has obtained and currently has in
place valid and binding provider agreements or other written
agreements necessary to enable Borrower to receive payment
from Medicare/Medicaid Account Debtors, Third Party Payors
or other governmental entities. All written agreements
between Borrower and such Medicare/Medicaid Account Debtors,
Third Party Payors and other governmental entities, and all
provider numbers which Borrower is required to have in its
own name in order to operate its business as presently
conducted are listed on the attached Schedule 12.16."
7.28 Deposit Accounts. Paragraph (a) of Section 12.18 of
the Agreement is hereby deleted in its entirety and the following
substituted therefor:
"(a) The names and addresses of all the banks holding
one or more Collection Accounts, Lock-Box Accounts,
Pharmaceutical Collection Accounts and/or Asset Sale
Accounts, and the name and address of the bank holding the
Concentration Account, together with the account numbers of
the Collection Accounts, Lock-Box Accounts, Pharmaceutical
Collection Accounts, Asset Sale Accounts and the
Concentration Account at such banks, are specified in
Schedule 12.18(a) hereto, as amended from time to time with
the prior written consent of the Agent."
7.29 Validity of Pharmaceutical Receivables. Section 12 of
the Agreement is hereby amended by adding the following new
Section 12.20:
" 12.20 VALIDITY OF PHARMACEUTICAL RECEIVABLES. (a)
Except with respect to Pharmaceutical Receivables, the
aggregate amount of which would not constitute a material
percentage of all Pharmaceutical Receivables at any given
time and Pharmaceutical Receivables the failure of which to
satisfy the following requirements, would not have a
material adverse effect on the value of the Collateral, each
Pharmaceutical Receivable existing on the Closing Date is,
and each future Pharmaceutical Receivable will be, at the
time of its creation, a genuine obligation enforceable
against the account debtor thereof in accordance with its
terms, and represents an undisputed and bona fide
indebtedness owing to Borrower by an account debtor, without
defense, setoff or counterclaim, free and clear of all Liens
other than the security interest in favor of the Agent under
the Security Documents; and no payment has been received
with respect to any Pharmaceutical Receivable and no
Pharmaceutical Receivable is subject to any credit or
extension or agreement therefor.
(b) No Pharmaceutical Receivable is evidenced by any
note, draft, trade acceptance or other instrument for the
payment of money."
7.30 Termination of Agreement. Paragraph (a) of Section
13.8 of the Agreement is hereby deleted in its entirety and the
following substituted therefor:
"(a) Subject to the Agent's and Borrower's rights
to terminate this Agreement earlier as set forth below,
Lenders' commitment to make Advances hereunder shall be
for an original period extending from the Closing Date
through the Maturity Date."
7.31 Service of Process. Section 13.12 of the Agreement is
hereby deleted in its entirety and the following new Section
13.12 inserted in its place:
" 13.12. SERVICE OF PROCESS. Each of the Credit
Parties hereby irrevocably consents to the jurisdiction of
the Bankruptcy Court or, in the event that the Bankruptcy
Court or any other United States Bankruptcy Court having
jurisdiction of the Cases declines to exercise such
jurisdiction, the courts of the State of New York and of any
Federal Court located in the City of New York in connection
with any action or proceeding arising out of or relating to
this Agreement, any Guaranty, any of the Security Documents,
all or any of the Lender Debt, the Collateral, all or any of
the Notes, any other Loan Document or any document or
instrument delivered pursuant to this Agreement. In any
such litigation, each of the Credit Parties waives, to the
fullest extent it may effectively do so, personal service of
any summons, complaint or other process and agrees that the
service thereof may be made by certified or registered mail
directed to any Credit Party at its address set forth in
Section 13.4 hereof. Within thirty (30) days after such
mailing, such Credit Party shall appear, answer or move in
respect of such summons, complaint or other process. Should
such Credit Party fail to appear or answer within said
thirty (30)-day period, such Credit Party shall be deemed in
default and judgment may be entered by the Agent on behalf
of the Lenders against such Credit Party for the amount as
demanded in any summons, complaint or other process so
served. Each of the Credit Parties hereby waives, to the
fullest extent it may effectively do so, the defenses of
forum non conveniens and improper venue."
7.32 Lenders and Commitments. Schedule 1.1(A) of the
Agreement is hereby deleted in its entirety and Schedule 1.1(A)
to this Ratification Agreement is substituted therefor.
7.33 Pending Litigation. Schedule 12.4 of the Agreement is
hereby deleted in its entirety and Schedule 12.4 to this
Ratification Agreement is substituted therefor.
7.34 Medicare/Medicaid and Third Party Payor Agreements. A
new Schedule 12.16 is hereby added to the Agreement in
substantially the form of Schedule 12.16 to this Ratification
Agreement.
7.35 Deposit Accounts. Schedule 12.18(a) of the Agreement
is hereby deleted in its entirety and Schedule 12.18(a) to this
Ratification Agreement is substituted therefor.
7.36 Post-Petition Revolving Note. Exhibit 2.3 of the
Agreement is hereby deleted in its entirety and Exhibit 2.3 to
this Ratification Agreement is substituted therefor.
7.37 Second Amended and Restated Guarantee. Exhibit 5.4 of
the Agreement is hereby deleted in its entirety and Exhibit 5.4
to this Ratification Agreement is substituted therefor.
7.38 Borrowing Base Certificate. Exhibit 9.1(k) of the
Agreement is hereby deleted in its entirety and Exhibit 9.1(k) to
this Ratification Agreement is substituted therefor.
7.39 Coupon Certificate. A new Exhibit 9.1(r) is hereby
added to the Agreement in substantially the form of Exhibit
9.1(r) to this Ratification Agreement.
7.40 Pharmaceutical Receivables Certificate. A new Exhibit
9.1(s) is hereby added to the Agreement in substantially the form
of Exhibit 9.1(s) to this Ratification Agreement.
7.41 Fiscal Year 1996 Budget. A new Exhibit 12.6(c) is
hereby added to the Agreement in substantially the form of
Exhibit 12.6(c) to this Ratification Agreement.
8. MISCELLANEOUS.
8.1 Amendments and Waivers. Neither this Ratification
Agreement nor any other instrument or document referred to herein
or therein may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or
termination is sought.
8.2 Further Assurances. Each Debtor shall, at its expense,
at any time or times duly execute and deliver, or shall cause to
be duly executed and delivered, such further agreements,
instruments and documents, including, without limitation,
additional security agreements, collateral assignments, UCC
financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens and consents to the
exercise by Agent and Lenders of all the rights and remedies
hereunder or under any of the other Loan Documents and do or
cause to be done such further acts as may be necessary or proper
in Agent's or Lenders' opinion to evidence, perfect, maintain and
enforce the security interest and the priority thereof in the
Collateral and to otherwise effectuate the provisions or purposes
of this Ratification Agreement, any of the other Loan Documents
or the Financing Orders. Upon the request of Agent, at any time
and from time to time, each Debtor shall, at its cost and
expense, do, make, execute, deliver and record, register or file,
financing statements, mortgages, deeds of trust, deeds to secure
debt, and other instruments, acts, pledges, assignments and
transfers (or cause the same to be done) and will deliver to
Agent such instruments evidencing items of Collateral as may be
requested by Agent.
8.3 Headings. The headings used herein are for convenience
only and do not constitute matters to be considered in
interpreting this Ratification Agreement.
8.4 Counterparts. This Ratification Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which shall together
constitute one and the same agreement.
8.5 Waiver of Defaults; Additional Events of Default.
Agent and Lenders hereby acknowledge the existence, as of the
date of this Ratification Agreement, of all Events of Default
arising as a result of (i) the failure of Borrower to make (A)
the interest payment on the Senior Notes due March 1, 1996, (B)
the remaining payments due to K-C Computer Systems, Inc. pursuant
to the terms of that certain Agreement dated October 10, 1991, as
amended, between Borrower and K-C Computer Systems, Inc., or (C)
certain rental and tax payments due with respect to certain store
locations as more specifically described on Exhibit "B" attached
hereto; (ii) Borrower's failure timely to deliver to Agent and
Lenders the unqualified audited year-end financial statements for
Fiscal Year 1995 required to be delivered pursuant to Section
9.1(c) of the Agreement; (iii) Borrower's failure to comply with
certain financial covenants under the Agreement; and (iv) the
filing of the Cases, and Agent and Lenders hereby waive all such
Events of Default to the extent not previously waived; provided,
however, that such waiver shall extend only to the foregoing
specific Events of Default and not to any other Events of Default
existing as of the date of this Ratification Agreement. The
parties hereto acknowledge, confirm and agree that the failure of
Debtors to comply with any of the covenants, conditions and
agreements contained herein or in any other agreement, document
or instrument at any time executed by Debtors in connection
herewith shall constitute an Event of Default under the Loan
Documents.
8.6 Costs and Expenses. Debtors shall pay to Agent and
Lenders on demand all reasonable costs and expenses that Agent
and Lenders pay or incur in connection with the negotiation,
preparation, consummation, administration, enforcement, and
termination of this Ratification Agreement, the Financing Orders
and the other Loan Documents including, without limitation:
(a) costs and expenses (including attorneys' and paralegals' fees
and disbursements) of counsel to Agent; (b) costs and expenses
(including attorneys' and paralegals' fees and disbursements) of
counsel to Heller; (c) costs and expenses (including attorneys'
and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection
with this Ratification Agreement, the other Loan Documents, the
Financing Orders and the transactions contemplated thereby; (d)
costs and expenses of lien searches; (e) fees and other charges
incurred in connection with the filing of UCC financing
statements and continuations, and other actions to perfect,
protect, and continue the security interests and Liens of Agent
in the Collateral; (f) sums paid or incurred to pay any amount or
take any action required of Debtors under the Loan Documents or
the Financing Orders that the Debtors fail to pay or take; (g)
costs of appraisals, inspections and verifications of the
Collateral including, without limitation, travel, lodging, and
meals for inspections of the Collateral and the Debtors'
operations by Agent or its agents and to attend court hearings or
otherwise in connection with the Cases; (h) costs and expenses of
preserving and protecting the Collateral; and (i) costs and
expenses (including attorneys' and paralegals' fees and
disbursements) paid or incurred to obtain payment of the Lender
Debt, enforce the security interests and Liens of Agent, sell or
otherwise realize upon the Collateral, and otherwise enforce the
provisions of this Ratification Agreement, the other Loan
Documents and the Financing Orders, or to defend any claims made
or threatened against Agent or Lenders arising out of the
transactions contemplated hereby (including, without limitation,
preparations for and consultations concerning any such matters).
The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to
be paid by Debtors. All sums provided for in this Section 8.6
shall be part of the Lender Debt, shall be payable on demand, and
shall accrue interest from the date paid or incurred at the
highest rate of interest then payable under the Loan Documents.
Lenders are hereby irrevocably authorized to charge any amounts
payable hereunder directly to the accounts maintained by Lenders
with respect to Debtors.
8.7 Effectiveness. This Ratification Agreement shall
become effective upon the execution hereof by Debtors, Agent and
Lenders and the entry of the Interim Financing Order.
8.8 Notices. All notices, requests and other
communications required to be given hereunder or under any of any
of the Loan Documents in writing will be deemed to have been duly
given if delivered in accordance with the provisions of Section
13.4 of the Agreement.
8.9 Ratification and Amendment Agreement. This
Ratification Agreement is the "Ratification and Amendment
Agreement" referred to in the Interim Financing Order, the
provisions of which are incorporated into this Ratification
Agreement by reference for all purposes. This Ratification
Agreement is entitled to all of the benefits of the Interim
Financing Order, and, upon entry of the Final Financing Order,
all of the benefits of the Final Financing Order.
8.10 Conflicts. In the event of a conflict between the
terms and provisions of this Ratification Agreement and the terms
and provisions of the Agreement or any of the other Loan
Documents, the terms of this Ratification Agreement shall govern.
In all respects, the Agreement and each of the other Loan
Documents, as amended and supplemented hereby, shall remain in
full force and effect.
8.11 Successors and Assigns. This Ratification Agreement
shall bind and inure to the benefit of the respective successors
and assigns of each of the parties and, in the case of Debtors,
including, without limitation, any trustees or other fiduciaries
hereafter appointed as Debtors' legal representatives or with
respect to the property of Debtors' respective bankruptcy
estates, whether under Chapter 11 of the Federal Bankruptcy Code
or any subsequent Chapter 7 case, and Debtors' respective
successors upon conclusion of the Cases.
[This space intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Ratification Agreement to be duly executed as of the day and year
first above written.
DEBTORS:
HOMELAND STORES, INC.,
Debtor and Debtor-in-Possession
By:
Larry W. Kordisch,
Executive Vice President -
Finance
HOMELAND HOLDING CORPORATION,
Debtor and Debtor-in-Possession
By:
Larry W. Kordisch,
Executive Vice President -
Finance
AGENT:
NATIONAL BANK OF CANADA,
as Agent
By:
Larry L. Sears,
Group Vice President
By:
David L. Schreiber,
Assistant Vice President
LENDERS:
NATIONAL BANK OF CANADA
By:
Larry L. Sears,
Group Vice President
By:
David L. Schreiber,
Assistant Vice President
HELLER FINANCIAL, INC.
By:
Elizabeth Schmidt,
Vice President
Schedules:
1.1(A) - Lenders and Commitments
12.4 - Pending Litigation
12.16 - Medicare/Medicaid and Third Party Payor Agreements
12.18(a) - Deposit Accounts
Exhibits:
A - Loan Documents
B Leased Store Locations for Which Delinquent Rental
and Tax Payments Have Arisen
C Owned Store Locations for Which Delinquent Tax
Payments Have Arisen
2.3 - Form of Post-Petition Revolving Note
5.4 - Form of Second Amended and Restated Guarantee
6.18(e) - Form of Pharmaceutical Collection Account Agreement
9.1(k) - Form of Borrowing Base Certificate
9.1(r) - Form of Coupon Certificate
9.1(s) - Form of Pharmaceutical Receivables Certificate
12.6(c) - Fiscal Year 1996 Budget
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<S> <C>
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<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-23-1996
<CASH> 4,283
<SECURITIES> 0
<RECEIVABLES> 8,563
<ALLOWANCES> 1,934
<INVENTORY> 40,477
<CURRENT-ASSETS> 1,765
<PP&E> 135,214
<DEPRECIATION> 64,865
<TOTAL-ASSETS> 129,996
<CURRENT-LIABILITIES> 143,938
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0
0
<COMMON> 337
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<TOTAL-LIABILITY-AND-EQUITY> 129,996
<SALES> 124,350
<TOTAL-REVENUES> 124,350
<CGS> 94,207
<TOTAL-COSTS> 94,207
<OTHER-EXPENSES> 29,330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,156
<INCOME-PRETAX> (2,343)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,343)
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<EXTRAORDINARY> 0
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