THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For Fiscal Quarter Ended September 7, 1996 Commission File Numbers 33-54928
------------------- --------------
</TABLE>
FF HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2506294
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
7530 TIDEWATER DRIVE, P. O. BOX 1289, NORFOLK, VIRGINIA 23501
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (804)480-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding shares at October 21, 1996
- -------------------------------------------------- --------------------------------------
<S> <C>
Class A common stock, par value $.01 per share 41,480
Class B common stock, par value $.01 per share 2,458,520
Class C common stock, par value $.01 per share 1
</TABLE>
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Index to Quarterly Report on Form 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information:
Item 1. Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets -
December 30, 1995 and September 7, 1996 1
Condensed Consolidated Statements of Loss
- 12 weeks ended September 9, 1995 and September 7, 1996
36 weeks ended September 9, 1995 and September 7, 1996 3
Condensed Consolidated Statement of Stockholders' Deficit -
36 weeks ended September 7, 1996 4
Condensed Consolidated Statements of Cash Flows -
36 weeks ended September 9, 1995 and September 7, 1996 5
Note to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 6. Exhibit and Reports on Form 8-K
(a) The Exhibits listed on the accompanying Index to Exhibits are
filed or incorporated by reference as part of this Form 10-Q
and such Index to Exhibits is incorporated herein by reference. 10
(b) Reports on Form 8-K: None
</TABLE>
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 30, September 7,
Assets 1995 1996
------ -------------- --------
<S> <C>
Current assets:
Cash $ 2,322,320 $ 1,249,669
Accounts receivable, net of
allowance for doubtful accounts
of $491,330 at December 30, 1995 and
$587,492 at September 7, 1996 16,789,683 15,649,390
Merchandise inventories:
Assuming the first-in, first-out method 56,700,404 50,467,902
Less adjustment to the last-in, first-out method 3,036,896 3,313,196
----------- ------------
53,663,508 47,154,706
----------- ------------
Prepaid expenses and other current assets 2,083,743 3,091,675
----------- ------------
Total current assets 74,859,254 67,145,440
------------ ------------
Assets held for sale 6,220,362 5,705,029
Property and equipment:
Land 10,627,356 10,627,365
Buildings 64,835,421 67,672,761
Leasehold improvements 32,016,115 35,758,671
Fixtures and equipment 82,743,500 90,442,731
Transportation equipment 628,072 587,492
Construction in progress 348,932 131,615
------------- ------------
191,199,396 205,220,635
Less accumulated depreciation and amortization 85,264,691 92,326,401
------------ ------------
Net property and equipment 105,934,705 112,894,234
----------- -----------
Favorable lease rights, net of accumulated
amortization of $6,398,657 at December 30, 1995
and $7,010,613 at September 7, 1996 4,519,402 3,907,443
Goodwill, net of accumulated amortization of
$994,136 at December 30, 1995 and $1,932,040 at
September 7, 1996 8,567,662 7,644,494
Deferred financing costs, net of accumulated
amortization of $4,393,934 at December 30, 1995
and $5,785,317 at September 7, 1996 8,853,224 8,079,397
Other, net 1,144,005 501,277
------------ ------------
$210,098,614 $205,877,314
=========== ===========
</TABLE>
(continued)
-1-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
(Unaudited)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Deficit December 30, September 7,
1995 1996
<S> <C>
Current liabilities:
Current installments of notes payable $ 1,183,073 $ 1,043,461
Current installments of obligations under capital leases 1,858,914 2,556,027
Trade accounts payable 32,900,110 33,110,154
Accrued expenses:
Licenses and other taxes 6,110,228 5,779,661
Interest 9,670,600 16,642,504
Insurance claims 3,669,027 3,903,776
Other 7,674,987 6,617,892
------------ -------------
Total accrued expenses 27,124,842 32,943,833
------------ ------------
Accrued costs relating to closed stores, current portion 1,965,073 1,713,268
------------ -------------
Total current liabilities 65,032,012 71,366,743
------------ ------------
Long-term debt, excluding current installments:
Revolving credit facility 12,169,258 17,041,097
Notes payable 1,751,721 1,022,200
Obligations under capital leases 31,617,554 33,821,538
12.25% senior notes 165,000,000 165,000,000
12.25% senior notes, series A 37,337,873 37,158,610
14.25% senior notes 74,348,357 79,751,955
Convertible subordinated debentures 9,322,398 5,796,950
------------ ------------
Total long-term debt 331,547,161 339,592,350
----------- -----------
Accrued costs relating to closed stores, excluding current portion 7,969,459 6,779,872
Deferred credits and other liabilities 4,356,659 3,661,690
------------ ------------
Total liabilities 408,905,291 421,400,655
----------- -----------
14.25% cumulative preferred stock, authorized 700,000 shares; issued 191,679
shares; stated at liquidation value of $100 per share plus accrued
and unpaid dividends 30,000,043 32,960,541
Stockholders' deficit:
Class A common stock of $.01 par value; authorized
2,500,000 shares; issued 41,480 shares 415 415
Class B common stock of $.01 par value; authorized
3,500,000 shares; issued 2,458,520 shares 24,585 24,585
Class C common stock of $.01 par value, authorized
and issued 1 share - -
Additional paid-in capital 10,975,050 10,975,050
Accumulated deficit (238,492,733) (258,169,895)
Stockholder loans (1,314,037) (1,314,037)
------------ ------------
Total stockholders' deficit (228,806,720) (248,483,882)
Commitments and contingencies
$210,098,614 $205,877,314
=========== ===========
See accompanying note to condensed consolidated financial statements.
-2-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Loss
12 Weeks Ended September 9, 1995 and September 7, 1996 and
36 Weeks Ended September 9, 1995 and September 7, 1996
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
12 weeks ended 36 weeks ended
September 9, September 7, September 9, September 7,
1995 1996 1995 1996
----------------- ----------------- ---------------- -----------
<S> <C>
Sales $ 215,894,626 $ 180,581,478 $638,809,727 $539,568,127
Cost of sales 165,417,676 139,406,428 487,906,686 414,371,763
----------- ----------- ----------- -----------
Gross profit 50,476,950 41,175,050 150,903,041 125,196,364
Selling, general and
administrative expenses (45,440,678) (36,965,388) (134,690,935) (110,397,307)
Interest expense (10,752,852) (10,679,035) (31,501,385) (31,553,453)
Gain (loss) on disposition of
property and equipment 14,192 (153,910) 14,192 (251,239)
Other, net 3,229 228,528 6,536 288,971
------------ ------------ ------------ -----------
Net loss (5,699,159) (6,394,755) (15,268,551) (16,716,664)
Dividends on cumulative preferred stock (877,718) (1,007,248) (2,601,191) (2,960,498)
----------- ----------- ----------- -----------
Net loss to common stockholders $ (6,576,877) $ (7,402,003) $ (17,869,742) $ (19,677,162)
=========== =========== =========== ===========
</TABLE>
See accompanying note to condensed consolidated financial statements.
-3-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Deficit
36 Weeks Ended September 7, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common stock Additional Total
Class A Class B Class C Paid-in Accumulated Stockholder Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Loans Deficit
<S> <C>
Balance at
December 30,
1995 41,480 $ 415 2,458,520 $24,585 1 $ - 10,975,050 (238,492,733) (1,314,037) (228,806,720)
Net loss - - - - - - - (16,716,664) - (16,716,664)
Preferred stock
dividends - - - - - - - (2,960,498) - (2,960,498)
-----------------------------------------------------------------------------------------------------------------
Balance at
September 7,
1996 41,480 $ 415 2,458,520 $24,585 1 $ - 10,975,050 (258,169,895) (1,314,037) (248,483,882)
======== ===== ========== ======= ======= ===== =========== ============ ============= ============
</TABLE>
See accompanying note to condensed consolidated financial statements.
-4-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
36 Weeks Ended
September 9, September 7,
1995 1996
<S> <C>
Cash flows from operating activities:
Net loss $ (15,268,551) $ (16,716,664)
------------- -------------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 15,764,759 14,002,887
Additional 14.25% senior notes issued in lieu of interest 4,677,702 5,368,021
Gain (loss) on sale of property and equipment (14,192) 251,239
Gain on conversion of convertible subordinated debentures - (269,439)
Amortization of premium on 12.25% senior notes, series A (160,440) (179,263)
Amortization of discount on 14.25% senior notes 8,520 35,577
LIFO charge to earnings 540,000 276,300
Noncash recognition of deferred revenue (447,966) (792,581)
Changes in assets and liabilities that increase (decrease) cash:
Accounts receivable, net 3,900,440 1,140,293
Merchandise inventories 3,532,901 4,902,566
Prepaid expenses and other current assets (1,294,890) (1,007.932)
Trade accounts payable (6,863,947) 210,044
Accrued expenses 9,041,194 5,818,991
Accrued costs relating to closed stores (1,437,484) (1,441,392)
Other deferred credits 1,152,528 97,612
Other, net (262,756) 246,199
------------- --------------
Total adjustments 28,136,369 28,659,122
------------ -------------
Net cash provided by operating activities 12,867,818 11,942,458
------------- -------------
Cash flows from investing activities:
Acquisitions of property and equipment (6,588,523) (16,316,415)
Proceeds from sale of property and equipment 30,969 4,535,822
-------------- --------------
Net cash used in investing activities (6,557,554) (11,780,593)
------------- -------------
Cash flows from financing activities:
Borrowings under revolving credit facility 103,844,491 98,225,233
Repayments under revolving credit facility (112,878,306) (93,353,394)
Repayments of long-term debt (1,525,146) (780,351)
Principal repayments of obligations under capital leases (1,386,492) (1,363,656)
Payment upon conversion of convertible subordinated debentures - (3,344,791)
Payment of refinancing costs - (617,557)
------------------ -------------
Net cash used in financing activities (11,945,453) (1,234,516)
------------ -------------
Net decrease in cash (5,635,189) (1,072,651)
Cash at beginning of period 6,799,415 2,322,320
------------- -------------
Cash at end of period $ 1,164,226 $ 1,249,669
============= =============
</TABLE>
(continued)
-5-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
36 Weeks Ended
September 9, September 7,
1995 1996
--------------- ---------
<S> <C>
Cash paid during the period for:
Interest $ 20,692,661 $ 19,177,951
=========== ===========
Income taxes $ - $ -
=============== ===========
</TABLE>
During the 36 week periods ended September 9, 1995 and September 7, 1996, the
Company entered into capital lease obligations of $1,722,500 and $4,277,847,
respectively.
See accompanying note to condensed consolidated financial statements.
-6-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Note to Condensed Consolidated Financial Statements
September 7, 1996
(Unaudited)
(1) Opinion of Management
The unaudited statements furnished in this report reflect all adjustments
which are, in the opinion of management, necessary to a fair statement of
the results for the interim periods presented. All such adjustments are of
a normal recurring nature. Results of interim periods are not necessarily
indicative of those which would be achieved in a full fiscal year.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward looking statements as a result of certain factors.
The following discussion should be read in conjunction with Item 1, unaudited
Condensed Consolidated Financial Statements.
Comparison of 12 Weeks and 36 Weeks ended September 7, 1996 with 12 Weeks and 36
Weeks ended September 9, 1995.
Sales. Sales for the 12 week period ended September 7, 1996 decreased 16.4% to
$180.6 million from $215.9 million for the comparable period in 1995. For the 36
week period ended September 7, 1996, sales were $539.6 million as compared to
$638.8 million for the corresponding period in 1995, a decrease of 15.5%. Same
store sales decreased 4.3% for the third quarter 1996 and 0.4% year to date in
1996. This decrease in sales was primarily attributable to the closure of six
combination stores primarily in fourth quarter of 1995 and sale of 10
combination stores to Hannaford Bros. in September 1995. The Company's super
warehouse stores contributed 32.2% and 29.8% of total sales in the third quarter
and year to date 1996, respectively, as compared to 20.4% and 19.4%
respectively, in 1995. The Company also sold two combination stores in the
second quarter of 1996. The decrease in same store sales was attributable to
increased competition in the Company's principal market resulting from the
opening of eight new stores.
Cost of Sales. Cost of sales for the 12 week period ended September 7, 1996
totalled $139.4 million, a decrease of $26.0 million or 15.7% from the
comparable period in 1995. For the 36 week period ended September 7, 1996, cost
of sales totalled $414.4 million, a decrease of $73.5 million or 15.1% from the
comparable period in 1995. Cost of sales was 77.2% and 76.8% of sales in the 12
and 36 week periods in 1996, respectively, as compared to 76.6% and 76.4%,
respectively, in the corresponding periods in 1995. This increase in cost of
sales as a percentage of sales is due to increased volume in the Company's super
warehouse stores, as discussed above, which operate at lower margins as compared
to the Company's combination stores and promotional markdowns taken in response
to the increased competition in the Company's principal market as described
above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter of 1996 and 1995 were $37.0
million and $45.4 million, respectively, a decrease of $8.4 million. These
expenses decreased as a percentage of sales to 20.5% in 1996 from 21.0% in 1995.
Selling, general and administrative expenses for the 36 week periods ended
September 7, 1996 and September 9, 1995 were $110.4 million and $134.7 million,
respectively, a decrease of $24.3 million. These expenses decreased as a
percentage of sales to 20.5% in 1996 from 21.1% in 1995. The decrease in
selling, general and administrative expenses as a percent of sales is primarily
attributable to a reduction in advertising expense (0.3%) due to reduced
advertising in the Richmond market and increased vendor supported advertising
and a decrease in occupancy costs (0.3%) and utilities (0.1%) due to the closure
of six stores in the fourth quarter of 1995.
Interest Expense. Interest expense totalled $10.7 million for the 12 week
periods ended September 7, 1996, a decrease of $0.1 million from the comparable
period in 1995. In the 36 weeks ended September 7, 1996, interest expense
totalled $31.6 million, an increase of $0.1 million over the same period in
1995. The increase is attributable to additional 14.25% senior notes issued in
lieu of interest. Interest expense was also impacted by a lower average
outstanding balance on the Company's revolving credit facility and the
conversion of $16.8 million face value of convertible subordinated debentures
into $9.0 million in cash during the fourth quarter of 1995 and the first three
quarters of 1996.
Liquidity and Capital Resources
Cash flow from operations as well as amounts available under Farm Fresh's
revolver represent the Company's primary sources of short-term liquidity. At
September 7, 1996, the Company had approximately $23.0 million available under
the revolving credit facility subject to certain borrowing base limitations,
less $5.3 million reserved for the redemption of the convertible subordinated
debentures and $1.1 million reserved as a result of outstanding letters of
credit. The Company believes that the revolver, together with cash flow from
operations, will provide sufficient financial resources to fund the Company's
operations.
Cash flows from the Company's operating, investing and financing activities for
the 36 week periods ended September 7, 1996 and September 9, 1995 are disclosed
in the accompanying condensed consolidated statements of cash flows. In the 36
weeks ended September 7, 1996, the Company's operating activities generated
$11.9
-8-
<PAGE>
million in cash as compared to the $12.9 million generated in the corresponding
period in 1995. This decrease is primarily attributable to decreased
depreciation and amortization due to the decreased number of stores. In
addition, the Company received $1.3 million in the first quarter 1995 related to
a vendor supply contract. These decreases were partially offset by an increase
in the Company's noncash working capital and additional 14.25% senior notes
issued in lieu of interest.
The Company used $11.8 million in cash in its investing activities year to date
of 1996 as compared to the $6.6 million in cash the Company used in the
corresponding period in 1995. This increase is attributable to four major store
remodeling projects and the opening of a new store in 1996. This increase was
partially offset by the sale of three stores.
In the 36 weeks ended September 7, 1996, the Company's financing activities used
$1.2 million in cash as compared to $11.9 million used in the corresponding
period in 1995. This fluctuation is due to the additional borrowings made under
the Company's revolver in 1996 as compared to net repayments made in 1995. The
additional borrowings were made to finance capital expenditures as described
above and to redeem $6.3 million at face value of the Company's convertible
subordinated debentures for $3.3 million in cash.
-9-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Seventh Amendatory Agreement, dated May 15, 1996, by and between
Farm Fresh, Inc., FF Holdings Corporation, certain guarantors and
lenders and NatWest USA Credit Corp.
10.2 Eighth Amendatory Agreement, dated March 31, 1996, by and between
Farm Fresh, Inc., FF Holdings Corporation, certain guarantors and
lenders and NatWest USA Credit Corp.
10.3 Ninth Amendatory Agreement, dated September 30, 1996, by and
between Farm Fresh, Inc., FF Holdings Corporation, certain guarantors
and lenders and NatWest USA Credit Corp.
27.1 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
-10-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FF Holdings Corporation
Date October 21, 1996 /s/ Orville R. Crook
--------------------- ------------------------
Orville R. Crook
Vice President Finance
(Principal Accounting Officer)
</TABLE>
SEVENTH AMENDATORY AGREEMENT,
CONSENT AND WAIVER
FLEET BANK, N.A. (formerly known as
NATWEST USA CREDIT CORP.), as Agent and as a Lender
175 Water Street
New York, New York 10038
HELLER FINANCIAL, INC., as a Lender
101 Park Avenue
New York, New York 10178
as of May 15, 1996
FARM FRESH, INC.
FF HOLDINGS CORPORATION
c/o Farm Fresh, Inc.
7530 Tidewater Drive
Norfolk, Virginia 23501
Re: Revolving Credit Agreement dated as of December 10, 1993 (as
amended to date, the "Credit Agreement") among Farm Fresh,
Inc., the Guarantors named therein, the Lenders named therein,
and Fleet Bank, N.A. (formerly known as NatWest USA Credit
Corp.), as Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Credit Agreement. You
have advised the Agent and Lenders that the Borrower desires to (i) enter into a
stock purchase agreement to be dated on or about June 1, 1996 (the "Store # 824
Agreement") between the Borrower and Community Pride, Inc. ("Community Pride"),
pursuant to which the Borrower intends to sell, and Community Pride intends to
purchase, the stock of Farm Fresh 824, Inc., a subsidiary of Borrower formed
solely for the purpose of holding and effecting the sale of store assets (the
"Store # 824 Assets") located at Store #824 of the Borrower located in Richmond
Virginia and enter into an agreement with Community Pride pursuant to which the
Store #824 lease would be assigned to Community Pride and (ii) enter into an
asset purchase agreement dated May 3, 1996 (the "Store # 191 Agreement", and
together with the Store # 824 Agreement, each an "Agreement" and collectively,
the "Agreements") between the Borrower and Winn-Dixie Raleigh, Inc.
("Winn-Dixie"), pursuant to which the Borrower intends to sell, and Winn-Dixie
intends to purchase, the lease and store assets (excluding inventory other than
prescription drugs) (the "Store # 191 Assets" and, together with the Store # 824
Assets, the "Sold Assets") located at Store #191 of the Borrower located in
Elizabeth City, North Carolina.
<PAGE>
Section 6.12 of the Credit Agreement requires Borrower to
pledge, pursuant to the Pledge Agreement, the stock of any newly created
subsidiary and cause any such subsidiary to become a Guarantor. Section 7.05 of
the Credit Agreement restricts the ability of the Borrower to sell, assign or
otherwise dispose of any of its assets. Section 7.06 of the Credit Agreement
restricts the ability of Borrower to own or acquire any stock, obligations,
assets or securities of any other person. Section 2.07(c) of the Credit
Agreement requires that the Commitment thereunder be reduced in connection with
certain asset sale transactions. Section 2.09(f) of the Credit Agreement
requires that the Borrower give the Agent certain prior written notice with
respect to certain events, including certain prepayments.
You have requested that the Agent and Lenders (a) consent to
the sale of the Store # 824 Assets pursuant to the terms of the Store # 824
Agreement and the assignment of the Store # 824 lease (the "Store # 824
Transaction") and consent to the sale of the Store #191 Assets pursuant to the
terms of the Store # 191 Agreement (the "Store #191 Transaction" and together
with the Store #824 Transaction, collectively, the "Transactions"); (b) consent
to the Borrower's formation of Farm Fresh 824, Inc. for the sole purpose of
holding the Store #824 Assets and effecting the Store #824 Transaction; (c)
waive with respect to the Store #824 Transaction their right to a pledge of the
stock of Farm Fresh 824, Inc. and their right to its becoming a Guarantor under
the Credit Agreement; (d) waive with respect to the Transactions their right to
the prior written notice of prepayment as required under Section 2.09(f) of the
Credit Agreement; (e) waive with respect to the Transactions their right to a
Commitment reduction as referenced in Section 2.07(c) of the Credit Agreement
and (f) release the security interest of the Agent with respect to the Store
#824 Assets and with respect to the Store #191 Assets.
Subject to the terms and conditions hereof, upon the
effectiveness of this Amendment, Consent and Waiver, the Agent and Lenders
hereby (a) consent to the Transactions; (b) consent to the formation of Farm
Fresh 824, Inc. for the sole purpose of holding the Store # 824 Assets and
effecting the Store # 824 Transaction; (c) waive their right to a pledge of Farm
Fresh 824 Inc.'s stock and its becoming a Guarantor under the Credit Agreement;
(d) waive their right to the prior written notice of prepayment in connection
with the Transactions as required under Section 2.09(f) of the Credit Agreement;
(e) waive their right to a Commitment reduction in connection with the
Transactions as referenced in Section 2.07(c) and (f) release any lien and/or
security interest in their favor in the Sold Assets; provided, however, that the
foregoing consent and waiver shall be limited to the Transactions as described
herein and shall not apply to any other transaction; and provided, further, that
this amendment, consent and waiver letter (the "Amendment, Consent and Waiver")
shall not diminish any of the rights, powers and remedies of the Agent or
Lenders under the Credit Agreement or otherwise with respect to any other
existing or future transaction.
You have also advised the undersigned that the Borrower has
entered into a certain equipment lease financing with AT&T Credit Corporation
("AT&T ") with respect to certain "scanner" and related equipment used in the
Borrower's business in the aggregate amount of approximately $5,000,000,
pursuant to a Lease dated April 23, 1996 between the Borrower and AT&T .
Although it was your intention to lease the foregoing equipment, $800,000 of the
2
<PAGE>
equipment was delivered by AT&T prior to consummation of the foregoing Lease and
AT&T has now requested that such $800,000 worth of equipment be treated as being
subject to a sale/leaseback transaction. Based upon your representation to the
undersigned that the foregoing transaction is in compliance with all other
provisions of the Credit Agreement, the undersigned hereby agrees that the
transaction with AT&T described above shall not count toward the $10,000,000
sale/leaseback basket set forth in Section 7.02(i) of the Credit Agreement.
This Amendment, Consent and Waiver shall be effective only
upon satisfaction of the following conditions precedent:
1. The Agent shall have received a true and complete copy of
all material agreements, documents, and instruments entered into in connection
with the Transactions (collectively, the "Transaction Documents"), each of the
foregoing to be in form and substance satisfactory to the Agent and the Lenders,
and the Borrower shall have certified to the Agent and the Lenders that the
Transactions shall have been consummated in accordance with the terms of the
Transaction Documents applicable to it and applicable law.
2. The Agent and Lenders shall have received either (i) the
consent with respect to the Transactions of all of the holders of the Borrower's
senior unsecured indebtedness and Subordinated Indebtedness or (ii) an opinion
of counsel stating that the Transactions do not conflict with or violate in any
manner the terms of any of the Borrower's Senior Notes (or the related Senior
Indenture) or Subordinated Indebtedness or in any manner affect status of the
Obligations under the Credit Agreement regarding the subordination provisions of
the Borrower's Subordinated Indebtedness, the foregoing to be in form and
substance satisfactory to the Agent and the Lenders; and
3. The Agent shall have received counterparts to this
Amendment, Consent and Waiver, duly executed and delivered by each of the Agent,
the Lenders, the Borrower and the Guarantors, and the Agent shall have
additionally received all of the following documents, each document being dated
the effective date of this Amendment, Consent and Waiver, in form and substance
satisfactory to the Agent:
(a) a certificate of the Secretary or an Assistant
Secretary of the Borrower and the Guarantor certifying the names and true
signatures of their respective officers authorized to sign this Amendment,
Consent and Waiver and the other documents to be delivered hereunder;
(b) certified copies of (i) the resolutions of the
Board of Directors of the Borrower and the Guarantor approving this Amendment,
Consent and Waiver and (ii) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment,
Consent and Waiver and the matters contemplated hereby;
(c) a certificate signed by a duly authorized officer
of each of the Borrower and the Guarantor stating that: (i) the representations
and warranties of the Borrower
3
<PAGE>
as set forth in Article IV of the Credit Agreement and in any documents
delivered therewith, including the Loan Documents, are true and correct on and
as of the date of such certificate as though made on and as of such date (except
insofar as such representations and warranties relate expressly to an earlier
date or are based on the accuracy of schedules prepared as of a prior date);
(ii) the execution, delivery and performance by the Borrower and the Guarantor
of this Amendment, Consent and Waiver, and the Transaction Documents are within
the Borrower's and Guarantor's corporate powers, have been duly authorized by
all necessary corporate action and do not contravene (x) the charter or by-laws,
and (y) any law or any contractual restriction binding on or affecting the
Borrower or the Guarantor; (iii) no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower or
the Guarantor of this Amendment, Consent and Waiver; (iv) this Amendment,
Consent and Waiver and each of the Transaction Documents constitute the legal,
valid and binding obligations of the Borrower and the Guarantor enforceable
against the Borrower and the Guarantor in accordance with their respective
terms; (v) there is no pending or threatened action or proceeding affecting the
Borrower, the Guarantor or any of their respective subsidiaries before any
court, governmental agency or arbitrator, which may materially adversely affect
the financial condition or operations of the Borrower, the Guarantor or any
subsidiary or which purports to affect the legality, validity or enforceability
of this Amendment, Consent and Waiver, and/or any of the Transaction Documents;
and
(d) a favorable opinion of Kaufman & Canoles, counsel
for the Borrower and the Guarantor, in a form reasonably acceptable to the Agent
and Lenders.
4. The entire net proceeds of the Sold Assets (to a maximum
amount equal to the principal amount of Loans outstanding at such time) shall
have been applied by the Borrower to a repayment of the outstanding principal
balance of the Loans, but such repayment will not reduce the Commitment under
the Credit Agreement.
The parties hereto acknowledge that the Store #824 Transaction
and the Store #191 Transaction may be consummated on the same or different dates
and that the foregoing conditions precedent with respect to such Transactions
may be satisfied on the same or on different dates. In the event that the
conditions precedent have been satisfied with respect to the Transactions on
different dates or with respect to one Transaction and not the other, then the
consent of the Agent and the Lenders shall be limited to the Transaction for
which all conditions precedent have been satisfied.
By your signature below, you jointly and severally (a) repeat
each of the representations and warranties set forth in Article IV of the Credit
Agreement and in any documents delivered therewith, including the Loan
Documents, (except insofar as such representations and warranties relate
expressly to an earlier date or are based on the accuracy of schedules prepared
as of a prior date); (b) certify that, both before and after giving effect to
the Transaction, the terms of this Amendment, Consent and Waiver and the terms
of the Transaction Documents, no Default or Event of Default has occurred and is
continuing (other than as the
4
<PAGE>
Borrower has notified the Agent in writing on or before the effective date of
this Amendment, Consent and Waiver); and (c) confirm and reaffirm all collateral
security, guarantees and other agreements executed or furnished by you in
connection with the Credit Agreement.
Except as modified hereby, all terms and conditions of the
Credit Agreement and the Loan Documents remain in full force and effect.
Terms used but not defined herein shall have the meaning
assigned thereto in the Credit Agreement.
The Borrower agrees to pay on demand all costs and expenses of
the Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Amendment, Consent and Waiver
and the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the Agent as to
its rights and responsibilities hereunder and thereunder. The Borrower further
agrees to pay on demand all costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Amendment, Consent and Waiver and the other instruments and documents to be
delivered hereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this paragraph. In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Amendment, Consent and Waiver and the other instruments and documents to be
delivered hereunder, and agrees to save the Agent and each Lender harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes.
This Amendment, Consent and Waiver may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
This Amendment, Consent and Waiver shall be governed by, and
construed in accordance with, the laws of the State of New York.
Very truly yours,
FLEET BANK, N.A. (formerly known as
NATWEST USA CREDIT CORP.), as
Agent and as Lender
By:/s/ Fleet Bank, N.A.
Title:
5
<PAGE>
HELLER FINANCIAL, INC.,
as Lender
By:/s/ Heller Financial, Inc.
Title:
FARM FRESH, INC.
By:/s/ Farm Fresh, Inc.
Title:
FF HOLDINGS CORPORATION,
as Guarantor
By:/s/ FF Holdings Corporation
Title:
6
WAIVER AND EIGHTH AMENDATORY AGREEMENT
Dated as of March 31, 1996
This WAIVER AND EIGHTH AMENDATORY AGREEMENT is among FARM
FRESH, INC., a Virginia corporation (the "Borrower"), the guarantors parties to
the Credit Agreement referred to below (the "Guarantors"), the lenders parties
to the Credit Agreement referred to below (the "Lenders"), and FLEET BANK, N.A.
(as successor to NatWest USA Credit Corp.), as agent (the "Agent") for the
Lenders thereunder.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Guarantors, the Lenders and the Agent
have entered into a Revolving Credit Agreement dated as of December 10, 1993 (as
amended to date, the "Credit Agreement"); the terms defined therein being used
herein as therein defined unless otherwise defined herein.
(2) The Borrower and the Lenders have, on the terms and
conditions stated below, agreed to waive and amend certain of the terms of the
Credit Agreement as hereinafter set forth.
SECTION 1. Waiver. The Borrower has advised the Agent and the
Lenders of the Borrower's non-compliance with Section 7.09 of the Credit
Agreement (Fixed Charge Coverage), as the result of the Fixed Charge Coverage
Ratio of the Borrower and its subsidiaries for the four consecutive fiscal
quarters ending December 31, 1995 being .70 to 1, rather than the required .84
to 1. Effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, the Agent and the Lenders
each hereby waive any Event of Default arising out of the Borrower's
non-compliance at any time with Section 7.09 of the Credit Agreement; provided,
however, that the foregoing waiver shall be limited to non- compliance with
Section 7.09 of the Credit Agreement and shall not apply to any other
noncompliances with the terms of the Credit Agreement or any other Loan
Documents. With respect to the aforementioned noncompliance with the Fixed
Charge Coverage Ratio for the four consecutive fiscal quarters ending December
31, 1995, the foregoing waiver shall also be effective as of December 31, 1995.
SECTION 2. Amendments to Credit Agreement. Effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 3 hereof, the Credit Agreement is hereby amended as follows:
(a) The definition of "Change of Control" in Article I of the
Credit Agreement is hereby amended by deleting clause (y) thereof in its
entirety and substituting, in lieu thereof, the following: "(y) a Change of
Control (as defined in the Senior Indenture) shall occur.".
(b)(i) The definition of "EBITDA" in Article I of the Credit
Agreement is hereby amended by deleting such definition in its entirety and by
substituting, in lieu thereof, the following:
<PAGE>
"EBITDA" shall mean, for any period, the sum of (i) Net Income
(without taking into account any (A) extraordinary gains, (B) extraordinary
losses, (C) reserves taken and occasioned by the closing of store locations, but
not to exceed $8,000,000 in the fiscal year ending January 1, 1994 occasioned by
the closing of Farm Fresh stores # 233, 361, 404, 465 and Safeway store #225 and
either Safeway store #228 or Farm Fresh store #363, and $2,500,000 in any fiscal
year thereafter, (D) assets written down as a result of store remodels,(E) gain
or loss from assets held for sale set forth in Schedule 7.05 hereto and (F) up
to $5,000,000 in non-cash losses recognized in 1995 resulting from (i) the sale
by the Borrower of the "Purchased Assets" (as such term is defined in the Fifth
Amendatory Agreement, Consent and Waiver to this Agreement) to Hannaford Bros.
Co., (ii) the sale by the Borrower of the preferred stock of Virginia
Supermarkets, Inc. to Great Valu Supermarkets, Inc. pursuant to the terms of the
Sixth Amendatory Agreement, Consent and Waiver to this Agreement; and (iii)
other sales of the assets of the Borrower to the extent such sales are permitted
under this Agreement), (ii) Interest Expense, (iii) depreciation and
amortization of intangible assets, (iv) federal, state and local income taxes,
(v) increases in LIFO reserves and (vi) for the period beginning on the Closing
Date and ending January 1, 1994, an amount not to exceed $2,000,000 and for each
fiscal year thereafter, an amount, not to exceed $2,000,000 in the aggregate for
any such fiscal year, in each case attributable to non-cash write downs of fixed
assets associated with the closing of stores, in each case of the Borrower and
its subsidiaries for such period determined on a Consolidated basis, computed
and calculated in accordance with generally accepted accounting principles
consistently applied."
(ii) The definition of "Final Maturity Date" in Article I of
the Credit Agreement is hereby amended by deleting the words "the third
anniversary of the Closing Date" and by substituting, in lieu thereof, the words
"January 13, 1998".
(c) Article I of the Credit Agreement is hereby amended by
adding the following definitions thereto:
"'Average Undrawn Availability' for any period shall mean the
quotient of (i) the aggregate Undrawn Availability at the end of each Business
Day in such period divided by (ii) the number of Business Days in such period.
'Eighth Amendment' shall mean the Waiver and Eighth Amendatory
Agreement dated as of March 31, 1996 to this Agreement, among the Borrower, the
Guarantors, the Agent and the Lenders."
(d) Section 2.01(a) of the Credit Agreement is hereby amended
by deleting clause (1)(B) thereof and by substituting therefor the following:
"(B) an amount equal to the sum of (i) up to sixty percent
(60%) of the Net Amount of Eligible Inventory plus (ii), subject to the terms of
Section 2.09(d) hereof, (a) $10,000,000 from the date of this Agreement to the
first anniversary date of this Agreement, (b) $6,666,667 from the first
anniversary date of this Agreement to the effective date of the Eighth
2
<PAGE>
Amendment to this Agreement and (c) $11,000,000 from the effective date of the
Eighth Amendment to this Agreement to January 13, 1998 at which time it will
become zero (0) (this clause (1)(B) referred to herein as the "Borrowing
Base")".
(e) Section 2.05 of the Credit Agreement is hereby amended by
deleting clauses (a) and (b) thereto and by substituting, in lieu thereof, the
following:
"(a) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, each Prime Rate Loan shall bear interest at a rate per annum equal
to the Prime Rate plus one and three quarter percent (1-3/4%); provided,
however, that, commencing on January 1, 1997, (i) effective one Business Day
after receipt by the Agent of a certificate pursuant to Section 6.05(d) hereof
(each such certificate, a "Four Quarter EBITDA Certificate") indicating that
EBITDA for the four (4) most recent consecutive fiscal quarter periods ending on
or before the date of determination (commencing with the four fiscal quarters
ending December 31, 1996) is greater than $45,000,000, then from such effective
date through (but excluding) one Business Day after receipt by the Agent of the
next Four Quarter EBITDA Certificate, each Prime Rate Loan shall bear interest
at a rate per annum equal to the Prime Rate plus one and one-quarter percent (1-
1/4%); and (ii) effective one Business Day after receipt by the Agent of a Four
Quarter EBITDA Certificate indicating that EBITDA for the four (4) most recent
consecutive fiscal quarter periods ending on or before the date of determination
(commencing with the four fiscal quarters ending December 31, 1996) is less than
$40,000,000, then from such effective date through (but excluding) one Business
Day after receipt by the Agent of the next Four Quarter EBITDA Certificate, each
Prime Rate Loan shall bear interest at a rate per annum equal to the Prime Rate
plus two percent (2%) (with any additional interest payable under Section
2.08(a) to be in addition to the foregoing interest).
(b) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, each Eurodollar Loan shall bear interest at a rate per annum equal
to the Adjusted LIBO Rate plus three percent (3%); provided, however, that,
commencing on January 1, 1997, (i) effective one Business Day after receipt by
the Agent of a Four Quarter EBITDA Certificate indicating that EBITDA for the
four (4) most recent consecutive fiscal quarter periods ending on or before the
date of determination (commencing with the four fiscal quarters ending December
31, 1996) is greater than $45,000,000, then from such effective date through
(but excluding) one Business Day after receipt by the Agent of the next Four
Quarter EBITDA Certificate, each Eurodollar Loan shall bear interest at a rate
per annum equal to the Adjusted LIBO Rate plus two and one-half percent (2-1/2%)
and (ii) effective one Business Day after receipt by the Agent of a Four Quarter
EBITDA Certificate indicating that EBITDA for the four (4) most recent
consecutive fiscal quarter periods ending on or before the date of determination
(commencing with the four fiscal quarters ending December 31, 1996) is less than
$40,000,000, then from such effective date through (but excluding) one Business
Day after receipt by the Agent of the next Four Quarter EBITDA Certificate, each
Eurodollar Loan shall bear interest at a rate per annum equal to the Adjusted
LIBO Rate plus three and one-half percent (3-1/2%) (with any additional interest
payable under Section 2.08(a) to be in addition to the foregoing interest)."
3
<PAGE>
(f) Section 2.06(a) is hereby amended by deleting the first
sentence thereof and by substituting, in lieu thereof, the following:
"(a) The Borrower shall pay each Lender, through the Agent,
(i) on the last Business Day of each March, June, September and December
commencing December 31, 1993, (ii) on the date of any reduction of Commitments
pursuant to Section 2.07 hereof and (iii) on the Termination Date, in
immediately available funds, a commitment fee (the "Commitment Fee") of one-half
percent (1/2%) per annum on the average amount, calculated on a daily basis, by
which the Commitment of such Lender, during the quarter (or shorter period
commencing with the date hereof or ending with the Termination date) ending on
such date exceeds the aggregate outstanding principal amount of the Loans made
by such Lender."
(g) Section 2.08(a) of the Credit Agreement is hereby amended
by deleting such Section 2.08(a) in its entirety and by substituting, in lieu
thereof, the following:
"(a) If there shall occur and be continuing any Event of
Default, the Borrower shall on demand from time to time pay interest, to the
extent permitted by law, on principal, interest, fees and any other amount which
is payable hereunder or under any other Loan Document (whether then due and
payable or not) (after as well as before judgment) at a rate per annum equal to
two percent (2%) in excess of the rates otherwise applicable thereto (or if no
rate is applicable thereto, at a rate per annum equal to three and one half
percent (3-1/2%) in excess of the Prime Rate); provided, however, that with
respect to Prime Rate Loans accruing interest under Section 2.05(a)(ii) of this
Agreement and letter of credit fees payable under Section 13.06(a)(ii) of this
Agreement, one and three quarter percent (1-3/4%) shall be substituted for the
foregoing 2%; and provided, further, that with respect to Eurodollar Loans
accruing interest under Section 2.05(b)(ii) of this Agreement, one and one half
percent (1-1/2%) shall be substituted for the foregoing 2%."
(h) Section 4.05 of the Credit Agreement is hereby amended by
deleting the words "January 2, 1993" and by substituting, in lieu thereof, the
words "the date of the latest financial statements delivered to the Agent by the
Borrower pursuant to Section 6.05(a) hereof".
(i) Section 4.06 of the Credit Agreement is hereby amended by
(x) adding the words "(other than a Material Adverse Effect solely with respect
to the Parent)" immediately after the words "Material Adverse Effect" at the end
of clause (a) thereof; and (y) deleting the words "the Parent," in Section
4.06(b) thereof.
(j) Section 6.05(a) of the Credit Agreement is hereby amended
by inserting the words "with respect to going concern, with respect to the
restructuring of the capital structure of the Parent and" after the word
"except" in the parenthetical contained therein.
(k) Section 6.05(d) of the Credit Agreement is hereby amended
by deleting (i) the words "for any fiscal month which ends a fiscal quarter,
with the covenants set forth in Sections 7.07, 7.08, 7.09, 7.10, 7.11 and 7.13
hereof" and by substituting therefor the words "for
4
<PAGE>
any fiscal month which ends a fiscal quarter, with the covenants set forth in
Sections 7.07 and 7.11 hereof" and (ii) the words "for each fiscal month, with
the covenants set forth in Sections 7.07, 7.08 and 7.10 hereof" and by
substituting therefor the words "for each fiscal month, with the covenant set
forth in Section 7.07 hereof".
(l) Section 7.07 of the Credit Agreement is hereby amended by
deleting the table set forth therein and by substituting therefor the following
table:
<TABLE>
<CAPTION>
"Period Maximum Amount
<S> <C>
Fiscal Year ending December 31, 1996 $18,000,000
Fiscal Year ending December 31, 1997
and each Fiscal Year thereafter $18,000,000"
</TABLE>
(m) Sections 7.08, 7.09, 7.10 and 7.13 of the Credit Agreement
are hereby amended by deleting each such Section in its entirety and by
substituting, in lieu thereof in each instance, the words "[Intentionally
Omitted]".
(n) Section 7.11 of the Credit Agreement is hereby amended by
deleting the table set forth therein and by substituting, in lieu thereof, the
following table:
"Date of Determination Amount
March 23, 1996 $40,000,000
June 15, 1996 $38,000,000
September 7, 1996 $37,000,000
December 28, 1996 $37,000,000
March 22, 1997 $38,000,000
June 14, 1997 $39,000,000
September 6, 1997 $40,500,000
December 27, 1997 $42,000,000".
(o) Article VIII of the Credit Agreement is hereby amended by:
(i) deleting the word "or" immediately after clause
"(n)" thereto;
5
<PAGE>
(ii) adding the word "; or" immediately after clause
"(o)" thereto and (iii) adding the following clause "(p)" thereto:
"(p) the failure of the Borrower's Financial Officer to
deliver to the Agent by the tenth (10th) day following the end of any fiscal
period of the Borrower, a certificate (with supporting calculations concurred to
by the Agent and the Lenders) indicating that Average Undrawn Availability for
such fiscal period was $2,000,000 or greater";
(iii) deleting clauses (e), (g) and (j) of such
Article VIII and substituting therefor the following:
"(e) the Borrower, any Guarantor, any Grantor or any
subsidiary of any thereof shall (i) voluntarily commence any proceeding or file
any petition seeking relief under Title 11 of the United States Code or any
other Federal, state or foreign bankruptcy, insolvency, liquidation or similar
law (other than a bankruptcy involving solely the Parent where (x) the Parent
retains the exclusive right to file a plan of reorganization and (y) not more
than one year has elapsed since the commencement date of such proceeding), (ii)
consent to the institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Borrower, such Guarantor, such Grantor or such
subsidiary or for a substantial part of its property or assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take corporate action for the purpose of
effecting any of the foregoing;"
"(g) default shall be made with respect to (i) any
Indebtedness or obligations under a capitalized lease of the Borrower, any
Guarantor (other than defaults of the Parent under Indebtedness of the Parent or
capitalized leases of the Parent), any Grantor (other than defaults of the
Parent under Indebtedness of the Parent or capitalized leases of the Parent) or
any subsidiary of any thereof, whose unpaid principal payments exceed in the
aggregate $250,000 at any time (excluding Indebtedness outstanding hereunder) or
(ii) any Indebtedness of the Borrower or any of its subsidiaries arising under
the Stock Purchase Agreement, if the effect of any such default shall be to
accelerate, or to permit the holder or obligee of any such Indebtedness or
obligations under a capitalized lease (or any trustee on behalf of such holder
or obligee) at its option to accelerate, the maturity of such Indebtedness or
obligations under a capitalized lease, or if any such Indebtedness or
obligations under a capitalized lease shall not be paid when scheduled to be due
and payable"
"(j) a judgment (not reimbursed by insurance policies of the
Borrower, any Guarantor, any Grantor or any subsidiary of any thereof) or decree
for the payment of money, a fine or penalty (x) shall be rendered by a court or
other tribunal against the Borrower, any Guarantor (other than the Parent), any
Grantor (other than the Parent) or any subsidiary of any thereof which when
taken together with all other such judgments, decrees, fines and penalties
6
<PAGE>
shall exceed $500,000 or (y) shall be rendered by a court or other tribunal
against the Borrower, any Guarantor (including the Parent), any Grantor
(including the Parent) or any subsidiary of any thereof which when taken
together with all other such judgments, decrees, fines and penalties shall
exceed $10,000,000, and (i) shall remain undischarged or unbonded for a period
of 30 consecutive days during which the execution of such judgment, decree, fine
or penalty shall not have been stayed effectively, or (ii) any judgment creditor
or other person shall legally commence actions to collect on or enforce such
judgment, decree, fine or penalty;"
(iv) (x) deleting paragraphs (m) and (n) of such
Article VIII in their entirety and substituting, in lieu thereof in each
instance, the words "[intentionally omitted]"; and
(y) deleting from clause (f) thereof the
words "and such proceeding or petition shall continue undismissed for 30 days or
an order or decree approving or ordering any of the foregoing shall continue
unstayed and in effect for 30 days" and substituting, in lieu thereof, the words
"and (x) such proceeding or petition with respect to the Borrower, any Guarantor
(other than the Parent) any Grantor (other than the Parent) or any subsidiary of
any thereof shall continue undismissed for 30 days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and in effect
for 30 days or (y) ninety days shall have elapsed from the date of the
commencement of such proceeding with respect to the Parent, the filing of such
petition with respect to the Parent or the entry of an order or decree approving
or ordering any of the foregoing with respect to the Parent, during which time
such proceeding, filing, order or decree shall not have been dismissed, remained
stayed or remained suspended".
(p) Section 13.06 of the Credit Agreement is hereby amended by
deleting clause (a) thereof and by substituting, in lieu thereof, the following:
"(a) for the ratable benefit of the Lenders, with respect to
any Letter of Credit, on the last Business Day of each September, December,
March and June and on the date of the full drawing, cancellation, termination or
expiration of such Letter of Credit, a letter of credit fee for such calendar
quarter or shorter period equal to two and one half percent (2-1/2%) per annum
on the average daily undrawn amount thereof for such calendar quarter or such
shorter period, payable to the Agent at its Domestic Lending Office in
immediately available funds; provided, however, that, commencing on January 1,
1997, (i) effective one Business Day after receipt by the Agent of a Four
Quarter EBITDA Certificate indicating that EBITDA for the four (4) most recent
consecutive fiscal quarter periods ending on or before the date of determination
(commencing with the four fiscal quarters ending December 31, 1996) is greater
than $45,000,000, then from such effective date through (but excluding) one
Business Day after receipt by the Agent of the next Four Quarter EBITDA
Certificate, the foregoing letter of credit fee shall be two and one-quarter
percent (2-1/4%) per annum and (ii) effective one Business Day after receipt by
the Agent of a Four Quarter EBITDA Certificate indicating that EBITDA for the
four (4) most recent consecutive fiscal quarter periods ending on or before the
date of determination (commencing with the four fiscal quarters ending December
31, 1996) is less than $40,000,000, then from such effective date through (but
excluding) one Business Day after
7
<PAGE>
receipt by the Agent of the next Four Quarter EBITDA Certificate, the foregoing
letter of credit fee shall be two and three quarters percent (2-3/4%) per
annum.".
SECTION 3. Conditions of Effectiveness. This Waiver and Eighth
Amendatory Agreement shall be operative as of the date hereof but shall become
effective when, and only when, the Agent shall have received (x) full and final
payment of a $550,000 fee (which shall be in substitution for, and in full
satisfaction of, payment of the $400,000 fee referenced in Section 2.06(c) of
the Credit Agreement); (y) counterparts of this Waiver and Eighth Amendatory
Agreement executed by the Borrower and the Lenders or, as to any of said
Lenders, advice satisfactory to the Agent that such Lender has executed this
Waiver and Eighth Amendatory Agreement and (z) all of the following documents,
each document (unless otherwise indicated) being dated the date hereof, in form
and substance satisfactory to the Agent:
(a) a certificate of the Secretary or an Assistant
Secretary of the Borrower and the Guarantor certifying the names and true
signatures of their respective officers authorized to sign this Waiver and
Eighth Amendatory Agreement, and the other documents to be delivered hereunder;
(b) a certificate signed by a duly authorized officer
of the Borrower stating that:
(i) the representations and warranties of
the Borrower as set forth in Article IV of the Credit Agreement and in any
documents delivered therewith, including the Loan Documents, are true and
correct on and as of the date of such certificate as though made on and as of
such date (except insofar as such representations and warranties relate
expressly to an earlier date or are based on the accuracy of schedules prepared
as of a prior date),
(ii) the representations and warranties
contained in Section 4 hereof are correct on and as of the date of such
certificate as though made on and as of such date, and
(iii) after giving effect to this Waiver and
Eighth Amendatory Agreement, no Default or Event of Default has occurred and is
continuing;
(c) certified copies of (i) the resolutions of the
Board of Directors of the Borrower and of the Guarantor approving this Waiver
and Eighth Amendatory Agreement and (ii) all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Waiver and Eighth Amendatory Agreement and the matters contemplated hereby;
(d) a favorable opinion of Kaufman & Canoles, counsel
for the Borrower and the Guarantor, in a form reasonably acceptable to the Agent
and Lenders; and
8
<PAGE>
(e) an amendment to the existing deeds of trust in
favor of the Agent, together with endorsements to the title insurance policies
in force with respect to such deeds of trust.
SECTION 4. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The execution, delivery and performance by the
Borrower of this Waiver and Eighth Amendatory Agreement and the Credit Agreement
as amended hereby are within the Borrower's and the Guarantor's corporate
powers, have been duly authorized by all necessary corporate action and do not
contravene (i) the charter or by-laws, and (ii) any law or any contractual
restriction binding on or affecting the Borrower or the Guarantor.
(b) No authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower or
the Guarantor of this Waiver and Eighth Amendatory Agreement and the Credit
Agreement as amended hereby.
(c) This Waiver and Eighth Amendatory Agreement and
the Credit Agreement as amended hereby, constitute legal, valid and binding
obligations of the Borrower and the Guarantor enforceable against the Borrower
and the Guarantor in accordance with their respective terms.
(d) There is no pending or threatened action or
proceeding affecting the Borrower, the Guarantor or any of their respective
subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower, the Guarantor or any subsidiary thereof or which purports to affect
the legality, validity or enforceability of this Waiver and Eighth Amendatory
Agreement and the Credit Agreement as amended hereby.
(e) The execution, delivery and performance of this
Waiver and Eighth Amendatory Agreement does not conflict with or violate in any
manner the terms of any of the Borrower's Senior Notes (or the related Senior
Indenture) or Subordinated Indebtedness or in any manner affect the status of
the Obligations under the Credit Agreement regarding the subordination
provisions of the Borrower's Subordinated Indebtedness.
SECTION 5. Reference to and Effect on the Loan Documents.
(a) Upon the effectiveness of this Waiver and Eighth
Amendment, on and after the date hereof each reference in the Credit Agreement
to "this Agreement," "hereunder," "hereof" or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents to "the
Credit Agreement," "thereunder," "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby.
9
<PAGE>
(b) Except as specifically amended above, the Credit
Agreement and the Notes, and all other Loan Documents, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed.
(c) The execution, delivery and effectiveness of this
Waiver and Eighth Amendatory Agreement shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of any Lender or the
Agent under any of the Loan Documents, nor constitute a waiver of any provision
of any of the Loan Documents.
SECTION 6. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Waiver and Eighth Amendatory Agreement and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities hereunder and thereunder. The Borrower further agrees to pay on
demand all costs and expenses, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Waiver and Eighth
Amendatory Agreement and the other instruments and documents to be delivered
hereunder, including, without limitation, reasonable counsel fees and expenses
in connection with the enforcement of rights under this Section 6. In addition,
the Borrower shall pay any and all stamp and other taxes payable or determined
to be payable in connection with the execution and delivery of this Waiver and
Eighth Amendatory Agreement and the other instruments and documents to be
delivered hereunder, and agrees to save the Agent and each Lender harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes.
SECTION 7. Execution in Counterparts. This Waiver and Eighth
Amendatory Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
SECTION 8. Governing Law. This Waiver and Eighth Amendatory
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
and Eighth Amendatory Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
10
<PAGE>
FARM FRESH, INC.
By:/s/ Farm Fresh, Inc.
Name:
Title:
FF HOLDINGS CORPORATION, as Guarantor
By:/s/ FF Holdings Corporation
Name:
Title:
FLEET BANK, N.A., (as successor to NatWest USA
Credit Corp.), as Lender
By:/s/ Fleet Bank, N.A.
Name:
Title:
FLEET BANK, N.A. (as successor to NatWest USA
Credit Corp.), as Agent
By:/s/ Fleet Bank, N.A.
Name:
Title:
HELLER FINANCIAL, INC., as Lender
By:/s/ Heller Financial, Inc.
Name:
Title:
11
<PAGE>
NINTH AMENDATORY AGREEMENT
Dated as of September 30, 1996
This NINTH AMENDATORY AGREEMENT is among FARM FRESH, INC., a Virginia
corporation (the "Borrower"), the guarantors parties to the Credit Agreement
referred to below (the "Guarantors"), the lenders parties to the Credit
Agreement referred to below (the "Lenders"), and FLEET BANK, N.A. (as successor
to NatWest USA Credit Corp.), as agent (the "Agent") for the Lenders thereunder.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Guarantors, the Lenders and the Agent
have entered into a Revolving Credit Agreement dated as of December 10, 1993 (as
amended to date, the "Credit Agreement"); the terms defined therein being used
herein as therein defined unless otherwise defined herein.
(2) The Borrower and the Lenders have, on the terms and
conditions stated below, agreed to waive and amend certain of the terms of the
Credit Agreement as hereinafter set forth.
SECTION 1. Amendment to Credit Agreement. Effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, the Credit Agreement is hereby amended as follows:
Section 2.01(a) of the Credit Agreement is hereby amended by
deleting clause (1)(B) thereof and by substituting therefor the following:
"(B) an amount equal to the sum of (i)(x) from April 1 through
and including May 31 of each calendar year and from October 1 through and
including November 30 of each calendar year, up to seventy percent (70%) of the
Net Amount of Eligible Inventory, and (y) at all other times up to sixty percent
(60%) of the Net Amount of Eligible Inventory plus (ii), subject to the terms of
Section 2.09(d) hereof, (a) $10,000,000 from the date of this Agreement to the
first anniversary date of this Agreement, (b) $6,666,667 from the first
anniversary date of this Agreement to the effective date of the Eighth Amendment
to this Agreement and (c) $11,000,000 from the effective date of the Eighth
Amendment to this Agreement to January 13, 1998 at which time it will become
zero (0) (this clause (1)(B) referred to herein as the "Borrowing Base")".
SECTION 2. Conditions of Effectiveness. This Ninth Amendatory Agreement
shall be operative as of the date hereof but shall become effective when, and
only when, the Agent shall have received (x) full and final payment of a $25,000
fee; (y) counterparts of this Ninth Amendatory Agreement executed by the
Borrower and the Lenders or, as to any of said Lenders, advice satisfactory to
the Agent that such Lender has executed this Ninth Amendatory Agreement and (z)
all of the following documents, each document (unless otherwise indicated) being
dated the effective date, in form and substance satisfactory to the Agent:
<PAGE>
(a) a certificate of the Secretary or an Assistant
Secretary of the Borrower and the Guarantor certifying the names and true
signatures of their respective officers authorized to sign this Ninth Amendatory
Agreement, and the other documents to be delivered hereunder;
(b) a certificate signed by a duly authorized officer
of the Borrower stating that:
(i) the representations and warranties of the
Borrower as set forth in Article IV of the Credit Agreement and in any documents
delivered therewith, including the Loan Documents, are true and correct on and
as of the date of such certificate as though made on and as of such date (except
insofar as such representations and warranties relate expressly to an earlier
date or are based on the accuracy of schedules prepared as of a prior date),
(ii) the representations and warranties contained in
Section 3 hereof are correct on and as of the date of such certificate as though
made on and as of such date, and
(iii) after giving effect to this Ninth Amendatory
Agreement, no Default or Event of Default has occurred and is continuing;
(c) certified copies of (i) the resolutions of the
Board of Directors of the Borrower and of the Guarantor approving this Ninth
Amendatory Agreement and (ii) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Ninth Amendatory
Agreement and the matters contemplated hereby; and
(d) a favorable opinion of Kaufman & Canoles, counsel
for the Borrower and the Guarantor, in a form reasonably acceptable to the Agent
and Lenders.
SECTION 3. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The execution, delivery and performance by the
Borrower of this Ninth Amendatory Agreement and the Credit Agreement as amended
hereby are within the Borrower's and the Guarantor's corporate powers, have been
duly authorized by all necessary corporate action and do not contravene (i) the
charter or by-laws, and (ii) any law or any contractual restriction binding on
or affecting the Borrower or the Guarantor.
(b) No authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower or
the Guarantor of this Ninth Amendatory Agreement and the Credit Agreement as
amended hereby.
(c) This Ninth Amendatory Agreement and the Credit
Agreement as amended hereby, constitute legal, valid and binding obligations of
the Borrower and the
2
<PAGE>
Guarantor enforceable against the Borrower and the Guarantor in accordance with
their respective terms.
(d) There is no pending or threatened action or
proceeding affecting the Borrower, the Guarantor or any of their respective
subsidiaries before any court, governmental agency or arbitrator, which may
materially adversely affect the financial condition or operations of the
Borrower, the Guarantor or any subsidiary thereof or which purports to affect
the legality, validity or enforceability of this Ninth Amendatory Agreement and
the Credit Agreement as amended hereby.
(e) The execution, delivery and performance of this
Ninth Amendatory Agreement does not conflict with or violate in any manner the
terms of any of the Borrower's Senior Notes (or the related Senior Indenture) or
Subordinated Indebtedness or in any manner affect the status of the Obligations
under the Credit Agreement regarding the subordination provisions of the
Borrower's Subordinated Indebtedness.
SECTION 4. Reference to and Effect on the Loan Documents.
(a) Upon the effectiveness of this Ninth Amendment,
on and after the date hereof each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement," "thereunder," "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and the Notes, and all other Loan Documents, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed.
(c) The execution, delivery and effectiveness of this
Ninth Amendatory Agreement shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Lender or the Agent
under any of the Loan Documents, nor constitute a waiver of any provision of any
of the Loan Documents.
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Ninth Amendatory Agreement and the other instruments and documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto and with
respect to advising the Agent as to its rights and responsibilities hereunder
and thereunder. The Borrower further agrees to pay on demand all costs and
expenses, if any (including, without limitation, reasonable counsel fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Ninth Amendatory Agreement and the other
instruments and documents to be delivered hereunder, including, without
limitation,
3
<PAGE>
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 5. In addition, the Borrower shall pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and delivery of this Ninth Amendatory Agreement and the other
instruments and documents to be delivered hereunder, and agrees to save the
Agent and each Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omitting to pay such taxes.
SECTION 6. Execution in Counterparts. This Ninth Amendatory
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement.
SECTION 7. Governing Law. This Ninth Amendatory Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Amendatory Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FARM FRESH, INC.
By:/s/ Farm Fresh, Inc.
Name:
Title:
FF HOLDINGS CORPORATION, as Guarantor
By:/s/ FF Holdings Corporation
Name:
Title:
FLEET BANK, N.A., (as successor to NatWest USA
Credit Corp.), as Lender
By:/s/ Fleet Bank, N.A.
Name:
Title:
FLEET BANK, N.A. (as successor to NatWest USA
Credit Corp.), as Agent
By:/s/ Fleet Bank, N.A.
Name:
Title:
5
<PAGE>
HELLER FINANCIAL, INC., as Lender
By:/s/ Heller Financial, Inc.
Name:
Title:
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-7-1996
<CASH> 1,250
<SECURITIES> 0
<RECEIVABLES> 16,237
<ALLOWANCES> 587
<INVENTORY> 47,155
<CURRENT-ASSETS> 67,145
<PP&E> 205,221
<DEPRECIATION> 92,326
<TOTAL-ASSETS> 205,877
<CURRENT-LIABILITIES> 71,367
<BONDS> 287,708
0
32,961
<COMMON> 25
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 205,877
<SALES> 539,568
<TOTAL-REVENUES> 539,568
<CGS> 414,372
<TOTAL-COSTS> 414,372
<OTHER-EXPENSES> 110,360
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,553
<INCOME-PRETAX> (16,717)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,717)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
