SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 31, 1994 Commission File No. 33-25621
KASH N' KARRY FOOD STORES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 95-4161591
(State of Incorporation) (IRS Employer Identification Number)
6422 Harney Road, Tampa, Florida 33610
(Address of Registrant's Principal Executive Offices)
(813) 621-0200
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
The registrant 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 and has been subject to such filing requirements for the past 90 days.
As of October 14, 1994, there were 2,819,589 shares outstanding of the
registrant's common stock, $0.01 par value. Because there is no established
market for the voting stock, the aggregate market value of the voting stock
of the registrant cannot be determined without unreasonable effort and
expense.
[x] Disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
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TABLE OF CONTENTS
Page Number
PART I
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security
Holders 5
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 14
PART III
Item 10. Directors and Executive Officers of the
Registrant 42
Item 11. Compensation of Executive Officers 44
Item 12. Security Ownership of Certain Beneficial Owners
and Management 47
Item 13. Certain Relationships and Related
Transactions 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 50
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PART I
Item 1. Business.
General
The Company is the third largest food retailer in west central Florida,
operating 92 multi-department supermarkets, five conventional supermarkets
and 33 liquor stores under the "Kash n' Karry" name and two super warehouse
stores under the "Save `n Pack" name, all supported by a centrally-located
warehouse and distribution facility. More than one-half of the Company's
stores are located in the Tampa-St. Petersburg area, which is Florida's
largest retail food sales market, with the balance located between
Gainesville, approximately 130 miles to the north, and Bonita Springs,
approximately 150 miles to the south. The west central Florida area has a
diverse and growing economy, which includes high technology and financial
centers, an insurance industry presence, retirement communities, coastal
resorts and commercial agricultural activity.
Company Store Profile
The following table presents a profile of the Company's stores:
Number of Stores
Square At Fiscal Year End
Footage (1) 1994 1993 1992
---------------- ---------------------
Kash n' Karry Food Stores 40,000 - 57,000 50 48 42
25,000 - 39,999 43 (2) 55 57
less than 25,000 5 9 12
Save `n Pack
Super Warehouse Stores 76,000 - 88,000 2 3 --
Kash n' Karry Liquor Stores 1,800 - 2,700 33 35 30
(1) Includes selling and backroom areas.
(2) Includes one food store closed subsequent to July 31, 1994.
Supermarket Stores
The Company operates 92 multi-department supermarkets, with an average
size of 40,000 total square feet. The Company also operates five
conventional supermarkets which average approximately 18,000 total square
feet. All of the Company's supermarket stores offer a wide selection of
items typically sold in grocery stores, including staple groceries, fresh
fruits and vegetables, bakery and dairy products, delicatessen items, frozen
foods and fresh meats. Each of the Company's supermarket stores also sells
certain non-food items such as health and beauty care items, paper and
tobacco products, soaps and detergents, drugs, sundries and housewares. The
Company's multi-department stores offer, in addition, a wider variety of
non-food items, including cosmetics and toiletries, small hardware and a
limited selection of soft goods. Most of the Company's multi-department
stores also feature expanded perishable goods departments, delicatessens and
in-store bakeries and many contain pharmacies and full-service seafood,
full-service floral and video rental departments. All of the Company's
stores feature national brands and also carry a selection of corporate brand
merchandise. Most of the Company's food stores are located in shopping
centers. The Company's food stores are open seven days a week, and most
operate 24 hours a day.
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Super Warehouse Stores
In fiscal 1993, the Company acquired three super warehouse stores (one
of which was subsequently closed), operating under the Save `n Pack name.
The super warehouse stores, which are 76,000 and 88,000 square feet in size,
feature among the lowest prices on basic items carried by supermarkets and
are designed to cater to the needs of the low-income household. The
assortment of packaged goods carried by the super warehouse stores is more
limited than that of a supermarket and is frequently augmented by one-time
purchases of specially priced products that may not be available on a regular
basis. Store decor is austere compared to that of a traditional supermarket,
and product is displayed on warehouse racking and on floor pallets to enhance
productivity and promote a low-price impression. The stores provide a full
complement of perishable departments which also feature low prices and are
frequently self-service, including meat, produce, bakery, deli and fresh
seafood. The super warehouse stores operate 24 hours a day, seven days a
week.
Liquor Stores
Each of the Company's 33 liquor stores is located on property adjacent
to one of the Company's supermarket stores and is operated as a department of
such store, although, in accordance with Florida law, each liquor store must
maintain a separate entrance. The liquor stores offer a wide variety of
wines, beers and hard liquors, as well as mixers, soft drinks, snacks, ice
and other party accessories and a limited number of traditional grocery
items. Sales from the Company's liquor stores represent approximately 2% of
the Company's total sales. The Company's liquor stores range in size from
1,800 to 2,700 square feet, and most are open seven days a week.
Purchasing and Distribution
The Company operates a modern, 687,000 square foot warehouse,
distribution and office facility in Tampa with sufficient capacity to service
anticipated store expansion for the foreseeable future. Shipments from the
Company's warehouse support approximately 75% of total Company sales. The
Company has a computerized storage and selection system in the warehouse,
which improves efficiency and optimizes capacity. The warehouse enables the
Company to reduce costs by purchasing in large quantities and eliminating
market intermediaries. The warehouse facility also allows the Company to
utilize forward buying strategies, acquiring and storing merchandise that is
not immediately required, in order to take advantage of special promotional
prices offered by vendors or to purchase prior to impending price increases.
The Company operates a trucking fleet which delivers all of the
merchandise from the Company's warehouse to the Company's stores. This fleet
consists of 49 tractors, 84 dry trailers and 56 refrigerated haulers. The
Company uses a computerized distribution system to increase the efficiency of
its trucking operations and, where practical, to save on delivery charges by
transporting to its warehouse products purchased by the Company. None of the
Company's stores is more than 150 miles from its warehouse, and the average
distance is approximately 46 miles.
Substantially all products sold, including corporate brand products, are
purchased from a large group of unaffiliated suppliers on a spot or short-
term basis. Liquor is purchased from several distributors and is shipped
directly to the Company's liquor stores. The Company is a large-volume
purchaser of grocery products, and its purchases are of sufficient size and
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volume to qualify for minimum price brackets for most products sold. The
Company believes that it has good relations with its suppliers.
Competition
The food retailing business is highly competitive. The principal
competitive factors include store locations, product selection and quality,
price, cleanliness of stores, customer service and overall store image. The
Company believes, based on its marketing research, that customers perceive
the Company as having a favorable low-price image in the markets that it
serves and offering a wide variety of quality products and services in a
pleasant environment. The Company believes that its competitive strengths
include an experienced management team, desirable store locations combined
with a strong consumer franchise and efficient warehousing and distribution
facilities.
The Company competes with several national, regional and local
supermarket chains, particularly Publix, Winn-Dixie, Albertson's and Food
Lion. The Company is also in competition with convenience stores, stores
owned and operated or otherwise affiliated with large food wholesalers,
unaffiliated independent food stores, merchandise clubs, discount drugstore
chains and discount general merchandise chains. The Company's principal
competitors have greater financial resources than the Company and could use
those resources to take steps which could adversely affect the Company's
competitive position and financial performance, and the Company's ability to
compete may be adversely affected by its high leverage and the limitations
imposed by its debt agreements.
Seasonality
The Company's sales and related inventory levels tend to increase during
the winter months due to the holidays, increased tourism and the influx of
winter residents and decrease during the summer months.
Personnel
The Company currently employs approximately 3,500 full-time and 4,900
part-time associates, none of whom is covered by a collective bargaining
agreement. The Company believes that it has good relations with its
associates.
Trademarks and Licenses
The Company employs various trademarks, trade names and service marks in
its business, including the "Kash n' Karry" logo and trade name. Except for
"K Kash n' Karry" and its derivatives, and "We Pledge to Keep Our Customers
Coming Back," "So Much More To Pay Less For!," "Kash $aver," "Smart Buy,"
"Five Star Meat," "Nature Friendly" and "Save `n Pack," the Company does not
believe that any of such trademarks or service marks are material to the
business of the Company.
Certain governmental licenses and permits, including alcoholic beverage
licenses, health permits and various business licenses, are necessary in the
Company's operations. The Company believes it has all material licenses and
permits necessary to enable it to conduct its business.
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Item 2. Properties.
The Company's 97 supermarket stores have an aggregate selling area of
approximately three million square feet. Fourteen of the food stores
(comprising approximately 549,000 square feet) are owned by the Company. The
remaining 83 supermarket stores are leased by the Company. Six of the leased
stores are operated under long-term ground leases with the Company owning the
improvements at such locations. Seventeen leases expire during the next five
years, with the Company having options to renew all but two. Most of the
Company's food store leases have minimum rentals with additional rentals
based on a percentage of sales.
The Company's two Save `n Pack super warehouse stores have an aggregate
selling area of approximately 119,000 square feet. One of the stores is
leased, with the other store operated under a long-term ground lease with the
Company owning the improvements at the location. Neither of the leases
expires within the next five years.
The Company's liquor stores have an aggregate selling area of
approximately 53,000 square feet. Four of the liquor stores are owned by the
Company. The remaining 29 liquor stores are leased by the Company. One of
the leases expires during the next five years, with the Company having an
option to renew.
The Company's warehouse, distribution and office facility is located on
53.6 acres of land, which the Company owns.
Item 3. Legal Proceedings.
Since May 12, 1994, representatives of the Company have engaged in
discussions with certain holders of the Company's Senior Floating Rate Notes
due August 2, 1996 (the "Old Senior Floating Rate Notes"), its 12 3/8% Senior
Fixed Rate Notes due February 1, 1999 (the "Old Senior Fixed Rate Notes"),
and its 14% Subordinated Debentures due February 1, 2001 (the "Old
Subordinated Debentures"), (those holders being hereinafter referred to as
the "Unofficial Bondholders' Committee"), with respect to a proposed capital
restructuring of the Company.
On July 27, 1994, the Company and the Unofficial Bondholders' Committee
agreed in principle to a restructuring of the Company (the "Restructuring"),
which would be implemented through the consummation of a "prepackaged" plan
of reorganization under Chapter 11 of the Bankruptcy Code (the "Plan").
Under the terms of the Plan:
(1) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes would be exchanged for (a) new Senior Floating Rate Notes due
February 1, 2003 (the "New Senior Floating Rate Notes") in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Floating Rate Notes from and including February 3, 1994, through
but not including the petition date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed
Rate Notes") in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of
New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim.
(2) Each $1,000 principal amount of the Company's Old Senior Fixed Rate
Notes would be exchanged for (a) New Senior Floating Rate Notes in an
original principal amount equal to $1,000 plus 100% of the accrued interest
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under the Old Senior Fixed Rate Notes from and including February 2, 1994,
through but not including the petition date, or, at such holder's election,
(b) New Senior Fixed Rate Notes in the same original principal amount, or, at
such holder's election, (c) an amount of New Senior Floating Rate Notes and
an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim.
(3) the Old Subordinated Debentures would be exchanged for newly-issued
common stock of the Company representing 85 percent of the common stock to be
outstanding on the effective date of the Plan (the "Effective Date");
(4) Green Equity Investors, L.P., would invest $10 million cash in
exchange for newly-issued common stock of the Company representing 15 percent
of the common stock to be outstanding on the Effective Date;
(5) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company would be extinguished; and
(6) the rights of trade creditors and other secured creditors of the
Company would be unimpaired.
On September 3, 1994 the Company mailed a disclosure statement to
solicit acceptances of the Plan from all creditors that would be impaired
under the Plan and a supplementary disclosure statement was mailed on October
29, 1994. As a result of this solicitation, the voting requirements
prescribed by Section 1126 of the Bankruptcy Code were satisfied, and the
Company filed with the Bankruptcy Court a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code on November 9, 1994,
and is seeking, as promptly as is practicable, confirmation by the Bankruptcy
Court of the Plan.
Consummation of the Restructuring will be subject to a number of
contingencies, including confirmation of the Plan by the Bankruptcy Court,
and there can be no assurance as to when the Restructuring will be
consummated, or whether it will be consummated as contemplated in the
Plan.
There are no material pending legal proceedings to which the Company is
a party or to which any of its property is subject. The Company is a party
to ordinary and routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders.
By written consent dated July 29, 1994, Green Equity Investors, L.P.,
the holder of 1,716,967 shares of common stock of the Company, removed Ronald
J. Floto as a member of the Board of Directors effective immediately. On
August 1, 1994, in a special telephonic meeting of the Board of Directors,
Anthony R. Petrillo was elected to fill the unexpired term of Mr. Floto.
After that written consent and Board meeting, Mr. Petrillo, Leonard I. Green,
Christopher V. Walker, Jennifer Holden Dunbar, Edward W. Gibbons, Thomas A.
Whipple, Raymond P. Springer, and Dennis V. Carter continued as directors.
On August 3, 1994, pursuant to Section 228(d) of the General Corporation
Law of the State of Delaware, notice of the written consent was given to all
holders of record of common stock of the Company. On August 11, 1994, the
Company filed a Form 8-K with respect to the foregoing and other events
occurring on and after July 27, 1994.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
There is no established public trading market for the Company's only
class of common equity, the $.01 par value Common Stock.
As of October 14, 1994, there were 28 record holders of Common Stock of
the Company.
No cash dividends have been declared on the Common Stock of the Company
since its issuance, and management anticipates that no cash dividends will be
declared in the foreseeable future. The Company's ability to declare cash
dividends on its Common Stock is materially limited by the rights and privi-
leges of the holders of the Company's Series B Cumulative Preferred Stock
(the "Series B Preferred Stock") to be paid current and accumulated dividends
prior to the payment of cash dividends to holders of Series C Common
Equivalent Convertible Preferred Stock (the "Series C Preferred Stock") and
Common Stock, and by the restrictions set forth in the Company's Bank Credit
Agreement and the various debt securities issued by the Company.
Item 6. Selected Financial Data.
The following selected balance sheet data as of the fiscal years ended
on the Sunday nearest to July 31, 1994, 1993, 1992, 1991, and 1990, and the
related statements of operations and other data for each of the fiscal years
ended on the Sunday nearest to July 31, 1994, 1993, 1992, 1991, and 1990, are
derived from the audited financial statements of the Company. Such financial
statements, and the report thereon, for the 1994, 1993, and 1992 fiscal years
are included elsewhere in this document, and should be read in conjunction
with this selected financial data and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The operating data have
been derived from the Company's management reporting records.
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Fiscal Year
-----------
1994 1993 1992(A) 1991 1990
---- ---- ------- ---- ----
(Dollar amounts in thousands)
Statements of Operations Data:
Merchandise sales $1,065,165 $1,086,125 $1,071,038 $1,059,636 $1,039,209
Cost of sales 845,597 856,156 848,441 842,687 831,644
---------- ---------- ---------- ---------- ----------
Gross profit 219,568 229,969 222,597 216,949 207,565
Selling, general
and admini-
strative expenses 176,945 175,177 164,897 159,359 151,970
Depreciation and
amortization 24,112 23,455 20,132 54,435 31,416
Store closing and
other costs 11,016 -- -- -- --
---------- ---------- ---------- ---------- ----------
Operating income 7,495 31,337 37,568 3,155 24,179
Interest expense, net 45,390 43,257 44,869 45,610 50,692
---------- ---------- ---------- ---------- ----------
Loss before
extraordinary
gain (37,895) (11,920) (7,301) (42,455) (26,513)
Extraordinary gain -- -- -- 3,427 943
---------- ---------- ---------- ---------- ----------
Net loss $ (37,895)$ (11,920)$ (7,301)$ (39,028)$ (25,570)
========== ========== ========== ========== ==========
Loss attribu-
table to
common
stock $ (38,359)$ (12,384)$ (7,775)$ (44,427)$ (30,969)
========== ========== ========== ========== ==========
Balance Sheet Data:
Total assets $ 389,893 $ 423,208 $ 399,419 $ 401,860 $ 445,204
Inventories 76,094 95,385 91,226 92,451 92,474
Property and
equipment, net 160,491 164,937 145,372 146,513 148,100
Working capital (12,747) 19,137 26,031 15,684 11,959
Long-term debt and
capital leases 317,381 329,262 310,404 324,864 326,734
Preferred stock 4,650 4,650 4,650 45,991 45,991
Stockholders' deficit(61,054) (23,159) (11,239) (72,640) (33,609)
Other Data:
Capital expendi-
tures $ 15,471 $ 37,703 $ 15,385 $ 15,672 $ 16,079
Operating Data:
Food stores open
at the end of period 100(B) 115 111 113 112
Average selling
square feet during
period (in
thousands) 3,084 3,100 2,970 2,949 2,918
(A) Fifty-three weeks of operations.
(B) Includes one food store closed by the Company subsequent to July 31,
1994.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This analysis should be read in conjunction with the financial
statements and related notes included elsewhere in this document. The
Company follows a 52/53 week fiscal year ending on the Sunday nearest to July
31. Therefore, the fiscal year ended August 2, 1992 included fifty-three
weeks of operations. Historical results of operations are given for the
Company's fiscal years ended July 31, 1994, August 1, 1993 and August 2, 1992
(respectively, the "1994, 1993, and 1992 Fiscal Years").
The Company acquired substantially all of its assets in October 1988.
The acquisitions were accounted for as purchases and the assets were recorded
at fair market value based on independent appraisals, resulting in an
increase in the carrying value of the assets of approximately $215.4 million.
The write-up was allocated to property and equipment ($22.6 million),
favorable lease interests ($26.2 million), depreciable intangible assets
($53.6 million), and excess of cost over net assets acquired ($113.0
million). As a result, the Company has since incurred a significant amount
of noncash charges. In addition, during the first quarter of 1994, the
Company recorded a non-recurring charge of $11.0 million which reflects
expenses associated with a program of closing twelve underperforming stores
and expensing costs associated with unsuccessful financing activities.
Therefore, the Company believes that the most relevant measure of its
operating results is earnings before interest and taxes after adding back
such noncash and non-recurring charges:
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------
(Dollars in Thousands)
Operating income $ 7,495 $31,337 $37,568
Depreciation and amortization 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
------- ------- -------
Operating cash flow
(EBITDA) $42,623 $54,792 $57,700
======= ======= =======
Depreciation of property and equipment and amortization of property under
capital leases includes depreciation of the Company's plant and equipment
over the useful lives of such assets and amortization of property under
capital leases over the lease terms. Favorable lease interests are amortized
on the straight-line method over the average life of the favorable leases at
the date of acquisition, which was approximately 20 years. Excess of cost
over net assets acquired represents the excess of amounts paid over the fair
value of net assets acquired and is being amortized over forty years.
Depreciable intangible assets were recorded at fair market value based on
independent appraisals at the date of acquisition and were completely
amortized prior to the 1994 Fiscal Year.
Overview
During the three year period ended July 31, 1994, the Company opened
seven new food stores, acquired one food store and three super warehouse food
stores (operating under the "Save `n Pack" name), and completed major
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expansion remodels on three existing food stores. However, sales growth has
been constrained primarily by the opening of 54 competitive supermarkets and
the closing of 24 of the Company's stores during this three year period. The
Company experienced a net loss in each of the 1994, 1993 and 1992 Fiscal
Years primarily due to depreciation and amortization resulting from and
interest costs associated with financing the 1988 acquisition of the Kash n'
Karry and Superx stores.
The Company is in a loss position for income tax purposes, and no
provision has been made for income taxes. The adoption of Statement of
Financial Accounting Standards No. 109 had no significant impact on the
Company's financial statements.
The following table sets forth certain items from the Company's
Statements of Operations as a percentage of sales for the periods indicated:
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------
Sales 100.00% 100.00% 100.00%
Gross profit 20.6% 21.2% 20.8%
Selling, general
and administrative expenses 16.6% 16.1% 15.4%
Depreciation and amortization 2.3% 2.2% 1.9%
Interest expense 4.3% 4.0% 4.2%
Net loss -3.6% -1.1% -0.7%
Operating cash flow (EBITDA) 4.0% 5.0% 5.4%
Results of Operations of the Company
The Company generated operating cash flow of $42.6 million for the 52
weeks ended July 31, 1994, compared to operating cash flow of $54.8 million
for the 52 weeks ended August 1, 1993 and $57.7 million for the 53 weeks
ended August 2, 1992.
Sales
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------
Sales (in millions) $1,065 $1,086 $1,071
Number of stores:
Food stores opened or acquired 2 8 1
Food stores closed 17 4 3
Expansion remodels 1 2 --
Total food stores at period end 100(1) 115 111
Average selling square
feet during year (in thousands) 3,084 3,100 2,970
Average sales per store
week (in thousands) $196 $183 $181
(1) Includes one store closed subsequent to July 31, 1994.
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The Company has maintained a relatively stable level of sales during the
three year period. Sales have been positively impacted by opening and
acquiring new stores, expanding and upgrading existing stores and increasing
promotional activities and advertising expenditures. However, sales have
been adversely affected by a weak economy, price deflation in certain
commodities, ongoing competitive new store and remodel activity, pricing and
promotional changes by certain competitors, and the closings of 24 of the
Company's stores. Store closings negatively impact sales, but do not cause a
substantial adverse impact on the Company's operating cash flow.
Gross Profit. Gross profit as a percentage of sales was 20.6% in the
1994 Fiscal Year, 21.2% in the 1993 Fiscal Year, and 20.8% in the 1992 Fiscal
Year. The decrease in gross profit as a percentage of sales from the 1993
Fiscal Year to the 1994 Fiscal Year is attributable to the impact of
eliminating investment in forward buy inventory (estimated to be
approximately 57 basis points), lower promotional funds, and generally lower
retail prices, partially offset by improved perishable margins and
efficiencies in product preparation and handling. The improvement from the
1992 Fiscal Year to the 1993 Fiscal Year is primarily attributable to
additional promotional funds and increasing efficiencies in product
acquisition and warehousing and distribution operations, partially offset by
low inflation and the competitive factors mentioned above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of the Company, as a percentage of sales, were 16.6%
in the 1994 Fiscal Year, 16.1% in the 1993 Fiscal Year, and 15.4% in the 1992
Fiscal Year. The increase of $1.8 million from the 1993 Fiscal Year to the
1994 Fiscal Year is primarily the result of increased occupancy costs and
other expenses related to stores opened, acquired or remodeled, and an
increase in insurance reserves and advertising expenses, offset by reduced
operating costs due to store closings. The increase as a percentage of sales
is attributable to operating costs of comparable stores in the aggregate
declining at a lesser rate than the rate of sales decline in those stores.
The increase, as a percentage of sales, for the 1993 Fiscal Year compared to
the 1992 Fiscal Year is primarily attributable to certain expenses, such as
employee benefits, utilities, and repairs and maintenance, which have
increased at a faster rate than the rate of growth in sales, offset partially
by lower average cost per hour and improved labor productivity in the stores.
Depreciation and Amortization. The Company's depreciation and amorti-
zation expenses were $24.1 million, or 2.3% of sales, for the 1994 Fiscal
Year; $23.5 million, or 2.2% of sales, for the 1993 Fiscal Year; and $20.1
million, or 1.9% of sales, for the 1992 Fiscal Year. The increase in
depreciation and amortization for the three year period is attributable to
the new stores and major remodels, and accelerated amortization of favorable
lease interests on certain stores closed during the period.
Interest Expense. Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------
(In Thousands)
Interest expense $42,917 $41,211 $42,292
Amortization of deferred
financing costs 2,950 2,850 2,932
Capitalized interest (477) (804) (355)
------- ------- -------
Interest expense, net $45,390 $43,257 $44,869
======= ======= =======
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Interest expense for the 1994 Fiscal Year was primarily comprised of
interest under the Bank Credit Agreement, the Senior Floating Rate Notes, the
Senior Fixed Rate Notes, the Subordinated Debentures, various mortgages and
capital leases. The increase in interest expense for the 1994 Fiscal Year is
primarily attributable to increased average borrowings under the revolving
credit facility, additional capital leases on store equipment, and slightly
higher interest rates on bank borrowings.
Losses. For the reasons set forth above, the Company experienced net
losses of $37.9 million for the 1994 Fiscal Year, $11.9 million for the 1993
Fiscal Year, and $7.3 million for the 1992 Fiscal Year.
Income Taxes. The Company is in a loss position for income tax
purposes,and no provision has been made for income taxes. The adoption of
Statement of Financial Accounting Standard No. 109 had no significant impact
on the Company's financial statements.
Liquidity and Capital Resources
Prior to July 31, 1994, the Company's Bank Credit Agreement provided for
a revolving credit facility with individual sublimits of $30.0 million for
working capital loans, $25.0 million for letters of credit and $13.7 million
for capital improvement loans, with a maximum of $60.0 million outstanding
under the total facility at any one time. As of July 31, 1994, the Company
had $28.7 million borrowed under the working capital line, $13.7 million in
capital improvement loans, and $16.4 million of letters of credit
outstanding. On August 1, 1994, the outstanding balance of capital
improvement loans converted to term loans amortizing to maturity in April
1996, and the revolving credit facility was reduced to provide for a maximum
outstanding balance under the facility of $50.0 million. This year, because
of its reduced availability under the working capital facility, the Company
had to fund its seasonal inventory build-up during the second and third
quarters by divesting of its profitable investment in forward buy
inventories. Additionally, Green Equity Investors, L.P., the Company's
majority shareholder, loaned the Company $2.0 million in February to improve
the Company's liquidity. Management believes that the reduction of the
Company's investment in forward buy inventory reduced gross profit by
approximately $1.5 million in the second quarter, approximately $2.4 million
in the third quarter, and approximately $2.2 million in the fourth quarter.
However, the Company has offset this negative impact on cash flow by
converting working capital to cash, as indicated below:
Increase/(Decrease)
in Cash Generated
July 31, August 1, from Changes
1994 1993 in Working Capital
-------- --------- ------------------
(In Thousands)
Accounts receivable $ 8,084 $10,888 $ 2,804
Inventory 76,094 95,385 19,291
Prepaid expenses
and other current assets 12,805 13,151 346
Accounts payable 34,908 42,561 (7,653)
Accrued expenses 38,934 37,243 1,691
------
$16,479
======
11
<PAGE>
Since the end of the fiscal year, the Company has further improved its
liquidity by continuing to manage working capital, instituting a payment
moratorium on interest due on the Senior Fixed Rate Notes, Senior Floating
Rate Notes, and Subordinated Debentures, and reducing expenses, allowing it
to begin investing in forward buy inventory on a limited basis.
As previously disclosed, the Company has been unsuccessful in
refinancing approximately $35.0 million of new store costs (land, building
and equipment) that has been advanced through, and therefore significantly
restricted the ongoing availability of, its revolving credit facility. The
Company believes that a significant deleveraging of its balance sheet is
required in order to improve its short-term liquidity and provide it with
additional capital to fully re-establish its forward buy program and
implement its business plan. Therefore, on May 11, 1994, the Company
executed an engagement letter with Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), pursuant to which DLJ is acting as financial advisor to
the Company in connection with a proposed capital restructuring, and on May
12, 1994, the Company met with certain of its bondholders and proposed such a
restructuring.
On July 27, 1994, the Company and the Unofficial Bondholders' Committee
consisting of a significant percentage of the holders of its Senior Fixed
Rate Notes, Senior Floating Rate Notes, and Subordinated Debentures agreed in
principle to a restructuring of the Company (the "Restructuring"), which
would be implemented through the consummation of a "prepackaged" plan of
reorganization under Chapter 11 of the Bankruptcy Code (the "Plan"). Under
the terms of the Plan:
(1) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes would be exchanged for (a) new Senior Floating Rate Notes due
February 1, 2003 (the "New Senior Floating Rate Notes") in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Floating Rate Notes from and including February 3, 1994, through
but not including the petition date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed
Rate Notes") in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of
New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim.
(2) Each $1,000 principal amount of the Company's Old Senior Fixed Rate
Notes would be exchanged for (a) New Senior Floating Rate Notes in an
original principal amount equal to $1,000 plus 100% of the accrued interest
under the Old Senior Fixed Rate Notes from and including February 2, 1994,
through but not including the petition date, or, at such holder's election,
(b) New Senior Fixed Rate Notes in the same original principal amount, or, at
such holder's election, (c) an amount of New Senior Floating Rate Notes and
an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim.
(3) the Old Subordinated Debentures would be exchanged for newly-issued
common stock of the Company representing 85 percent of the common stock to be
outstanding on the effective date of the Plan (the "Effective Date");
(4) Green Equity Investors, L.P., would invest $10 million cash in
exchange for newly-issued common stock of the Company representing 15 percent
of the common stock to be outstanding on the Effective Date;
12
<PAGE>
(5) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company would be extinguished; and
(6) the rights of trade creditors and other secured creditors of the
Company would be unimpaired.
On July 27, 1994, the Company also obtained a commitment from
BankAmerica Business Credit, Inc. to provide the Company with
debtor-in-possession financing in the form of a revolving credit facility of
up to $40 million, subject to certain terms and conditions. However, there
can be no assurance that the Bankruptcy Court will approve the debtor-in-
possession financing.
On September 3, 1994, the Company began to solicit acceptances of the
Plan from all creditors that would be impaired under the Plan. Subsequently,
the Company received commitments from CIT Group/Business Credit Inc. and its
existing bank lenders to provide a new 3-year $35 million term loan facility
and a new 3-year $50 million revolving credit facility (the "Exit Bank
Financing"). The Company has agreed to limit the debtor-in-possession
financing described above to the difference between the commitment for the
Exit Bank Financing and the current commitments under the existing Bank
Credit Agreement. A supplemental disclosure statement describing the Exit
Bank Financing was mailed on October 29, 1994. As a result of this
solicitation, the voting requirements prescribed by Section 1126 of the
Bankruptcy Code were satisfied, and the Company filed with the Bankruptcy
Court a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code on November 9, 1994, and is seeking, as promptly as is
practicable, confirmation by the Bankruptcy Court of the Plan.
The Restructuring will have an immediate beneficial impact on the
Company's financial condition. See "Pro Forma Financial Statements." In the
absence of the Restructuring, the Company would be unable to make a
substantial portion of its scheduled principal and cash interest payments on
its existing indebtedness. However, consummation of the Restructuring will
be subject to a number of contingencies, including confirmation of the Plan
by the Bankruptcy Court, and there can be no assurance as to when the
Restructuring will be consummated, or whether it will be consummated as
contemplated in the Plan. There are certain tax benefits to completing the
Restructuring prior to December 31, 1994, and it is the intent of both the
Company and the Unofficial Bondholders' Committee to meet this important
deadline.
The Company's capital expenditures totalled $15.5 million for the 1994
Fiscal Year, the majority of which was funded through funds generated from
operations, borrowings under the working capital line and through capitalized
store equipment leases. During this period the Company completed one major
remodel of an existing store and completed construction of two new stores
begun last summer. The Company previously reported that it will not commence
any further new store construction pending completion of the Restructuring,
but it is continuing its maintenance capital program. Beginning August 1,
1994, the Company implemented a new business strategy to improve the
Company's financial performance. The focus is to conserve capital, reduce
administrative and operating expenses, and direct management attention toward
the operation of existing stores. To that end, the Company expects that
capital expenditures (excluding capital expenditures expected to be
refinanced) for its 1995 Fiscal Year will total approximately $7.4 million.
13
<PAGE>
Due to the non-recurring charges incurred during the first quarter as
well as its operating performance, the Company breached several financial
covenants under its Bank Credit Agreement for each of the reporting periods
during the fiscal year ended July 31, 1994. However, the Company has
received all necessary waivers from the banks. Additionally, the Company did
not pay $2,510,747, $3,093,750, and $7,350,000 in interest due in August 1994
on the Senior Floating Rate Notes, the Senior Fixed Rate Notes, and the
Subordinated Debentures, respectively. As provided under the terms of the
Restructuring, all interest on the Senior Floating Rate Notes and the Senior
Fixed Rate Notes which is accrued and unpaid as of the date the Company filed
its voluntary petition with the Bankruptcy Court shall be capitalized into
New Senior Floating Rate Notes or New Senior Fixed Rate Notes and all
interest which is accrued and unpaid on the Subordinated Debentures will be
converted into equity.
The Company has entered into a series of interest rate hedging
transactions to reduce its exposure to increases in short-term interest rates
on the majority of its floating rate debt. These transactions include swaps
and collars and extend through August 1995. The Company estimates the cost
to liquidate these contracts would be approximately $2.6 million at July 31,
1994.
Effects of Inflation
The Company's primary costs, inventory and labor, are affected by a
number of factors that are beyond its control, including availability and
price of merchandise, the competitive climate and general and regional
economic conditions. As is typical of the supermarket industry, the Company
has generally been able to maintain margins by adjusting its retail prices,
but competitive conditions may from time to time render it unable to do so
while maintaining its market share.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data for the Company begin on
page 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
14
<PAGE>
Independent Auditors' Report
The Board of Directors
Kash n' Karry Food Stores, Inc.:
We have audited the accompanying balance sheets of Kash n' Karry Food Stores,
Inc. as of July 31, 1994 and August 1, 1993, and the related statements of
operations, stockholders' deficit, and cash flows for the fifty-two weeks
ended July 31, 1994 and August 1, 1993, and fifty-three weeks ended August 2,
1992. In connection with our audits of the financial statements, we also
have audited the financial statement schedules as listed under Item 14 of
Part IV in the Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kash n' Karry Food Stores,
Inc. at July 31, 1994 and August 1, 1993, and the results of its operations
and its cash flows for the fifty-two weeks ended July 31, 1994 and August 1,
1993, and fifty-three weeks ended August 2, 1992, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
The accompanying financial statements and financial statement schedules have
been prepared assuming that Kash n' Karry Food Stores, Inc. will continue as
a going concern. However, Kash n' Karry Food Stores, Inc. has suffered
recurring losses from operations and has a net capital deficiency. As
discussed in note 1 to the financial statements, Kash n' Karry Food Stores,
Inc. filed a pre-packaged petition under Chapter 11 of the United States
Bankruptcy Code on November 9, 1994. These matters raise substantial doubt
about its ability to continue as a going concern. The financial statements
and financial statement schedules do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
- -----------------------------------
Tampa, Florida
September 16, 1994, except with respect to notes 1
and 5, which are as of November 9, 1994
15
<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)
ASSETS
July 31, August 1,
1994 1993
-------- ---------
Current assets:
Cash and cash equivalents $ 6,852 $ 2,145
Accounts receivable 8,084 10,888
Inventories 76,094 95,385
Prepaid expenses and other current assets 12,805 13,151
-------- --------
Total current assets 103,835 121,569
Property and equipment, at cost, net 160,491 164,937
Favorable lease interests, less accumulated
amortization of $13,543 and $7,506 12,312 18,349
Deferred financing costs, less accumulated
amortization of $22,572 and $19,622 12,630 15,153
Excess of cost over net assets acquired, less
accumulated amortization of $16,288 and $13,457 96,758 99,589
Other assets 3,867 3,611
-------- --------
Total assets $389,893 $423,208
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 42,740 $ 22,628
Accounts payable 34,908 42,561
Accrued expenses 38,934 37,243
-------- --------
Total current liabilities 116,582 102,432
Long-term debt, less current portion 317,381 329,262
Other long-term liabilities 12,334 10,023
Series B Cumulative Preferred Stock of $.01
par value and a stated value of $100 a share.
Authorized 50,000 shares; 38,750 shares
outstanding. 3,875 3,875
Series C Convertible Preferred Stock of $.01
par value. Authorized 100,000 shares; 77,500
shares outstanding. 775 775
Stockholders' deficit:
Common Stock of $.01 par value. Authorized
4,000,000 and 3,200,000 shares; 2,819,589
shares outstanding. 28 28
Capital in excess of par value 77,695 77,695
Accumulated deficit (138,740) (100,845)
Less cost of Treasury Stock - 2,437 shares (37) (37)
-------- --------
Total stockholders' deficit (61,054) (23,159)
-------- --------
Total liabilities and stockholders' deficit $389,893 $423,208
======== ========
See accompanying notes to financial statements.
16
<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF OPERATIONS
(In Thousands)
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------
Sales $1,065,165 $1,086,125 $1,071,038
Cost of sales 845,597 856,156 848,441
---------- ---------- ----------
Gross profit 219,568 229,969 222,597
Selling, general and administrative
expenses 176,945 175,177 164,897
Depreciation and amortization 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
---------- ---------- ----------
Operating income 7,495 31,337 37,568
Interest expense (net of interest
income of $4, $1 and $25) 45,390 43,257 44,869
---------- ---------- ----------
Net loss (37,895) (11,920) (7,301)
Undeclared dividends on
Preferred Stock 464 464 474
---------- ---------- ----------
Loss attributable to
Common Stock $ (38,359) $ (12,384) $ (7,775)
========== ========== ==========
See accompanying notes to financial statements.
17
<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
Fiscal Years Ended July 31, 1994,
August 1, 1993 and August 2, 1992
(Dollar Amounts In Thousands)
Capital
in Excess
Common of Par Accumulated Treasury
Stock Value Deficit Stock Total
------ --------- ----------- -------- ---------
Balance at July 28, 1991 $ 9 $ 8,994 $(81,624) $ (19) $(72,640)
Purchase of 250 shares
for Treasury -- -- -- (3) (3)
Reclassification of Series
A Preferred Stock to -- 40,000 -- (11) 39,989
Common Stock
Conversion of 11,250 shares
of Series B Preferred
Stock and 22,500 shares
of Series C Preferred
Stock to 22,500 shares
of Common Stock -- 1,350 -- -- 1,350
Sale of 1,859,531 shares
of Common Stock for cash 19 27,347 -- -- 27,366
Loss for period -- -- (7,301) -- (7,301)
---- ------- --------- ----- --------
Balance at August 2, 1992 $ 28 $77,691 $(88,925) $ (33) $(11,239)
Purchase of 2,713 shares
for Treasury -- -- -- (40) (40)
Sale of 2,436 shares
of Treasury Stock -- 4 -- 36 40
Loss for period -- -- (11,920) -- (11,920)
---- ------- --------- ----- --------
Balance at August 1, 1993 $ 28 $77,695 $(100,845) $ (37) $(23,159)
Loss for period -- -- (37,895) -- $(37,895)
---- ------- --------- ----- --------
Balance at July 31, 1994 $ 28 $77,695 $(138,740) $ (37) $(61,054)
==== ======= ========= ===== ========
See accompanying notes to financial statements.
18
<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1,1993 August 2, 1992
------------- ------------- --------------
Net cash flows from
operating activities:
Net loss $ (37,895) $ (11,920) $ (7,301)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and amortization,
excluding deferred
financing costs 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
Amortization of deferred
financing costs 2,950 2,850 2,932
Senior Subordinated Extendible
Reset Notes ("Reset Notes")
issued in lieu of cash interest -- -- 2,222
(Increase) decrease in assets:
Accounts receivable 2,804 (3,778) (2,090)
Inventories 19,291 (4,159) 1,225
Prepaid expenses and
other assets (278) (5,426) (842)
Increase (decrease) in liabilities:
Accounts payable (7,653) 3,722 3,283
Accrued expenses and
other liabilities (1,565) (3,684) 822
--------- --------- --------
Net cash provided by
operating activities 12,782 1,060 20,383
--------- --------- --------
Cash provided (used) by investing
activities:
Additions to property and equipment (10,942) (13,103) (11,660)
Leased asset additions (4,529) (24,600) (3,725)
Sale of property and equipment 504 91 570
--------- --------- --------
Net cash used by investing
activities (14,967) (37,612) (14,815)
--------- --------- --------
19
<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
(In Thousands)
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1,1993 August 2, 1992
------------- ------------- --------------
Cash provided (used) by financing
activities:
Borrowings under term and
revolving loan facilities 17,700 38,100 16,000
Additions to obligations under
capital leases and notes payable 5,230 14,867 3,725
Sale of Senior Notes -- -- 49,750
Sale of Common Stock (net of
Treasury Stock transactions
and transaction costs) -- -- 27,362
Repurchase of Reset Notes -- -- (32,426)
Repayments of term and revolving
loan facilities (5,488) (12,881) (62,497)
Repayments of other long-term
liabilities (9,212) (4,415) (3,632)
Financing costs (1,338) (1,453) (3,160)
--------- --------- ---------
Net cash provided (used)
by financing activities 6,892 34,218 (4,878)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 4,707 (2,334) 690
Cash and cash equivalents at
beginning of year 2,145 4,479 3,789
--------- --------- ---------
Cash and cash equivalents at
the end of year $ 6,852 $ 2,145 $ 4,479
========= ========= =========
See accompanying notes to financial statements.
20
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(1) Subsequent Event.
On September 3, 1994, the Company began to solicit acceptances of all impaired
parties of a restructuring of the Company which would be implemented through
the consummation of a "prepackaged" plan of reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Plan"). As a result of such
solicitation, the voting requirements prescribed by Section 1126 of the
Bankruptcy Code were satisfied, and the Company filed with the Bankruptcy
Court a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code, and is seeking, as promptly as is practicable, confirmation
by the Bankruptcy Court of the Plan. During the pendency of the bankruptcy
case, the Company intends to operate its business in the ordinary course, and
to pay all pre-petition claims of the Company's secured lenders, general
unsecured creditors, trade creditors and employees in full. The Plan also
provides that:
(i) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes would be exchanged for (a) new Senior Floating Rate Notes due
February 1, 2003 (the "New Senior Floating Rate Notes") in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Floating Rate Notes from and including February 3, 1994, through
but not including the petition date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed Rate
Notes") in the same original principal amount, or, at such holder's election,
(c) an amount of New Senior Floating Rate Notes and an amount of New Senior
Fixed Rate Notes equal, in the aggregate, to 100% of such claim.
(ii) Each $1,000 principal amount of the Company's Old Senior Fixed Rate
Notes would be exchanged for (a) New Senior Floating Rate Notes in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Fixed Rate Notes from and including February 2, 1994, through but
not including the petition date, or, at such holder's election, (b) New Senior
Fixed Rate Notes in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of New
Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim.
(iii) the Old Subordinated Debentures would be exchanged for
newly-issued common stock of the Company representing 85 percent of the common
stock to be outstanding on the effective date of the Plan (the "Effective
Date");
(iv) Green Equity Investors, L.P., would invest $10 million cash in
exchange for newly-issued common stock of the Company representing 15 percent
of the common stock to be outstanding on the Effective Date; and
(v) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company would be extinguished.
See also Footnote 5 - "Long-Term Debt," Footnote 6 - "Redeemable Preferred
Stock," Footnote 7 - "Common Stock," Footnote 8 - "Stock Option Plans," and
Footnote 10 - "Income Taxes."
21
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(2) Summary of Significant Accounting Policies
Fiscal Year End. The Company follows a 52/53 week fiscal year ending on
the Sunday nearest July 31. The fiscal year ended August 2, 1992 included 53
weeks of operations.
Inventories. Inventories consist of merchandise held for resale and are
stated at the lower of cost or market; cost is determined using average cost,
which approximates the first-in, first-out (FIFO) method.
Prepaid Expenses and Other Current Assets. Prepaid expenses and other
current assets include expenditures for construction in progress expected to
be financed ($9,987 at July 31, 1994 and $9,246 at August 1, 1993) and
prepaid expenses to be recognized over the next twelve months.
Depreciation, Amortization, and Maintenance and Repairs. Depreciation is
provided principally using the composite method based on the estimated useful
lives of the respective asset groups. Amortization of leasehold improvements
is based on the estimated useful lives or the remaining lease terms, whichever
is shorter. Property under capital leases consists of buildings and fixtures
and equipment. Interest costs of property under development are capitalized
during the development period. Capitalized amounts were $477, $804, and $355
for the fiscal years ended July 31, 1994, August 1, 1993, and August 2, 1992,
respectively. The approximate annual rates used to compute depreciation and
amortization are:
Rate
----
Buildings and improvements 5%
Fixtures and equipment 10%
Transportation equipment 25%
Leasehold improvements 8%
Maintenance and repairs are charged to expense as incurred. The Company
capitalizes expenditures for renewals and betterments.
Favorable Lease Interests. Favorable lease interests represent the
present value of the excess of current market rental rates over rents that
existed under the Company's operating leases of store locations as of October
12, 1988. Such costs are amortized on the straight-line method over the
average life of the favorable leases, which was approximately 20 years.
Deferred Financing Costs. Deferred financing costs represent fees and
expenses related to various financing activities and are amortized on a
straight-line basis over the life of the related debt and classified as
interest expense.
Excess of Cost Over Net Assets Acquired. Excess of cost over net assets
acquired represents the excess of amounts paid over the fair value of net
assets acquired, and is being amortized over forty years. As discussed in
Footnote 1, the Company filed a voluntary petition for reorganization under
Chapter 11 of the Bankruptcy Code. Management of the Company believes that,
based on the proposed restructuring, the excess of cost over net assets
acquired has not been permanently impaired, and that an appropriate valuation
of such amounts is reflected in the accompanying financial statements as of
July 31, 1994 and August 1, 1993.
22
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Costs of Opening and Closing Stores. Preopening costs of new stores are
charged to expense in the year the store opens. These costs are primarily
labor to stock the store, preopening advertising, store supplies and other
expendable items. When operations are discontinued and a store is closed, the
remaining investment, net of realizable value, is charged against earnings,
and, for leased stores, a provision is made for the remaining lease liability,
net of expected sublease income.
Store Closing and Other Costs. During the first quarter of fiscal 1994
the Company recorded a non-recurring charge of $11,016. This charge included
$1,900 of costs associated with unsuccessful financing activities, $4,159 of
favorable lease interests written off in connection with the closing of twelve
underperforming stores, $4,000 representing an adjustment to the expected
lease liability on closed stores, net of sublease income, and $957 of other
store closing and related expenses.
Income Taxes. The Company is in a loss position for income tax purposes,
and, consequently, no income taxes have been provided. The Company adopted
Statement of Financial Accounting Standards No. 109 ("SFAS 109") as of August
2, 1993. No cumulative effect of this change in accounting was required as of
August 2, 1993 and prior years' financial statements have not been restated to
apply the provisions of SFAS 109. The effect on prior years' financial
statements of retroactively implementing SFAS 109 would be immaterial.
Interest Rate Hedge Agreements. The Company enters into interest rate
hedging agreements which involve the exchange of fixed and floating rate
interest payments periodically over the life of such agreements without the
exchange of the underlying principal amounts. The differential to be paid or
received is accrued as interest rates change and is recognized over the life
of the agreements as an adjustment to interest expense.
Cash and Cash Equivalents. The Company considers all highly liquid
investment instruments with a maturity of three months or less when purchased
to be cash equivalents. There were no cash equivalents at July 31, 1994 or
August 1, 1993.
Cash interest paid (excluding financing costs) was $41,545, $41,675, and
$39,202, for the fiscal years ended July 31, 1994, August 1, 1993, and August
2, 1992, respectively.
23
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(3) Property and Equipment
Property and equipment is summarized as follows: July 31, August 1,
1994 1993
-------- ---------
Land $ 19,543 $ 18,713
Buildings and improvements 63,517 56,421
Fixtures and equipment 100,717 104,686
Transportation equipment 2,593 2,595
Leasehold improvements 28,402 25,957
Construction in progress 4,115 4,275
-------- --------
218,887 212,647
Less accumulated depreciation (70,196) (61,831)
-------- --------
148,691 150,816
Property under capital leases
(less accumulated amortization
of $11,154 and $8,032) 11,800 14,121
-------- --------
$160,491 $164,937
======== ========
(4) Accrued Expenses
Accrued expenses consist of the following: July 31, August 1,
1994 1993
-------- ---------
Accrued payroll and benefits $ 5,579 $ 4,492
Accrued interest 15,849 15,080
Taxes, other than income 6,056 5,708
Accrued insurance reserves 4,886 5,684
Other accrued expenses 6,564 6,279
-------- --------
$ 38,934 $ 37,243
======== ========
24
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(5) Long-Term Debt
Long-term debt consists of the following: July 31, August 1,
1994 1993
-------- ---------
Bank term and revolving loan facilities (a) $ 59,629 $ 47,417
Senior Floating Rate Notes (b) 85,000 85,000
Senior Fixed Rate Notes (c) 50,000 50,000
Subordinated Debentures (d) 105,000 105,000
Mortgages payable, bearing interest at rates
from 7.50% to 10.35%, in equal monthly
installments of $355, with maturities
from 1999 through 2003 (e) 34,368 34,772
Capital lease obligations 13,877 16,999
Other 12,247 12,702
-------- --------
Long-term debt including current portion 360,121 351,890
Less current portion (f) (42,740) (22,628)
-------- --------
Long-term debt $317,381 $329,262
======== ========
(a) At July 31, 1994, the Bank Credit Agreement (as amended and
restated) provides for borrowings of up to $17,229 under a term loan facility
(with principal repayments varying from $1,463 to $4,409 per quarter until the
Bank Credit Agreement terminates in April 1996), and a revolving credit
facility with individual sublimits of $30,000 for working capital, $25,000 for
letters of credit, and $13,700 for capital improvement loans, with a maximum
of $60,000 outstanding under the revolving credit facility at any time. At
July 31, 1994, the Company had $28,700 in borrowings under the working capital
line, $13,700 in borrowings under the capital improvement line, and had
$16,358 of letters of credit issued against the revolving credit facility. On
August 1, 1994, the outstanding balance of capital improvement loans converted
into a term loan amortizing to maturity in April 1996 (with principal
repayments varying from $1,713 to $2,283 per quarter) and the maximum
borrowings under the revolving credit facility was reduced to $50,000.
Amounts outstanding under the Bank Credit Agreement bear interest
(8.36% at July 31, 1994) equal to the bank's prime rate plus 1.0%. Prior to
December 15, 1993, amounts outstanding under the Bank Credit Agreement bore
interest (6.27% at August 1, 1993) equal to, at the Company's option, (1) the
bank's prime rate plus 1.0%, (2) the certificate of deposit rate plus 2.25% or
(3) the Eurodollar rate plus 2.0%.
(b) The Senior Floating Rate Notes mature on August 2, 1996, and bear
interest (5.88% at July 31, 1994 and August 1, 1993) payable semiannually, at
a rate equal to six-month LIBOR (as defined in the Senior Floating Rate Note
Indenture) plus 250 basis points. The Senior Floating Rate Notes are
redeemable in whole or in part (subject to a minimum redemption of $9,000), at
the option of the Company, on any interest payment date at a redemption price
equal to 101% of the principal amount with accrued interest to the redemption
date.
25
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(c) The Senior Fixed Rate Notes mature on February 1, 1999, and bear
interest at 12.375% per annum, payable semiannually. The Senior Fixed Rate
Notes will be subject to redemption, otherwise than through operation of the
sinking fund, at any time on and after February 1, 1996 or from time to time
thereafter, at the option of the Company, as a whole or in part, on not less
than 30 nor more than 60 days notice, at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning February 1, of the years indicated:
Redemption
Year Price
---- ----------
1996 104.125%
1997 102.000%
1998 100.000%
and thereafter at 100% of the principal amount, together in the case of any
such redemption with accrued interest to the redemption date. The Senior
Fixed Rate Notes are subject to redemption on February 1, 1998 through the
operation of a sinking fund, at a redemption price equal to the principal
amount and accrued interest at the redemption date. The sinking fund provides
for the redemption in such year of $25,000 aggregate principal amount of the
Senior Fixed Rate Notes, calculated to retire 50% of the notes prior to
maturity. Senior Fixed Rate Notes acquired or redeemed by the Company (other
than through the operation of the sinking fund) may be credited against
sinking fund requirements. The Senior Fixed Rate Notes are also subject to
mandatory redemption upon a change in control of the Company (as defined in
the Senior Fixed Rate Note Indenture).
(d) The Subordinated Debentures will mature on February 1, 2001, and
bear interest, payable semiannually, at the rate of 14% per annum. The
Subordinated Debentures are redeemable, in whole or in part, at the option of
the Company, at any time and from time to time on and after February 1, 1994
at the following redemption prices together with accrued interest to the date
of redemption:
Year Redemption Price
---- ----------------
1994 106.22%
1995 104.67%
1996 103.11%
1997 101.56%
1998 100.00%
Mandatory sinking fund payments on the Subordinated Debentures, commencing
February 1, 1999, are calculated to retire 50% of the original principal
amount prior to maturity.
(e) In September 1989, the Company completed a $17,000 mortgage
financing of its warehouse, distribution, and office facility; in November
1989, seven fee-owned store properties were mortgaged for $13,200; and in
January 1990, an additional fee-owned store property was mortgaged for $2,000.
The net proceeds of these transactions were used to reduce existing bank debt.
Final payments of $12,529 and $13,895 are due October 1999 and November 1999,
respectively, on these mortgages.
26
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(f) Approximate principal payments for the next five fiscal years are:
Senior Capital
Year Ending Term Loans Notes Mortgages Leases Other Total*
- ----------- ---------- ------- --------- ------- ------ -------
1995 $11,504 $ -- $ 1,260 $4,114 $2,162 $19,040
1996 19,425 -- 960 4,357 949 25,691
1997 -- 85,000 1,057 2,694 752 89,503
1998 -- 25,000 1,163 734 640 27,537
1999 -- 25,000 1,282 370 540 27,192
* Does not include $28,700 outstanding under the working capital line at July
31, 1994. The revolving credit facility under the Bank Credit Agreement
requires the Company to pay down its outstanding working capital borrowings
for a 30 day period in each fiscal year to an average daily balance not to
exceed $5,000 with all such borrowings required to be repaid prior to
termination of the Bank Credit Agreement in April 1996. Therefore, the
Company classifies any outstanding balance in excess of $5,000 as current
portion of long-term debt. In August 1994, the outstanding balance of capital
improvement loans of $13,700 converted into a term loan amortizing to maturity
in April 1996, and these amounts are included as term loans in the table
above.
The Bank Credit Agreement, which is secured by a pledge of substantially
all assets of the Company, requires the Company to maintain a minimum net
worth and to satisfy certain other financial ratios, and provides for certain
restrictions on nonstock distributions and certain other restrictions. The
Senior Floating Rate Notes, the Senior Fixed Rate Notes, the Subordinated
Debentures, and certain other of the Company's indebtedness also contain
compliance covenants that are less restrictive than the covenants under the
Bank Credit Agreement. Due to the non-recurring charges incurred during the
first quarter as well as its operating performance, the Company breached
several financial covenants under its Bank Credit Agreement for each of the
reporting periods during the fiscal year ended July 31, 1994. The Company has
received all necessary waivers from the banks through the petition date
discussed in Note 1. Additionally, the Company has not paid $2,511, $3,094,
and $7,350 in interest due on the Senior Floating Rate Notes, the Senior Fixed
Rate Notes, and the Subordinated Debentures, respectively. These amounts have
been accrued on the accompanying financial statements, and as provided in the
plan of reorganization discussed in Footnote 1, all interest on the Senior
Floating Rate Notes and the Senior Fixed Rate Notes which is accrued and
unpaid as of the date the Company filed its voluntary petition with the
Bankruptcy Court shall be capitalized into New Senior Floating Rate Notes or
New Senior Fixed Rate Notes and all interest which is accrued and unpaid on
the Subordinated Debentures will be converted into equity. Given the
automatic stay provisions of the Chapter 11 filing discussed in Note 1 the
creditors discussed above are not able to declare these obligations in default
and currently due. Therefore, certain portions of these obligations have been
classified as long-term debt in the July 31, 1994 balance sheet.
The Company has entered into a series of interest rate hedging
transactions to reduce its exposure to fluctuations in short-term interest
27
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
rates on the majority of its floating rate indebtedness. Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 107 (SFAS
107), "Disclosures about Fair Value of Financial Instruments", requires
disclosure of estimated fair values of financial instruments, whether
recognized or not in the balance sheets, for which it is practical to estimate
such value. In calculating the fair value of each material class of financial
instrument, the value is estimated by the Company to be the current carrying
value adjusted to estimate the cost to liquidate the financial instruments.
The Company does not intend to dispose of a significant portion of its
financial instruments and thus any aggregate unrealized gains and losses
should not be interpreted as a forecast of future earnings or cash flows. The
Company estimates the cost to liquidate its interest rate hedging agreements
to be approximately $2,600 at July 31, 1994. Carrying value is considered a
reasonable estimate of the fair value of the remainder of the Company's
financial instruments. Fair value estimates do not include the value of
nonfinancial instruments, such as fixed assets, the value of customer
relationships and various other factors. As a result, these fair values are
not comprehensive and, therefore, do not reflect the underlying value of the
Company.
(6) Redeemable Preferred Stock
The Series B Preferred Stock shareholders are entitled to receive, when,
as, and if declared by the Board of Directors of the Company, cash dividends
at the rate of 12% per annum on the face amount per share, and such dividends
shall be cumulative and shall accrue whether or not earned or declared from
the date of issue or from the most recent preceding dividend payment date
through which dividends have been paid, as the case may be. Cumulative
undeclared dividends are $2,562 from October 12, 1988 through July 31, 1994.
Shares of Series B Preferred Stock are not entitled to any voting rights with
respect to matters voted on by stockholders of the Company, except as
otherwise required by Delaware law.
The Series C Preferred Stock ranks junior to all classes and series of
stock of the Company other than Common Stock. The holders of Common Stock and
Series C Preferred Stock are entitled to share equally in such dividends
(other than dividends in Common Stock) as may be declared by the Board of
Directors and paid by the Company out of funds legally available therefor.
Upon the voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of shares of Series C Preferred Stock shall be
entitled, before any payment is made in respect of the Common Stock, to be
paid a liquidation preference in cash equal to $4.00 per share. After payment
of the liquidation preference to the holders of the Series C Preferred Stock,
the holders of shares of Common Stock then out-standing shall be entitled to be
paid an amount in cash equal to $4.00 per share, following which each
outstanding share of Series C Preferred Stock and Common Stock shall share in
the distribution of the remaining assets of the Company, each share of Series
C Preferred Stock being entitled to the amount it would have received had it
been converted to Common Stock immediately prior to such distri-bution. Except
as otherwise provided by Delaware law, holders of Series C Preferred Stock
have no right to vote for the election of directors or on any other matters
that may be submitted to a vote of the Company's stock-holders except in the
case of a proposal to merge or consolidate the Company with or into another
28
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
entity, to sell, lease or exchange all or substantially all of the assets of
the Company as an entirety, to dissolve or liquidate the Company or to adopt a
plan to do any of the foregoing. In any such event, holders of shares of
Series C Preferred Stock shall be entitled to one vote per share and shall
vote together as a class with the Common Stock and not as a separate class.
The payment of cash dividends by the Company is prohibited by the terms
of the Bank Credit Agreement and restricted by the Indentures relating to the
Company's Senior Floating Rate Notes, Senior Fixed Rate Notes and Subordinated
Debentures.
The Company has certain mandatory redemption requirements applicable to
the Series B Preferred Stock, and certain repurchase obligations on the Series
B Preferred Stock and Series C Preferred Stock, provided that such redemption
or repurchase does not, among other things, violate any terms of an existing
or future financing agreement. The Company's current Bank Credit Agreement
and its current Indentures prohibit or significantly restrict the redemption
or repurchase by the Company of any shares of its capital stock. However, due
to these redemption requirements, preferred stock has been excluded from the
stockholders' deficit section of the accompanying balance sheets. If or when
such redemption or repurchase is allowed to occur, the Company, at its option,
may consummate the transaction in the form of cash or by issuing subordinated
notes.
(7) Common Stock
In November 1991, Green Equity Investors, L.P. ("GEI"), an investment
fund managed by Leonard Green & Partners, L.P. ("LGP"), purchased 1,716,967
newly issued shares of the Company's Common Stock, or approximately 55.4% on a
fully-diluted basis, for $27,700 in cash and The Fulcrum III Limited
Partnership and The Second Fulcrum III Limited Partnership (collectively, the
"Fulcrum Partnerships"), investment funds managed by Gibbons, Goodwin, van
Amerongen ("GGvA"), collectively purchased 142,564 newly issued shares of the
Company's Common Stock, or approximately 4.5% on a fully-diluted basis, for
$2,300 in cash. Contemporaneously, a majority of the holders of the Company's
Series A Preferred Stock voted to amend the Company's Certificate of
Incorporation to reclassify each share of Series A Preferred Stock and all
cumulative and unpaid dividends thereon into one-tenth (1/10) of a share of
Common Stock. As a result of the reclassification, all shares of Series A
Preferred Stock, together with all cumulative and unpaid dividends thereon,
were converted into an aggregate of 40,000 shares of Common Stock,
representing 1.3% of the Common Stock, on a fully-diluted basis. In addition,
the Fulcrum Partnerships exchanged shares of the Company's Series B Preferred
Stock, and all cumulative and unpaid dividends thereon, and Series C Preferred
Stock for Common Stock. As a result, cumulative undeclared dividends as of
the date of these transactions were reduced from $16,648 to $1,304.
In February 1994, GEI loaned the Company $2,000 in cash in exchange for
warrants to purchase 63,235 shares of Common Stock. At the time of this
transaction, the warrant was deemed to have nominal value, and therefore no
adjustment was made to equity in the accompanying financial statements.
29
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(8) Stock Option Plans
Certain key employees, including all executive officers, are eligible to
receive nonqualified stock options to purchase Common Stock under the Restated
1988 Management Stock Option Plan (the "1988 Option Plan") and/or the 1991
Management Stock Option Plan (the "1991 Option Plan" and, together with the
1988 Option Plan, the "Option Plans"). Options granted under the 1988 Option
Plan have an exercise price of the greater of 85% of fair market value at the
date of grant or $10 per share and options granted under the 1991 Option Plan
have an exercise price of (a) $16.13 per share for options granted within 30
days of the approval of the 1991 Option Plan by the stockholders of the
Company and (b) thereafter at 100% of the fair market value at the date of
grant. The 1988 Option Plan terminates at the end of the Company's 1995
fiscal year and the 1991 Option Plan terminates on November 26, 2001. A
three-person committee of the Board of Directors (the "Option Committee"),
which includes one officer of the Company, administers both Option Plans. The
Option Committee designates the class of employees eligible to participate in
the Option Plans and, during each fiscal year of the Option Plans, designates
eligible employees who will be granted options and the number of shares
subject to such options. Members of the Option Committee are eligible to
receive options.
The Option Plans provide for tenure-vesting based upon a participant's
employment with the Company and, in addition, the 1988 Option Plan provides
for performance-vesting based on the Company meeting certain earnings targets.
Once exercised, the transfer of the shares subject to the options will be
restricted pursuant to the terms of a Restricted Stock Agreement to be entered
into among the Company and each holder.
A summary of changes in the Option Plans for the fiscal years ended July
31, 1994, August 1, 1993, and August 2, 1992, are presented below:
1988 Option Plan
Fiscal Year
-----------
1994 1993 1992
---- ---- ----
Stock options outstanding
at beginning of year 27,147 27,976 28,924
Granted -- -- --
Exercised -- -- --
Forfeited 1,136 829 948
Outstanding at end
of year 26,011 27,147 27,976
Exercisable at end
of year 25,061 18,255 15,972
Average option price
per share $11.45 $11.54 $11.50
Reserved for future
grant -- -- --
30
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
1991 Option Plan
Fiscal Year
-----------
1994 1993 1992
---- ---- ----
Stock options outstanding
at beginning of year 118,597 110,722 --
Granted -- 8,875 110,722
Exercised -- -- --
Forfeited 1,000 1,000 --
Outstanding at
end of year 117,597 118,597 110,722
Exercisable at
end of year -- -- --
Average option price
per share $16.16 $16.16 $16.13
Reserved for future
grant 1,000 1,000 8,875
For the 1988 Option Plan, compensation expense is determined based on the
difference between the fair market value (as determined by the Option
Committee) and exercise price upon performance-vesting, such compensation
expense to be recognized over the tenure-vesting period on a pro rata basis.
For the 1991 Option Plan, options are granted at the fair market value of
Common Stock (as determined by the Option Committee) at the date of grant and
therefore no compensation expense will be recorded.
(9) Leases
The Company leases certain stores, other facilities and equipment under
leases that are not cancelable. Such leases generally contain renewal options
exercisable at the Company's option. In addition to minimum rental payments,
certain leases provide for payments of taxes, maintenance and percentage
rentals based upon sales in excess of stipulated amounts. The future minimum
payments under leases that are not cancelable, as of July 31, 1994, are:
31
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Operating Capital
Year Ending in leases leases
-------------- --------- --------
1995 $ 23,200 $ 5,430
1996 22,900 5,238
1997 21,800 3,163
1998 20,600 1,030
1999 20,400 965
Thereafter 212,400 2,329
-------- --------
Total minimum lease payments $321,300 18,155
========
Less portion representing interest (4,278)
Present value of net minimum lease payments at --------
July 31, 1994 $13,877
========
Total rent expense was $26,642, $25,475, and $24,059 for the fiscal
years ended July 31, 1994, August 1, 1993, and August 2, 1992, respectively.
Included in total rent expense are percentage rents totaling $241, $446, and
$534, for 1994, 1993, and 1992, respectively.
(10) Income Taxes
The Company has reported a pretax loss for all fiscal years since October
12, 1988, and, consequently, no income tax expense has been reported.
Financial Accounting Standards Board Statement 109 (SFAS 109) was adopted by
the Company as of August 2, 1993. There was no cumulative effect of this
change in accounting for income taxes determined as of August 2, 1993. Prior
years' financial statements have not been restated to apply the provisions of
SFAS 109. The effect on prior years' financial statements of retroactively
implementing SFAS 109 would be immaterial.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of July
31, 1994 are presented as follows:
Deferred tax assets:
Inventory, principally due to reserves and
additional costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 $ 900
Insurance and other reserves 8,100
Net operating loss carryforward 35,000
General business credit carryforward 1,600
Charitable contributions carryforward 3,200
Other, net 1,800
--------
Total gross deferred tax assets 50,600
Less valuation allowance (50,600)
Net deferred tax assets $ --
========
32
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Upon adoption of SFAS 109, effective August 2, 1993, the Company
determined a valuation allowance requirement in the amount of $36,200. The
valuation allowance as of July 31, 1994 has been determined to be $50,600,
resulting in a change in the valuation allowance in the amount of $14,400.
The Company has net operating loss ("NOL") carryforwards for federal
income tax purposes of $93,000 which are available to offset future taxable
income, if any, through the year 2009. The Company has general business
credit carryforwards of $1,600 which are also available to reduce future
federal income taxes, if any, through the year 2009. The Company anticipates
that, in connection with the restructuring discussed in Footnote 1, it will
undergo an ownership change pursuant to Internal Revenue Code Section 382 that
will result in an annual limitation on the amount of the NOL and general
business credit carryforwards that the Company may utilize to offset future
federal taxable income. In addition, should the Company fail to emerge from
bankruptcy by December 31, 1994, its NOL and general business credit
carryforwards will be eliminated to the extent of any income realized from the
cancellation of debt by the Company.
(11) Supplementary Statements of Operations Information
Supplementary Statements of Operations information is as follows:
Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
-------------- -------------- --------------
Amortization of:
Lease interests $ 6,037 $ 2,576 $ 1,293
Deferred financing costs 2,950 2,850 2,932
Goodwill 2,831 2,832 2,886
------- ------- -------
Total amortization of
intangible assets $11,818 $ 8,258 $ 7,111
======= ======= =======
Advertising costs $14,099 $13,530 $12,428
======= ======= =======
(12) Employee Benefit Plans
Kash n' Karry Retirement Estates ("KKRE"), a trusteed defined
contribution retirement plan, was authorized by the Company's Board of
Directors in 1988. KKRE is a tax savings/profit sharing plan maintained
primarily for the purpose of providing retirement income for eligible
employees of the Company. KKRE is qualified under Section 401(a) and Section
401(k) of the Internal Revenue Code of 1986. Generally, all employees who
have attained the age of 21 years and complete one year of participation
33
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
service (as defined under KKRE) are eligible to participate in KKRE.
Participants may, subject to certain federal limitations, elect to defer an
amount not to exceed 15% of their base compensation and have such amount
contributed to KKRE. The Company may match all or a portion of the
participant's deferred compensation, but the amount of the matching
contribution may not exceed 3% of such participant's compensation. Additional
non-matching contributions may be made to KKRE by the Company in such amount
as determined by the Company's Board of Directors based on the Company's
operating performance. Funds that participants elect to defer are invested,
at the participant's option, into various investment accounts. The vested
percentage of the amounts allocated to a participant's account will be payable
to the participant upon such participant's death, disability, retirement, or
other separation of service from the Company. Plan expenses were $573, $573,
and $461, for the fiscal years ended July 31, 1994, August 1, 1993, and August
2, 1992, respectively.
Kash n' Karry Executive Supplemental Retirement Plan ("KESP"), a non-
qualified, unfunded salary deferral plan, was authorized by the Company's
Board of Directors in November 1989. Certain Key Employees (as defined under
KESP) of the Company as selected by its Board of Directors participate in
KESP. Currently, nineteen Key Employees participate in KESP. Prior to the
beginning of each plan year, a participant may elect to defer an amount not to
exceed 15% of such participant's annual base compensation (as defined under
KESP). The Company will match a certain portion of the amount deferred by the
participant, but the amount of the match may not exceed 6% of such
participant's annual base compensation. The Company will record income to the
participant's account at an annual rate (11% for the 1994, 1993 and 1992 plan
years) as determined by the Company's Board of Directors, but the rate of such
income shall not be less than 8% per annum.
The vested percentage of the amounts recorded in the participant's
account will be paid to the participant upon the earlier of: (i) such
participant's death, disability, retirement, or other separation of service
from the Company; (ii) the date the plan is terminated; or (iii) the date that
a change in control occurs (as defined under KESP). Expense for this plan was
$135, $149, and $172, for the fiscal years ended July 31, 1994, August 1,
1993, and August 2, 1992, respectively.
(13) Commitments and Contingencies
The Company had letters of credit outstanding totaling $16,358 and
$19,118 at July 31, 1994 and August 1, 1993, respectively, which amounts have
been reflected as reductions of the available revolving loan facility as of
those dates. These letters of credit primarily guarantee various insurance
and financing activities.
34
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(14) Related Party Transactions
Leonard Green & Partners ("LGP"), the sole general partner of Green
Equity Investors, L.P., which owns approximately 55.4% of the Company's Common
Stock on a fully-diluted basis, received a closing fee on November 26, 1991 as
compensation in connection with its equity investment in the Company and was
also reimbursed for its out-of-pocket expenses. In addition, as consideration
for the provision of ongoing financial advisory services, the Company agreed
to pay LGP an annual fee plus related out-of-pocket expenses. Three of the
Company's Directors are general partners of LGP. The Company has made $143,
$598 and $489 in such payments for the fiscal years ended July 31, 1994,
August 1, 1993 and August 2, 1992, respectively.
Gibbons, Goodwin, van Amerongen ("GGvA"), the sole general partner of The
Fulcrum III and The Second Fulcrum III Limited Partnerships, which combined
own approximately 30.7% of the Company's Common Stock on a fully-diluted
basis, received a closing fee on November 26, 1991 as compensation in
connection with its equity investment in the Company and was also reimbursed
for its out-of-pocket expenses. In addition, GGvA receives, as consideration
for the provision of ongoing financial advisory services, an annual fee plus
related out-of-pocket expenses. One of the Company's Directors is a general
partner of GGvA. The Company made total payments to GGvA for on-going
services of $42, $235, and $262, for the fiscal years ended July 31, 1994,
August 1, 1993, and August 2, 1992, respectively.
35
<PAGE>
KASH N' KARRY FOOD STORES, INC.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements have been prepared
using the principles of "fresh-start" accounting pursuant to the American
Institute of Certified Public Accountants Statement of Position No. 90-7,
entitled "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOS No. 90-7"). The unaudited pro forma statement of
operations of the Company for the fiscal year ended July 31, 1994 gives effect
to the Restructuring as if it had occurred on August 2, 1993. The unaudited
pro forma balance sheet of the Company as of July 31, 1994 gives effect to the
Restructuring as if such Restructuring had occurred on July 31, 1994. The pro
forma data are not necessarily indicative of the financial position or results
of operations that would have been reported had the Restructuring occurred on
the dates referred to, nor are they necessarily indicative of the financial
position or results of operations to be expected in the future. KPMG Peat
Marwick LLP, the Company's independent auditors, have neither examined,
reviewed nor compiled the pro forma information and, consequently, do not
express an opinion or any other form of assurance or other association with
respect thereto.
The pro forma data should be read together with the other information
contained herein under the headings "Selected Financial Data," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company and the notes thereto.
36
<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of July 31, 1994
(In Thousands)
ASSETS
Pro Forma Adjustments
---------------------
July 31, Discharge Fresh Pro Forma
1994 and Exchange Start Reorganized
Current assets: --------- -------------- ------ -----------
Cash and cash equivalents $ 6,852 $ (1,500)(a)$ $ 6,412
10,000 (b)
(4,500)(c)
(4,440)(d)
Accounts receivable 8,084 8,084
Inventories 76,094 76,094
Prepaid expenses and
other current assets 12,805 12,805
--------- ---------- -------- --------
Total currents assets 103,835 (440) 103,395
Property and equipment,
at cost, net 160,491 160,491
Favorable lease interest, net 12,312 12,312
Deferred financing costs, net 12,630 (10,717)(e) 3,413
1,500 (a)
Excess of cost over fair value of
net assets acquired, net 96,758 (96,758)(f) --
Reorganization value in excess of
amounts allocated to net assets -- 92,524 (g) 92,524
Other assets 3,867 3,867
--------- -------- -------- --------
Total assets $ 389,893 $ (9,657) $ (4,234) $376,002
========= ======== ======== ========
37
<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of July 31, 1994
(Continued)
(In Thousands)
LIABILITIES & STOCKHOLDERS' EQUITY
Pro Forma Adjustments
---------------------
July 31, Discharge Fresh Pro Forma
1994 and Exchange Start Reorganized
--------- -------------- ------ -----------
Current liabilities:
Current portion of
long-term debt $ 42,740 $ (940)(d)$ $ 13,596
(28,204)(h)
Accounts payable 34,908 34,908
Accrued expenses 38,934 (7,350)(i) 25,993
(5,591)(j)
--------- ---------- -------- --------
Total current liabilities 116,582 (42,085) 74,497
Long-term debt,
less current portion 317,381 (105,000)(i) 242,676
28,204 (h)
5,591 (j)
(3,500)(d)
Other long-term liabilities 12,334 12,334
Series B preferred stock 3,875 (3,875)(k) --
Series C preferred stock 775 (775)(k) --
Stockholders' equity (deficit):
Common stock, pre-restructuring 28 (28)(k) --
Common stock, post-restructuring -- 26 (i) 31
5 (b)
Capital in excess of par value 77,695 (77,695)(k) 46,464
112,324 (i)
9,995 (b)
(4,500)(c)
(71,355)(g)
Accumulated deficit (138,740) 71,619 (l) --
67,121 (g)
Less cost of treasury stock (37) 37 (k) --
--------- --------- -------- --------
Total stockholders'
equity (deficit) (61,054) 111,783 (4,234) 46,495
--------- --------- -------- --------
Total liabilities and
stockholders' equity
(deficit) $ 389,893 $ (9,657) $ (4,234) $376,002
========= ========= ======== ========
38
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(Dollar Amounts in Thousands, Except per Share Amounts)
The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma Balance Sheet. The pro forma adjustments
are based on management's best estimates using information currently
available.
The pro forma Balance Sheet has been prepared assuming that the estimated
fair value of property and equipment and certain other assets, including
favorable lease interest, approximates current book values, and that the
capital structure of the Company post-Restructuring will be 3,100,000 shares
of $.01 common stock with an approximate market value of $15 per share.
Market value is based on a multiple of projected operating cash flow (which is
the methodology most often used to value grocery businesses) less the
long-term debt of the Company.
(a) To reflect estimated transaction costs associated with the Company's New
Bank Credit Agreement.
(b) To reflect the purchase of 15.0% of the New Common Stock by GEI in
exchange for $10,000 in cash.
(c) To reflect estimated transaction costs associated with the Restructuring.
(d) To repay certain notes on the Effective Date.
(e) To reflect the elimination of net capitalized transaction costs
associated with the $105,000 Old Subordinated Debentures, Old Credit
Agreement, and the Old Senior Floating Rate Notes and Old Senior Fixed
Rate Notes.
(f) To reflect the elimination of pre-existing goodwill.
(g) To record "fresh-start" accounting adjustments.
(h) To reflect principal amortization adjustments between the New Bank Credit
Agreement and the Old Credit Agreement. Adjustment reflects current
portions of the Old Credit Agreement of $35,204 and current portions of
the New Bank Credit Agreement of $7,000.
(i) To reflect the conversion of $105,000 Old Subordinated Debentures, plus
accrued interest totaling approximately $7,350 for 85.0% of the New
Common Stock.
(j) To reflect the conversion of Old Senior Floating Rate Notes totaling
$85,000 and Old Senior Fixed Rate Notes totaling $50,000, along with
accrued interest thereon totaling approximately $5,591, into New Senior
Fixed Rate Notes.
(k) To reflect the elimination of Old Equity Interests.
(l) To reflect the net operating impact of discharge and exchange
adjustments.
39
<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Fifty-Two Weeks Ended July 31, 1994
(In Thousands, Except Share and Per Share Amounts)
July 31, Pro Forma Pro Forma
1994 Adjustments Reorganized
---------- ----------- -----------
Sales $1,065,165 $ $1,065,165
Cost of sales 845,597 845,597
---------- --------- ----------
Gross profit 219,568 219,568
Selling, general and
administrative expenses 176,945 176,945
Depreciation and amortization 24,112 (2,832)(a) 24,981
3,701 (b)
Store closing and other costs 11,016 11,016
---------- --------- ----------
Operating income 7,495 6,626
Interest expense, net 45,390 (14,700)(c) 33,003
(11,289)(d)
15,525 (e)
(2,423)(f)
500 (g)
---------- --------- ----------
Loss before income taxes (37,895) (26,377)
Income taxes -- --
---------- --------- ----------
Net loss (37,895) (26,377)
Undeclared dividends on preferred stock (464) 464 (h) --
---------- ----------
Net loss attributable to common stock $ (38,359) $ (26,377)
========== ==========
Pro forma loss per common share $ (8.51)
==========
Weighted average common shares outstanding 3,100,000
==========
40
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Dollar Amounts In Thousands)
The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma Statement of Operations. The pro forma
adjustments are based on management's best estimates using information
currently available.
The pro forma Statement of Operations has been prepared assuming that the
estimated fair value of property and equipment and certain other assets,
including favorable lease interest, approximates current book values, and that
the capital structure of the Company post-Restructuring will be 3,100,000
shares of $.01 common stock with an approximate market value of $15 per share.
Market value is based on a multiple of projected operating cash flow (which is
the methodology most often used to value grocery businesses) less the
long-term debt of the Company.
(a) To reflect the elimination of amortization on previously capitalized
excess of cost over fair value of net assets acquired.
(b) To reflect the amortization of reorganizational value in excess of
amounts allocated to net assets totaling $92,524 over 25 years.
(c) To reflect the elimination of interest expense occurred at 14% on the
$105,000 Old Subordinated Debentures.
(d) To reflect the elimination of interest expense on the Old Senior Fixed
Rate Notes and Old Senior Floating Rate Notes.
(e) To reflect interest expense on New Senior Fixed Rate Notes at 11.5% based
upon an average outstanding principal balance of $135,000 (Old Senior
Floating Rate Notes of $85,000 and Old Senior Fixed Rate Notes of
$50,000).
(f) To reflect the elimination of amortization on deferred transaction costs
related to the Old Credit Agreement and the $105,000 Old Subordinated
Debentures and the Old Senior Floating Rate Notes and Old Senior Fixed
Rate Notes.
(g) To reflect the amortization of transaction costs related to the New Bank
Credit Agreement.
(h) To reflect the elimination of undeclared dividends on Old Equity
Interests.
41
PART III
<PAGE>
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth certain information regarding the
directors and executive officers of the Company.
Name Age Position
- ---- --- --------
Anthony R. Petrillo 52 Acting Chairman of the Board and Chief
Executive Officer
Thomas A. Whipple 50 Chief Operating Officer, Executive Vice
President, Marketing, and Director
Raymond P. Springer 44 Executive Vice President, Administration
and Director
Dennis V. Carter 47 Executive Vice President, Operations and
Director
Richard D. Coleman 40 Vice President, Controller and Secretary
Leonard I. Green 60 Director
Christopher V. Walker 47 Director
Jennifer Holden Dunbar 31 Director
Edward W. Gibbons 58 Director
Anthony R. Petrillo has been Acting Chairman of the Board of Directors
and Acting Chief Executive Officer of the Company since August 1, 1994. From
1991 to August 1, 1994, Mr. Petrillo was an independent consultant in the
supermarket industry. Mr. Petrillo previously served as Executive Vice
President and Chief Operating Officer of Riser Foods, a food wholesaler and
retailer, from 1989 to 1991. Prior thereto, he served as President of Mayfair
Supermarkets, a supermarket chain.
Thomas A. Whipple has been Chief Operating Officer, Executive Vice
President, and a Director of the Company since August 1, 1994. Mr. Whipple
served as Executive Vice President from October 1988 through November 1992 and
from November 1993 through July 1994. He served as a Director of the Company
from October 1988 until July 1991 and from November 1991 to the present. The
Company granted Mr. Whipple an unpaid leave of absence from his position as
Executive Vice President from December 1, 1992 through November 1, 1993, and
he served as President, Chief Executive Officer and a director of Almac's
Supermarkets, Inc. and Almac's Inc. from December 1, 1992 until October 1993.
Mr. Whipple served in various capacities, including Senior Vice President,
Operations, of the Florida Division of Lucky and its predecessors from May
1962 until October 1988.
Raymond P. Springer has been Executive Vice President, Administration of
the Company since October 1988 and has been a Director of the Company since
November 1991. Mr. Springer also served as a Director of the Company from
October 1988 to July 1991. Mr. Springer previously served as Senior Vice
President of the Florida Division of Lucky from December 1987.
Dennis V. Carter has been Executive Vice President, Operations and a
Director of the Company since November 1991. Mr. Carter also served as a
Director of the Company from February 1991 until July 1991. Mr. Carter joined
the Company's predecessor in 1972 and has spent his career with the Company
and its predecessors developing and enforcing store policy and executing the
Company's marketing programs. His most recent prior position was Vice
President, Operations.
42
<PAGE>
Richard D. Coleman has been Vice President, Controller and Secretary of
the Company since October 1988. Mr. Coleman previously served as Vice
President and Controller of the Florida Division of Lucky from February 1988.
Leonard I. Green has been a Director of the Company since November 1991.
Mr. Green also served as a Director of the Company from April 1988 to July
1991. Mr. Green has been the controlling shareholder of a general partner of
LGP since November 1989. Mr. Green was a general partner of Gibbons, Green,
van Amerongen ("Gibbons Green"), the predecessor of GGvA from September 1969
to June 1989. Mr. Green is a director of Almac's Supermarkets, Inc.,
Australian Resources Limited, Big 5 Holdings, Inc., Carr-Gottstein Foods Co.,
Family Restaurants, Inc., Foodmaker, Inc., Horace Mann Educators Corporation
and Thrifty PayLess Holdings, Inc.
Christopher V. Walker has been a Director of the Company since November
1991. Mr. Walker also served as a director of the Company from April 1988 to
July 1991. Mr. Walker has been a general partner of LGP since November 1989,
was a general partner of Gibbons Green from January 1989 to August 1989 and
was a limited partner of Gibbons Green from October 1985 to January 1989. Mr.
Walker is a director of Foodmaker, Inc. and Australian Resources and Mining
Company NL.
Jennifer Holden Dunbar has been a Director of the Company since November
1991. Ms. Holden Dunbar has been a general partner of LGP since January 1994
and was a principal of LGP from January 1992 to January 1994 and an associate
of LGP from November 1989. Prior to such time, Ms. Holden Dunbar was an
associate of Gibbons Green and a financial analyst with Morgan Stanley & Co.,
Incorporated in its mergers and acquisitions department. Ms. Holden Dunbar is
a director of Almac's Supermarkets, Inc., Big 5 Holdings Inc. and Thrifty
PayLess Holdings, Inc.
Edward W. Gibbons has been a Director of the Company since November 1989.
He has been a general partner of GGvA and its predecessor since September
1969. Mr. Gibbons is a director of Robert Half International, Inc., Bath Iron
Works Corporation, Foodmaker, Inc., and Horace Mann Educators Corporation.
On August 6, 1993, Almac's Supermarkets, Inc. and Almac's Inc. filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code.
On July 29, 1994, the Company announced the resignation of Ronald J.
Floto as President, Chief Executive Officer and Chairman of the Board of
Directors, positions he had held since October 1988. Anthony R. Petrillo
assumed the position of Acting Chairman of the Board of Directors and Chief
Executive Officer of the Company effective August 1, 1994.
All Directors hold office until their successors are duly elected and
qualified or until their earlier resignation or removal. Pursuant to a
Stockholders Agreement among the Company, Green Equity Investors, L.P.
("GEI"), The Fulcrum III Limited Partnership and The Second Fulcrum III
Limited Partnership (collectively, the "Fulcrum Partnerships"), Edward W.
Gibbons or another representative designated by the Fulcrum Partnerships,
subject to the approval of GEI, will continue to be elected to the Board until
the Company consummates a registered offering of its Common Stock to the
public.
43
<PAGE>
Item 11. Compensation of Executive Officers
Summary compensation
The following table sets forth compensation for the fiscal years ended
July 31, 1994, August 1, 1993, and August 2, 1992, respectively, awarded to,
earned by, or paid to the Chief Executive Officer and the individuals who,
during the 1994 fiscal year, were all of the other executive officers of the
Company (collectively, the "Executive Officers").
Summary Compensation Table
Long-Term
Comp.
Awards
Number of
Securities
Underlying
Name and Annual Compensation Options All Other
Principal Position Year Salary (1) Bonus Granted Comp. (2)
- ------------------ ---- ------------------- ---------- ----------
Ronald J. Floto
Chairman of the Board, 1994 $346,056 $ -- -- $ 8,978
President and 1993 248,358 41,400 --
Chief Executive Officer 1992 358,270 267,720 39,485
Thomas A. Whipple
Chief Operating Officer 1994 $118,331 $ -- -- $ 3,073
and Executive Vice 1993 60,923 -- --
President, Marketing 1992 186,923 87,300 12,165
Raymond P. Springer 1994 $177,298 $ -- -- $ 11,910
Executive Vice President, 1993 131,233 15,000 --
Administration 1992 186,923 87,300 18,120
Dennis V. Carter 1994 $133,356 $ -- -- $ 7,514
Executive Vice President, 1993 123,250 17,000 4,162
Operations 1992 139,038 91,665 15,351
Richard D. Coleman 1994 $100,000 $ -- -- $ 2,574
Vice President, 1993 95,481 5,000 --
Controller and Secretary 1992 103,846 27,160 4,515
- -----------------------
(1) Includes amounts deferred at the election of the Executive Officers under
the Company's Retirement Estates 401(k) Plan (the "Retirement Plan"), a
trusteed defined contribution plan, and its nonqualified unfunded supplemental
salary deferral plan (the "Supplemental Retirement Plan").
(2) Represents (i) matching contributions by the Company under its Retirement
Plan of $2,587 for the benefit of Mr. Floto, $1,292 for the benefit of Mr.
Whipple, $1,321 for the benefit of Mr. Springer, $990 for the benefit of Mr.
Carter and $741 for the benefit of Mr. Coleman; (ii) matching allocations by
the Company under its Supplemental Retirement Plan of $5,175 for the benefit
44
<PAGE>
of Mr. Floto, $1,453 for the benefit of Mr. Whipple, $9,854 for the benefit of
Mr. Springer, $6,075 for the benefit of Mr. Carter and $1,500 for the benefit
of Mr. Coleman; and (iii) above-market interest recorded by the Company under
its Supplemental Retirement Plan of $1,216 for the benefit of Mr. Floto, $328
for the benefit of Mr. Whipple, $735 for the benefit of Mr. Springer, $449 for
the benefit of Mr. Carter and $333 for the benefit of Mr. Coleman.
Stock option grants
The Company has in effect two nonqualified employee stock option plans
pursuant to which options to purchase Common Stock of the Company are granted
to certain key employees of the Company, including each of the Executive
Officers. No options were granted in fiscal year 1994 under either the 1988
Management Stock Option Plan (the "1988 Option Plan") or the 1991 Management
Stock Option Plan (the "1991 Option Plan").
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
None of the outstanding options granted under the 1988 Option Plan or the
1991 Option Plan has been exercised. The following table shows information
concerning the value of the unexercised options held by the Executive Officers
determined as of July 31, 1994.
Fiscal Year End Option Values Table
Value of
Number of Securities
Securities Underlying
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- --------------- ---------------
Ronald J. Floto -- / -- --
Thomas A. Whipple 1,877/12,349 (1)
Raymond P. Springer 1,877/18,304 (1)
Dennis V. Carter 1,102/19,697 (1)
Richard D. Coleman 610/ 4,569 (1)
(1) On November 9, 1994, the Company filed a "prepackaged" plan of
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Plan"), and is seeking, as promptly as is practicable, confirmation by the
Bankruptcy Court of the Plan. Pursuant to this plan, all existing options
will be cancelled, and the holders will receive no distribution and retain no
interest in the Company. Therefore, the value of all such options is nil.
45
<PAGE>
Compensation of Directors
Directors of the Company, as such, do not receive any compensation.
However, LGP, of which Mr. Green is the controlling shareholder of a general
partner and of which Mr. Walker and Ms. Holden Dunbar are general partners,
and GGvA, of which Mr. Gibbons is a general partner and of which Messrs. Green
and Walker are former general partners, receive compensation for certain
ongoing financial advisory services and have also received certain other fees
and expenses from the Company. See Item 13. "Certain Relationships and
Related Transactions."
Termination of Employment and Change-in-Control Arrangements
The Company has severance pay agreements with members of its senior
management and other key employees. The severance pay agreements provide,
among other things, that if the employee is terminated without Cause (as
defined therein) in connection with a Change of Control (as defined therein)
then such employee will be entitled to payment ranging from 50% to 200% of
that employee's annual compensation. The Company does not believe that the
Restructuring will constitute a change of control under the agreements.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Board of Directors of the Company has had, from time to time, a
compensation committee and a stock option committee. The compensation
committee approves cash compensation payable to the executive officers, and
the stock option committee grants options and administers the Company's 1988
Option Plan and 1991 Option Plan. During the 1994 fiscal year, Ronald J.
Floto, Leonard I. Green, Christopher V. Walker, Jennifer Holden Dunbar, and
Edward W. Gibbons performed the functions of the compensation committee and
Messrs. Floto, Green and Gibbons served on the stock option committee.
Mr. Green is a controlling shareholder of a general partner of LGP and a
former partner of Gibbons Green, Mr. Walker is a general partner of LGP and a
former partner of Gibbons Green, and Mr. Gibbons is a general partner of GGvA.
LGP is the general partner of GEI, which owns approximately 60.9% of the
Company's Common Stock (55.4% on a fully diluted basis). GGvA is the general
partner of the Fulcrum Partnerships, which collectively own approximately
33.8% of the Company's Common Stock (30.7% on a fully diluted basis), and
Gibbons Green is a predecessor of GGvA. Mr. Floto was the Chairman of the
Board, President and Chief Executive Officer of the Company until July 29,
1994.
The Company paid an annual fee of $554,000 plus related out-of-pocket
expenses to LGP, and an annual fee of $232,000 plus related out-of-pocket
expenses to GGvA as consideration for the provision of ongoing financial
advisory services, through September 1993. Since September 1993, the Company
has only reimbursed LGP and GGvA for out-of-pocket expenses that have been
billed to the Company.
46
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of October 14, 1994
by each entity or person known by the Company to own more than 5% of the
Common Stock of the Company.
Number of Percentage of
Name and address of beneficial owner shares owned(2) Common Stock(3)
- ------------------------------------ --------------- ---------------
Green Equity Investors, L.P.(1) 1,716,967 60.9%
333 South Grand Avenue
Suite 5400
Los Angeles, CA 90071
The Fulcrum III Limited Partnership(2) 566,850 20.1%
600 Madison Avenue
New York, NY 10022
The Second Fulcrum III Limited Partnership(2) 385,325 13.7%
600 Madison Avenue
New York, NY 10022
- -------------------
(1) LGP, the sole general partner of GEI, Leonard I. Green, the controlling
shareholder of a general partner of LGP, and Christopher V. Walker and
Jennifer Holden Dunbar, general partners of LGP, may be deemed beneficial
owners of the shares owned by GEI.
(2) GGvA, the general partner of the Fulcrum Partnerships, and Edward W.
Gibbons, as a general partner of GGvA, may be deemed beneficial owners of the
shares owned by the Fulcrum Partnerships. Messrs. Green and Walker were
formerly general partners of Gibbons Green and have terminated their
partnership interest in GGvA but continue to be entitled to their
proportionate share of GGvA's economic interest in the Company, other than the
investment in the Company made by the Fulcrum Partnerships in November 1991.
See "The Company."
(3) Based on 2,819,589 shares of Common Stock outstanding.
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of October 14, 1994
by each Director, each of the Executive Officers and the Directors and
Executive Officers of the Company as a group. Except as indicated, each
person listed below has sole voting and investment power with respect to the
shares set forth opposite such person's name.
47
<PAGE>
Number of Percentage of
Name of individual shares owned(1)(7) Common Stock(2)
- ------------------ ------------------ ---------------
Anthony R. Petrillo -- --
Ronald J. Floto 29,949 1.1%
Thomas A. Whipple 13,937 (3)
Raymond P. Springer 13,937 (3)
Dennis V. Carter 6,127 (3)
Richard D. Coleman 5,635 (3)
Leonard I Green (4) 1,716,967 60.9%
Christopher V. Walker (4) 1,716,967 60.9%
Jennifer Holden Dunbar (4) 1,716,967 60.9%
Edward W. Gibbons (5) 952,175 33.8%
All Executive Officers and Directors
as a group (9 persons) (4) (5) (6) 2,708,778 96.1%
- -----------------
(1) Includes outstanding shares of Common Stock and shares subject to
exercisable options issued under the 1988 Option Plan and the 1991 Option
Plan. Of the shares subject to such options, 1,877 shares are owned
beneficially by Mr. Whipple; 1,877 are owned beneficially by Mr. Springer;
1,102 shares are owned beneficially by Mr. Carter; and 610 shares are owned
beneficially by Mr. Coleman.
(2) Based on 2,819,589 shares of Common Stock outstanding.
(3) Less than 1% of class.
(4) Represents shares owned by GEI of which LGP is the sole general partner.
Mr. Green may be deemed to be the beneficial owner of such shares by reason of
his being the controlling shareholder of a general partner of LGP, and Mr.
Walker may be deemed to be the beneficial owner of such shares by reason of
his being a general partner of LGP and Ms. Holden Dunbar may be deemed to be
the beneficial owner of such shares by reason of her being a general partner
of LGP. In addition, Messrs. Green and Walker were formerly general partners
of Gibbons Green and have terminated their partnership interest in GGvA but
continue to be entitled to their proportionate share of GGvA's economic
interest in the Company, other than the investment in the Company made by the
Fulcrum Partnerships in November 1991. See "The Company."
(5) Represents shares owned by the Fulcrum Partnerships. Mr. Gibbons may be
deemed to be the beneficial owner of such shares by reason of his general
partnership interest in GGvA, which is the sole general partner of each of the
Fulcrum Partnerships.
(6) Includes 5,466 shares subject to exercisable options under the 1988
Option Plan and the 1991 Option Plan.
(7) On November 9, 1994, the Company filed a "prepackaged" plan of
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Plan"), and is seeking, as promptly as is practicable, confirmation by the
Bankruptcy Court of the Plan. Pursuant to this plan, all existing common
stock will be cancelled, and the holders will receive no distribution and
retain no interest in the Company.
48
<PAGE>
Item 13. Certain Relationships and Related Transactions.
As consideration for the provision of financial advisory services, the
Company agreed to pay an annual fee of $554,000, plus out-of-pocket expenses,
to LGP, the general partner of GEI, which owns approximately 55.4% of the
Company's Common Stock on a fully diluted basis, and an annual fee of
$232,000, plus out-of-pocket expenses, to GGvA, the general partner of the
Fulcrum Partnerships, which collectively own approximately 30.7% of the
Company's Common Stock on a fully diluted basis. The Company believes that
the terms of its agreements with LGP and GGvA are comparable to what could be
obtained from an unrelated, but equally qualified, third party. Messrs. Green
and Walker and Ms. Holden Dunbar are general partners of LGP and each is a
director of the Company. Mr. Gibbons, who is a general partner of GGvA, is a
director of the Company. Messrs. Green and Walker have terminated their
partnership interests in GGvA but continue to be entitled to their
proportionate share of GGvA's economic interest in the Company, other than the
investment in the Company made by the Fulcrum Partnerships in November 1991.
Since September 1993, the Company has only reimbursed LGP and GGvA for
out-of-pocket expenses that have been billed to the Company.
49
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
Page Number
1. Financial Statements:
Report of Independent Certified Public Accountants 15
Balance Sheets as of July 31, 1994 and August 1, 1993 16
Statements of Operations for the fiscal years ended
July 31, 1994, August 1, 1993, and August 2, 1992 17
Statement of Stockholders' Deficit for the fiscal years
ended August 2, 1992, August 1, 1993 and July 31, 1994 18
Statements of Cash Flows for the fiscal years ended
July 31, 1994, August 1, 1993, and August 2, 1992 19
Notes to Financial Statements 21
2. Financial Statement Schedules:
V. Property and Equipment and Property Under Capital
Leases 60
VI. Accumulated Depreciation and Amortization of Property
and Equipment and Property Under Capital Leases 61
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and notes thereto.
3. Exhibits:
Certain of the following exhibits, which have heretofore been filed with
the Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 and which are designated in prior filings as
noted below, are hereby incorporated by reference and made a part hereof:
Exhibit No. Description
3(i)(a) Restated Certificate of Incorporation filed with the Delaware
Secretary of State on October 11, 1988 (previously filed as
Exhibit 19.1(a) to the Company's Quarterly Report on Form 10-Q
for the period ended October 31, 1993, which exhibit is hereby
incorporated by reference).
3(i)(b) Certificate of Amendment of Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
January 10, 1989 (previously filed as Exhibit 19.1(b) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1993, which exhibit is hereby incorporated by
reference).
50
<PAGE>
3(i)(c) Certificate of Amendment of Restated Certificate of
Incorporation to amend the Statement of Designations, Rights,
Preferences and Restrictions of 12% Junior Cumulative
Redeemable Preferred Stock filed with the Delaware Secretary of
State on January 10, 1989 (previously filed as Exhibit 19.1(c)
to the Company's Quarterly Report on Form 10-Q for the period
ended October 31, 1993, which exhibit is hereby incorporated by
reference).
3(i)(d) Certificate of Amendment of Restated Certificate of
Incorporation to amend the Restated Statement of Designations,
Rights, Preferences and Restrictions of Series A Cumulative
Preferred Stock filed with the Delaware Secretary of State on
January 30, 1989 (previously filed as Exhibit 19.1(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1993, which exhibit is hereby incorporated by
reference).
3(i)(e) Certificate of Designations, Rights, Preferences and
Restrictions of Series B Cumulative Preferred Stock filed with
the Delaware Secretary of State on January 10, 1989 (previously
filed as Exhibit 19.1(e) to the Company's Quarterly Report on
Form 10-Q for the period ended October 31, 1993, which exhibit
is hereby incorporated by reference).
3(i)(f) Certificate of Designations, Rights, Preferences and
Restrictions of Series C Common Equivalent Convertible
Preferred Stock filed with the Delaware Secretary of State on
January 10, 1989 (previously filed as Exhibit 19.1(f) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1993, which exhibit is hereby incorporated by
reference).
3(i)(g) Certificate of Amendment of Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
November 13, 1990 (previously filed as Exhibit 19.1(g) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1993, which exhibit is hereby incorporated by
reference).
3(i)(h) Certificate of Amendment of the Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
November 26, 1991 (previously filed as Exhibit 19.1(h) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 31, 1993, which exhibit is hereby incorporated by
reference).
3(i)(i) Certificate of Amendment of the Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
August (previously filed as Exhibit 19.1(i) to the Company's
Quarterly Report on Form 10-Q for the period ended October 31,
1993, which exhibit is hereby incorporated by reference).
3(ii)(i) Bylaws (previously filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-25621,
which exhibit is hereby incorporated by reference).
51
<PAGE>
3(ii)(ii) First Amendment to Bylaws adopted July 30, 1991 (previously
filed as Exhibit 3.2(b) to the Company's Annual Report on Form
10-K for the period ended July 28, 1991, which exhibit is
hereby incorporated by reference).
4.1(a) Indenture entered into between the Company and First Florida
Bank, N.A., relating to the $105 million 14% Subordinated
Debentures due February 1, 2001, dated as of February 8, 1989
(previously filed as Exhibit 4.2(a) to the Company's Annual
Report on Form 10-K for the period ended July 30, 1989, which
exhibit is hereby incorporated by reference).
4.1(b) Agreement of Resignation, Appointment and Acceptance dated as
of April 11, 1994, by and among the Company, Barnett Bank of
Tampa (as successor in interest to First Florida Bank, N.A.),
as resigning Trustee, and The Bank of New York, as successor
Trustee (previously filed as Exhibit 4.1(b) to the Company's
Quarterly Report on Form 10-Q for the period ended May 1, 1994,
which exhibit is hereby incorporated by reference).
4.2 Piggyback Registration Rights Agreement between the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated
February 8, 1989 (previously filed as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the period ended July
30, 1989, which exhibit is hereby incorporated by reference).
4.3 Indenture entered into between the Company and NCNB National
Bank of Florida, as Trustee, relating to the $85 million Senior
Floating Rate Notes due August 2, 1996, dated as of September
14, 1989 (previously filed as Exhibit 4.6(a) to the Company's
Annual Report on Form 10-K for the period ended July 30, 1989,
which exhibit is hereby incorporated by reference).
4.4(a) Indenture entered into between the Company and AmeriTrust
Texas, N.A., as Trustee, relating to the $50 Million Senior
Notes due 1999 dated as of January 29, 1992 (previously filed
as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the period ended February 2, 1992, which exhibit is hereby
incorporated by reference).
4.4(b) Registration Rights Agreement dated as of January 29, 1992,
between the Company and the purchasers of the Senior Notes due
1999 (previously filed as Exhibit 28.1 to the Company's
Quarterly Report on Form 10-Q for the period ended February 2,
1992, which exhibit is hereby incorporated by reference).
4.4(c) Indenture Amendment No. 1 entered into between the Company and
AmeriTrust Texas, N.A., as Trustee, relating to the Series B
Senior Notes due 1999 dated as of July 2, 1992 (previously
filed as Exhibit 4.7(c) to the Company's Amendment No. 3 to
Registration Statement on Form S-1, Registration No. 33-47324,
which exhibit is hereby incorporated by reference).
10.1(a)(i) Amended and Restated Credit Agreement dated as of September 14,
1989, among the Company, certain lenders, and Security Pacific
National Bank, as Agent (previously filed as Exhibit 10.4(g) to
the Company's Annual Report on Form 10-K for the period ended
July 30, 1989, which exhibit is hereby incorporated by
reference).
52
<PAGE>
10.1(a) Agreement to Amend and Restate the Credit Agreement, dated as
(ii) of October 12, 1988 among the Company, certain senior lenders,
and Security Pacific National Bank, as Agent, dated as of
September 14, 1989, among the Company, certain senior lenders
and Security Pacific National Bank, as Agent (previously filed
as Exhibit 10.1(a)(i) to the Company's Registration Statement
on Form S-1, Registration No. 33-65070, which exhibit is hereby
incorporated by reference).
10.1(a) Assignment and Acceptance Agreement among the Company, Security
(iii) Pacific National Bank, and California Federal Bank, dated as of
September 14, 1989 (previously filed as Exhibit 10.1(a)(ii) to
the Company's Registration Statement on Form S-1, Registration
No. 33-65070, which exhibit is hereby incorporated by
reference).
10.1(b) First Amendment to Amended and Restated Credit Agreement and
Limited Waiver among the Company, certain lenders, and Security
Pacific National Bank, as Agent, dated December 28, 1989
(previously filed as Exhibit 10.4(h) to the Company's Annual
Report on Form 10-K for the period ended July 29, 1990, which
exhibit is hereby incorporated by reference).
10.1(c) Second Amendment to Amended and Restated Credit Agreement among
the Company, certain lenders, and Security Pacific National
Bank, as Agent, dated as of July 10, 1990 (previously filed as
Exhibit 10.4(i) to the Company's Annual Report on Form 10-K for
the period ended July 29, 1990, which exhibit is hereby
incorporated by reference).
10.1(d) Third Amendment to Amended and Restated Credit Agreement dated
as of November 27, 1990, among the Company, certain lenders,
and Security Pacific National Bank, as Agent (previously filed
as Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q
for the period ended April 28, 1991, which exhibit is hereby
incorporated by reference).
10.1(e) Fourth Amendment to Amended and Restated Credit Agreement and
Limited Waiver among the Company, certain senior lenders, and
Security Pacific National Bank, as Agent, dated as of November
25, 1991 (previously filed as Exhibit 28.1 to the Company's
Quarterly Report on Form 10-Q for the period ended November 3,
1991, which exhibit is hereby incorporated by reference).
10.1(f) Fifth Amendment to Amended and Restated Credit Agreement and
Limited Waiver and Instruction dated as of January 29, 1992,
among the Company, certain lenders, and Security Pacific
National Bank (previously filed as Exhibit 28.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
February 2, 1992, which exhibit is hereby incorporated by
reference).
53
<PAGE>
10.1(g) Sixth Amendment to Credit Agreement dated as of January 4,
1993, among the Company, certain lenders, and Bank of America
National Trust and Savings Association, as successor by merger
to Security Pacific National Bank, as Agent (previously filed
as Exhibit 10.1(g) to the Company's Registration Statement on
Form S-1, Registration No. 33-65070, which exhibit is hereby
incorporated by reference).
10.1(h) Limited Waiver dated as of July 1, 1993, among the Company,
certain lenders, and Bank of America National Trust and Savings
Association, as successor by merger to Security Pacific
National Bank, as Agent (previously filed as Exhibit 10.1(i) to
the Company's Registration Statement on Form S-1, Registration
No. 33-65070, which exhibit is hereby incorporated by
reference).
10.1(i) Limited Waiver dated as of September 22, 1993, among the
Company, certain lenders, and Bank of America National Trust
and Savings Association, as successor by merger to Security
Pacific National Bank, as Agent (previously filed as Exhibit
10.1(i) to the Company's Quarterly Report on Form 10-Q for the
period ended May 1, 1994, which exhibit is hereby incorporated
by reference).
10.1(j) Limited Waiver dated as of December 15, 1993, among the
Company, certain lenders, and Bank of America National Trust
and Savings Association, as successor by merger to Security
Pacific National Bank, as Agent (previously filed as Exhibit
10.1(i) to the Company's Quarterly Report on Form 10-Q for the
period ended January 30, 1994, which exhibit is hereby
incorporated by reference).
10.1(k) Seventh Amendment to Credit Agreement dated as of February 1,
1994, among the Company, certain lenders, and Bank of America
National Trust and Savings Association, as successor by merger
to Security Pacific National Bank, as Agent (previously filed
as Exhibit 10.1(k) to the Company's Quarterly Report on Form
10-Q for the period ended May 1, 1994, which exhibit is hereby
incorporated by reference).
10.1(l) Limited Waiver dated as of March 11, 1994, among the Company,
certain lenders, and Bank of America National Trust and Savings
Association, as successor by merger to Security Pacific
National Bank, as Agent (previously filed as Exhibit 10.1(l) to
the Company's Quarterly Report on Form 10-Q for the period
ended May 1, 1994, which exhibit is hereby incorporated by
reference).
10.1(m) Eighth Amendment to Credit Agreement dated as of April 12,
1994, among the Company, certain lenders, and Bank of America
National Trust and Savings Association, as successor by merger
to Security Pacific National Bank, as Agent (previously filed
as Exhibit 10.1(m) to the Company's Quarterly Report on Form
10-Q for the period ended May 1, 1994, which exhibit is hereby
incorporated by reference).
54
<PAGE>
10.1(n) Limited Waiver dated as of July 5, 1994, among the Company,
certain lenders, and Bank of America National Trust and Savings
Association, as successor by merger to Security Pacific
National Bank, as Agent.
10.1(o) Limited Waiver dated as of September 1, 1994, among the
Company, certain lenders, and Bank of America National Trust
and Savings Association, as successor by merger to Security
Pacific National Bank, as Agent.
10.1(p) Limited Waiver and Consent dated as of September 8, 1994, among
the Company, certain lenders, and Bank of America National
Trust and Savings Association, as successor by merger to
Security Pacific National Bank, as Agent.
10.1(q) Limited Waiver dated as of September 14, 1994, among the
Company, certain lenders, and Bank of America National Trust
and Savings Association, as successor by merger to Security
Pacific National Bank, as Agent.
10.1(r) Limited Waiver dated as of September 29, 1994,
among the Company, certain lenders, and Bank of
America National Trust and Savings Association, as
successor by merger to Security Pacific National
Bank, as Agent.
10.1(s) Limited Waiver dated as of October 27, 1994,
among the Company, certain lenders, and Bank of
America National Trust and Savings Association, as
successor by merger to Security Pacific National
Bank, as Agent.
10.1(t) Limited Waiver and Consent dated as of November 1, 1994, among
the Company, certain lenders, and Bank of America National
Trust and Savings Association, as successor by merger to
Security Pacific National Bank, as Agent.
10.2 Form of Indemnity Agreement between the Company and its
directors and certain of its officers (previously filed as
Exhibit 10.3 to the Company's Registration Statement on Form
S-1, Registration No. 33-25621, which exhibit is hereby
incorporated by reference).
10.3(a) Restated 1988 Management Stock Option Plan (effective for the
Plan Years beginning on and after July 30, 1990) (previously
filed as Exhibit 10.3(a) to the Company's Annual Report on Form
10-K for the period ended July 28, 1991, which exhibit is
hereby incorporated by reference).
10.3(b) Form of Management Stock Option Agreement to be entered into
between the Company and certain key employees with respect to
options granted for Plan Years beginning on and after July 30,
1990 (previously filed as Exhibit 10.3(b) to the Company's
Annual Report on Form 10-K for the period ended July 28, 1991,
which exhibit is hereby incorporated by reference).
55
<PAGE>
10.3(c) Form of Amendment to the Management Stock Option Agreement
under the 1988 Restated Management Stock Option Plan dated as
of June 19, 1992, entered into between the Company and the
holder of each outstanding option granted under the Restated
1988 Management Stock Option Plan (previously filed as Exhibit
10.3(c) to the Company's Annual Report on Form 10-K for the
period ended August 2, 1992, which exhibit is hereby
incorporated by reference).
10.3(d) Form of Second Amendment to Stock Option Agreement dated
December 1988 under Restated 1988 Management Stock Option Plan,
dated as of December 9, 1993, entered into by and between the
Company and the holder of each outstanding option granted under
the Restated 1988 Management Stock Option Plan for the Plan
Year ended July 31, 1989 (previously filed as Exhibit 10.3(d)
to the Company's Quarterly Report on Form 10-Q for the period
ended January 30, 1994, which exhibit is hereby incorporated by
reference).
10.3(e) Form of Restricted Stock Agreement to be entered into between
the Company and certain key employees with respect to stock
issued pursuant to options granted under the Restated 1988
Management Stock Option Plan (previously filed as Exhibit
10.3(d) to the Company's Registration Statement on Form S-1,
Registration No. 33-65070, which exhibit is hereby incorporated
by reference).
10.4(a) 1991 Management Stock Option Plan (previously filed as Exhibit
28.2(a) to the Company's Quarterly Report on Form 10-Q for the
period ended November 3, 1991, which exhibit is hereby
incorporated by reference).
10.4(b) Form of Stock Option Agreement entered into between the Company
and certain key employees with respect to the options granted
pursuant to the 1991 Management Stock Option Plan (previously
filed as Exhibit 28.2(b) to the Company's Quarterly Report on
Form 10-Q for the period ended November 3, 1991, which exhibit
is hereby incorporated by reference).
10.4(c) Form of Restricted Stock Agreement to be entered into among the
Company, Green Equity Investors, L.P. ("GEI") and certain key
employees with respect to stock issued pursuant to options
granted pursuant to the 1991 Management Stock Option Plan
(previously filed as Exhibit 28.2(c) to the Company's Quarterly
Report on Form 10-Q for the period ended November 3, 1991,
which exhibit is hereby incorporated by reference).
10.5 Amended and Restated Kash n' Karry Retirement Estates and Trust
dated October 14, 1993, effective as of January 1, 1992
(previously filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the period ended August 1, 1993, which
exhibit is hereby incorporated by reference).
10.6 Key Employee Stock Purchase Plan (previously filed as Exhibit
10.6 to the Company's Registration Statement on Form S-1,
Registration No. 33-25621, which exhibit is hereby incorporated
by reference).
56
<PAGE>
10.7 Deferred Compensation Agreement dated October 12, 1988, between
the Company and Ronald J. Floto (previously filed as Exhibit
10.7 to the Company's Registration Statement on Form S-1,
Registration No. 33-25621, which exhibit is hereby incorporated
by reference).
10.8 Trademark License Agreement dated as of October 12, 1988,
between the Company and Lucky Stores, Inc. (previously filed as
Exhibit 10.11 to the Company's Registration Statement on Form
S-1, Registration No. 33-25621, which exhibit is hereby
incorporated by reference).
10.9 Warrant Agreement dated as of October 12, 1988, between the
Company and Lucky Stores, Inc. (previously filed as Exhibit
10.15 to the Company's Registration Statement on Form S-1,
Registration No. 33-25621, which exhibit is hereby incorporated
by reference).
10.10 Management Bonus Plan (previously filed as Exhibit 10.16 to the
Company's Registration Statement on Form S-1, Registration No.
33-25621, which exhibit is hereby incorporated by reference).
10.11(a) Mortgage, Fixture Filing, Security Agreement and Assignment of
Rents between the Company, as Mortgagor, and Sun Life Insurance
Co. of America ("Sun Life"), dated as of September 7, 1989
(previously filed as Exhibit 28.1(a) to the Company's Quarterly
Report on Form 10-Q for the period ended October 29, 1989,
which exhibit is hereby incorporated by reference).
10.11(b) Assignment of Rents and Leases and Other Income between the
Company and Sun Life dated as of September 7, 1989 (previously
filed as Exhibit 28.1(b) to the Company's Quarterly Report on
Form 10-Q for the period ended October 29, 1989, which exhibit
is hereby incorporated by reference).
10.11(c) Fixture Financing Statement between the Company and Sun Life
filed with the Clerk of Hillsborough County, Florida, on
September 11, 1989 (previously filed as Exhibit 28.1(c) to the
Company's Quarterly Report on Form 10-Q for the period ended
October 29, 1989, which exhibit is hereby incorporated by
reference).
10.11(d) Partial Release of Mortgage executed by Security Pacific
National Bank as of September 7, 1989 (previously filed as
Exhibit 28.1(d) to the Company's Quarterly Report on Form 10-Q
for the period ended October 29, 1989, which exhibit is hereby
incorporated by reference).
10.12(a) Mortgage between the Company, as Mortgagor, and Ausa Life
Insurance Company ("Ausa"), as Mortgagee, dated as of November
21, 1989 (previously filed as Exhibit 28.2(a) to the Company's
Quarterly Report on Form 10-Q for the period ended October 29,
1989, which exhibit is hereby incorporated by reference).
10.12(b) Conditional Assignment of Leases, Rents and Contracts between
the Company and Ausa dated as of November 21, 1989 (previously
filed as Exhibit 28.2(b) to the Company's Quarterly Report on
Form 10-Q for the period ended October 29, 1989, which exhibit
is hereby incorporated by reference).
57
<PAGE>
10.12(c) Financing Statement between the Company and Ausa filed with the
Clerk of Hillsborough County, Florida, on November 22, 1989
(previously filed as Exhibit 28.2(c) to the Company's Quarterly
Report on Form 10-Q for the period ended October 29, 1989,
which exhibit is hereby incorporated by reference).
10.13(a) Form of Deferred Compensation Agreement dated as of December
21, 1989, between the Company and key employees and a select
group of management (KESP) (previously filed as Exhibit 28.3(a)
to the Company's Quarterly Report on Form 10-Q for the period
ended January 28, 1990, which exhibit is hereby incorporated by
reference).
10.13(b) Form of Deferred Compensation Agreement dated as of December
21, 1989, between the Company and Ronald J. Floto (KESP)
(previously filed as Exhibit 28.3(b) to the Company's Quarterly
Report on Form 10-Q for the period ended January 28, 1990,
which exhibit is hereby incorporated by reference).
10.13(c) Master First Amendment to Deferred Compensation Agreements,
dated as of November 11, 1991, between the Company and the key
employees party thereto (previously filed as Exhibit 28.3 to
the Company's Quarterly Report on Form 10-Q for the period
ended November 3, 1991, which exhibit is hereby incorporated by
reference).
10.13(d) Master Second Amendment to Deferred Compensation Agreements,
dated as of December 30, 1993, between the Company and the key
employees party thereto (previously filed as Exhibit 10.13(d)
to the Company's Quarterly Report on Form 10-Q for the period
ended January 30, 1994, which exhibit is hereby incorporated by
reference).
10.14(a) Stockholders Agreement dated as of November 26, 1991, among The
Fulcrum III Limited Partnership and The Second Fulcrum III
Limited Partnership (collectively, the "Fulcrum Partnership"),
GEI and the Company (previously filed as Exhibit 28.2 to the
Company's Current Report on Form 8-K dated November 26, 1991,
which exhibit is hereby incorporated by reference).
10.14(b) Stock Purchase Agreement dated as of November 15, 1991, among
the Company, GEI and the Fulcrum Partnerships (previously filed
as Exhibit 10.15(b) to the Company's Registration Statement on
Form S-1, Registration No. 33-65070, which exhibit is hereby
incorporated by reference).
10.15 Stockholders Agreement dated as of June 19, 1992, between the
Company, GEI and certain employee-stockholders (previously
filed as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the period ended August 2, 1992, which exhibit is
hereby incorporated by reference).
10.16 Stockholders Agreement dated as of May 3, 1993, between the
Company, GEI and certain employee-stockholders (previously
filed as Exhibit 10.17 to the Company's Registration Statement
on Form S-1, Registration No. 33-65070, which exhibit is hereby
incorporated by reference).
58
<PAGE>
10.17 Leave Agreement dated as of November 30, 1992, between the
Company and Thomas A. Whipple (previously filed as Exhibit
10.18 to the Company's Registration Statement on Form S-1,
Registration No. 33-65070, which exhibit is hereby incorporated
by reference).
10.18 Ronald J. Floto Severance Pay Agreement dated as of February 9,
1994, by and between the Company and Ronald J. Floto
(previously filed as Exhibit 10.18 to the Company's Quarterly
Report on Form 10-Q for the period ended January 30, 1994,
which exhibit is hereby incorporated by reference).
10.19 Form of Senior Management Severance Pay Agreement dated as of
February 9, 1994, by and between the Company and the key
employees party thereto (previously filed as Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q for the period
ended January 30, 1994, which exhibit is hereby incorporated by
reference).
10.20(a) Note and Warrant Purchase Agreement dated as of February 1,
1994, by and between the Company and GEI (previously filed as
Exhibit 10.20(a) to the Company's Quarterly Report on Form 10-Q
for the period ended May 1, 1994, which exhibit is hereby
incorporated by reference).
10.20(b) Stock Purchase Warrants dated as of February 2, 1994, issued by
the Company to GEI (previously filed as Exhibit 10.20(b) to the
Company's Quarterly Report on Form 10-Q for the period ended
May 1, 1994, which exhibit is hereby incorporated by
reference).
(b) Reports on Form 8-K:
(1) On a Form 8-K dated May 12, 1994, the Company reported on its
engagement of Donaldson, Lufkin & Jenrette Securities Corporation as financial
advisor in connection with a proposed capital restructuring.
(2) On a Form 8-K dated July 27, 1994, the Company reported on the
agreement in principle reached between the Company and representatives of
certain of its creditors with respect to a proposed capital restructuring of
the Company.
59
<PAGE>
KASH N' KARRY FOOD STORES, INC.
PROPERTY AND EQUIPMENT AND PROPERTY UNDER CAPITAL LEASES Schedule V
Years ended July 31, 1994, August 1, 1993,
and August 2, 1992
(In Thousands)
Other Balance
Balance Charges at end
Beginning Additions Retirements Increase of
Classification of Period at Cost or Sales (Decrease) Period
--------- --------- ----------- -------- -------
Year ended July 31, 1994:
Land $ 18,713 $ 635 $ -- $ 195 $ 19,543
Buildings and improvements 56,421 -- -- 7,096 63,517
Fixtures and equipment 104,686 -- (8,252) 4,283 100,717
Transportation equipment 2,595 -- (63) 61 2,593
Leasehold improvements 25,957 -- -- 2,445 28,402
Construction in progress 4,275 10,307 -- (10,467) 4,115
-------- -------- -------- -------- --------
$212,647 $ 10,942 $ (8,315) $ 3,613 $218,887
======== ======== ======== ======== ========
Capital leases/financed
asset additions $ 22,153 $ 4,603 $ (189) $ (3,613) $ 22,954
======== ======== ======== ======== ========
Year ended August 1, 1993:
Land $ 15,218 $ -- $ -- $ 3,495 $ 18,713
Building and improvements 48,453 -- -- 7,968 56,421
Fixtures and equipment 90,762 -- (1,699) 15,623 104,686
Transportation equipment 2,594 -- -- 1 2,595
Leasehold improvements 20,765 -- (11) 5,203 25,957
Construction in progress 3,325 13,103 -- (12,153) 4,275
-------- -------- -------- -------- --------
$181,117 $ 13,103 $ (1,710) $ 20,137 $212,647
======== ======== ======== ======== ========
Capital leases/financed
asset additions $ 17,690 $ 24,600 $ -- $(20,137) $ 22,153
======== ======== ======== ======== ========
Year ended August 2, 1992:
Land $ 15,204 $ -- $ -- $ 14 $ 15,218
Buildings and improvements 43,838 -- -- 4,615 48,453
Fixtures and equipment 91,294 -- (7,093) 6,561 90,762
Transportation equipment 2,502 -- (45) 137 2,594
Leasehold improvements 19,753 -- (66) 1,078 20,765
Construction in progress 4,203 11,660 (133) (12,405) 3,325
-------- -------- -------- -------- --------
$176,794 $ 11,660 $ (7,337) $ -- $181,117
======== ======== ======== ======== ========
Capital leases $ 13,986 $ 3,725 $ (21) $ -- $ 17,690
======== ======== ======== ======== ========
Other charges reflect the transfer of assets between the classifications.
See accompanying independent auditors' report.
60
<PAGE>
KASH N' KARRY FOOD STORES, INC.
PROPERTY AND EQUIPMENT - ACCUMULATED DEPRECIATION Schedule VI
AND PROPERTY UNDER CAPITAL LEASES - AMORTIZATION
Years ended July 31, 1994, August 1, 1993,
and August 2, 1992
(In Thousands)
Other Balance
Balance Charges at end
Beginning Additions Retirements Increase of
Classification of Period at Cost or Sales (Decrease) Period
--------- --------- ----------- -------- -------
Year ended July 31, 1994:
Building and improvements $10,896 $ 2,532 $ -- $ 560 $13,988
Fixtures and equipment 40,511 10,669 (7,803) 3 43,380
Transportation equipment 2,595 19 -- (1) 2,613
Leasehold improvements 7,829 2,947 -- (561) 10,215
------- ------- ------- ------- -------
$61,831 $16,167 $(7,803) $ 1 $70,196
======= ======= ======= ======= =======
Capital leases $ 8,032 $ 3,238 $ (115) $ (1) $11,154
======= ======= ======= ======= =======
Year ended August 1, 1993:
Building and improvements $ 8,180 $ 2,716 $ -- $ -- $10,896
Fixtures and equipment 31,898 10,220 (1,607) -- 40,511
Transportation equipment 2,574 21 -- -- 2,595
Leasehold improvements 5,782 2,059 (12) -- 7,829
------- ------- ------- ------- -------
$48,434 $15,016 $(1,619) $ -- $61,831
======= ======= ======= ======= =======
Capital leases $ 5,001 $ 3,031 $ -- $ -- $ 8,032
======= ======= ======= ======= =======
Year ended August 2, 1992:
Building and improvements $ 5,978 $ 2,331 $ (129) $ -- $ 8,180
Fixtures and equipment 29,306 9,136 (6,544) -- 31,898
Transportation equipment 1,945 657 (28) -- 2,574
Leasehold improvements 4,202 1,646 (66) -- 5,782
------- ------- ------- ------- -------
$41,431 $13,770 $(6,767) $ -- $48,434
======= ======= ======= ======= =======
Capital leases $ 2,836 $ 2,186 $ (21) $ -- $ 5,001
======= ======= ======== ======= =======
Other charges reflect the transfer of assets between the classifications.
See accompanying independent auditors' report.
61
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KASH N' KARRY FOOD STORES, INC.
November 9, 1994 By: /s/ Richard D. Coleman
-----------------------------
Richard D. Coleman, Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
November 9, 1994 /s/ Anthony R. Petrillo
---------------------------------------
Anthony R. Petrillo,
Acting Chief Executive Officer,
and Acting Chairman of the Board
November 9, 1994 /s/ Thomas A. Whipple
---------------------------------------
Thomas A. Whipple,
Chief Operating Officer, Executive
Vice President - Marketing and
Director
November 9, 1994 /s/ Raymond P. Springer
---------------------------------------
Raymond P. Springer, Executive
Vice-President - Administration,
Principal Financial Officer and
Director
November 9, 1994 /s/ Dennis V. Carter
---------------------------------------
Dennis V. Carter, Executive
Vice-President - Operations and
Director
<PAGE>
November 9, 1994 /s/ Richard D. Coleman
---------------------------------------
Richard D. Coleman,
Vice-President, Controller
and Secretary, and
Principal Accounting Officer
November 9, 1994 /s/ Leonard I. Green
---------------------------------------
Leonard I. Green, Director
November 9, 1994 /s/ Christopher V. Walker
---------------------------------------
Christopher V. Walker,
Director
November 9, 1994 /s/ Jennifer Holden Dunbar
---------------------------------------
Jennifer Holden Dunbar,
Director
November 9, 1994 /s/ Edward W. Gibbons
---------------------------------------
Edward W. Gibbons, Director
Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by registrants which have not registered securities
pursuant to Section 12 of the Act.
No annual report or proxy statement has been sent to security holders.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 6,852
<SECURITIES> 0
<RECEIVABLES> 8,084
<ALLOWANCES> 0
<INVENTORY> 76,094
<CURRENT-ASSETS> 103,835
<PP&E> 241,841
<DEPRECIATION> 81,350
<TOTAL-ASSETS> 389,893
<CURRENT-LIABILITIES> 116,582
<BONDS> 317,381
<COMMON> 28
4,650
0
<OTHER-SE> (61,082)
<TOTAL-LIABILITY-AND-EQUITY> 389,893
<SALES> 1,065,165
<TOTAL-REVENUES> 1,065,165
<CGS> 845,597
<TOTAL-COSTS> 1,046,654
<OTHER-EXPENSES> 11,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,390
<INCOME-PRETAX> (37,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,895)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>EPS is meaningless.
</FN>
</TABLE>
<PAGE> 1
LIMITED WAIVER
THIS LIMITED WAIVER (this "Waiver"), dated as of July 5, 1994,
relates to that certain Credit Agreement dated as of October 12, 1988, and
amended and restated as of September 14, 1989 (as further amended through the
date hereof, the "Credit Agreement"), among Kash n' Karry Food Stores, Inc.
(the "Borrower"), the Senior Lenders referred to therein and Bank of America
National Trust and Savings Association (as successor in interest to Security
Pacific National Bank) as agent (in such capacity, the "Agent") for the Senior
Lenders. Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein with the same meanings ascribed to them therein.
RECITALS
WHEREAS, the Borrower's trade creditors have expressed concern over
the expiration by no later than July 15, 1994 of the Limited Waiver dated as of
June 10, 1994 among the Borrower and the Requisite Senior Lenders; and
WHEREAS, it is of material significance to the Borrower and the
Senior Lenders and other Holders of Secured Obligations that the Borrower's
trade creditors continue to provide credit to the Borrower on terms no less
favorable to the Borrower than those in effect as of June 30, 1994;
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are incorporated herein as a part of this Waiver) and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Agent and the Senior Lenders agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive:
(a) The provisions of Section 2.02(a)(v) of the Credit
Agreement in respect (and solely in respect) of the Borrower's failure to
comply with the Revolver Cleandown requirement set forth therein for the
Fiscal Year ending in 1994 ("Fiscal Year 1994");
(b) The provisions of Section 9.01 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with the
Minimum Net Worth amount set forth therein for the first, second and third
quarters of Fiscal Year 1994;
(c) The provisions of Section 9.03 of the Credit Agreement in
respect (and solely in respect) of the
<PAGE> 2
Borrower's failure to comply with the Fixed Charge Coverage Ratio set
forth therein for the first, second and third quarters of Fiscal Year 1994;
(d) The provisions of Section 9.04 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with the
Interest Coverage Ratio set forth therein for the first, second and third
quarters of Fiscal Year 1994; and
(e) The provisions of Section 10.01(e) of the Credit Agreement
in respect (and solely in respect) of (i) the Borrower's default (as of the
last day of the third quarter of Fiscal Year 1994) under Section 4(e) of
the Security Agreement dated as of July 15, 1993 (the "Heller Security
Agreement") between the Borrower and Heller Financial, Inc. ("Heller") and
(ii) the nonpayment of interest due on August 1, 1994 to holders of the New
Senior Notes and the Junior Subordinated Debentures and the nonpayment of
interest due on August 2, 1994 to holders of the Senior Notes (together
with the New Senior Notes and the Junior Subordinated Debentures, the
"Public Debt").
Among other things, the effect of this Waiver is to extend, on the terms and
conditions set forth herein, the Limited Waivers dated as of December 15, 1993,
March 11, 1994 and June 10, 1994, respectively, among the Borrower, the Agent
and the Requisite Senior Lenders for the period from the Effective Date to the
Termination Date (in each case, as defined herein). In addition to the
foregoing, and for the duration of this Waiver, none of the Senior Lenders
shall be obligated to make a Fixed Rate Loan.
2. Waiver Fee. The Borrower shall pay to the Agent (for the
benefit of the Senior Lenders in accordance with their respective Pro Rata
Shares) a waiver fee of $317,500 in cash in same day funds on the earliest of
(a) December 30, 1994, (b) the date on which an exchange offer for (or an
amendment to, or modification of, the terms of) any of the Public Debt is
consummated and (c) the effective date of a plan of reorganization.
3. Expenses. In addition to the costs and expenses payable under
Section 12.03(b) of the Credit Agreement, the Borrower agrees to pay or
reimburse the Agent and the Senior Lenders (and any of their respective
Affiliates), promptly upon receipt of demand therefor, for costs and expenses
incurred or accrued in connection with the amendment, waiver, refinancing,
restructuring, reorganization, enforcement or collection of any of the
Obligations (including without limitation (a) appraisal fees, search fees and
other out-of-pocket expenses incurred or accrued by the Agent, (b) the
reasonable fees and expenses of any
-2-
<PAGE> 3
legal counsel, independent public accountants and other outside experts
retained by or on behalf of the Agent and (c) reasonable travel expenses and
allocated costs of internal legal counsel incurred or accrued by the Agent or
any of the Senior Lenders).
4. Effective Date. This Waiver shall become effective upon the
date (the "Effective Date") on or before July 15, 1994 on which the Agent has
received counterparts hereof signed by the Borrower, the Requisite Senior
Lenders and the Agent.
5. Termination Date. This Waiver shall expire and cease to be of
any force or effect automatically (without any action by the Agent or any
Senior Lender) at 5:00 p.m., Los Angeles time, on the date (the "Termination
Date") which is the earlier of (a) September 30, 1994 and (b) the earliest date
on which any of the conditions set forth below fails to be satisfied:
(i) No Event of Default or Potential Event of Default
(including without limitation failure to pay costs and expenses upon
demand in accordance with Section 12.03 of the Credit Agreement)
shall have occurred (other than those expressly waived by this
Waiver);
(ii) No event shall have occurred and be continuing (for at
least two Business Days after notice thereof from Agent to the
Borrower) which materially adversely affects the business, condition
(financial or otherwise), properties or prospects of the Borrower
and any Subsidiary of the Borrower, taken as a whole;
(iii) Heller shall not have exercised any remedies against the
Borrower which are available to Heller by reason of a default under
the Loan Documents (as defined in the Heller Security Agreement); and
(iv) None of the holders of any of the Public Debt nor any
representative thereof (including without limitation a trustee under
an indenture governing the terms thereof) shall have exercised any
remedies available to any of them by reason of a default under the
Senior Notes, the New Senior Notes or the Junior Subordinated
Debentures or any of the indentures governing the terms thereof.
6. Representations and Warranties. The Borrower hereby represents
and warrants that, as of the date hereof, and after giving effect to this
Waiver:
-3-
<PAGE> 4
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is continuing;
and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly speak
as of a different date) are true, correct and complete in all material
respects, except that such representations and warranties need not be true,
correct and complete to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or
permitted under the Credit Agreement.
7. Limitation on Waiver. This Waiver shall be limited solely to
the matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
8. Miscellaneous. This Waiver is a Loan Document and, together
with the Credit Agreement and the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
9. Governing Law. This Amendment shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New
York.
10. Counterparts. This Amendment may be executed in
-4-
<PAGE> 5
any number of counterparts which, when taken together, shall be deemed to
constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC., as
Borrower
By: /s/ R. P. Springer
-----------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as Agent
By: /s/ Laura Knight
-----------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as a Senior Lender
By: /s/ Laura Ann Marshall
-----------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
-----------------------------------
Title: Vice President
-5-
<PAGE> 6
BARNETT BANK OF TAMPA (as successor in
interest to First Florida Bank, N.A.),
by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank of
Tampa
By:
-----------------------------------
Title:
NATIONSBANK OF FLORIDA, N.A.
By: /s/ Samuel P. McNeil
-----------------------------------
Title: Vice President
-6-
<PAGE> 1
LIMITED WAIVER
THIS LIMITED WAIVER (this "Waiver"), dated as of September 1, 1994,
relates to that certain Credit Agreement dated as of October 12, 1988, and
amended and restated as of September 14, 1989 (as further amended through the
date hereof, the "Credit Agreement"), among Kash n' Karry Food Stores, Inc.
(the "Borrower"), the Senior Lenders referred to therein and Bank of America
National Trust and Savings Association (as successor in interest to Security
Pacific National Bank) as agent (in such capacity, the "Agent") for the Senior
Lenders. Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein with the same meanings ascribed to them therein.
RECITALS
WHEREAS, pursuant to the Leasehold Purchase Agreement between the
Borrower and Office Depot, Inc. ("ODI") attached hereto as Exhibit A (the
"Leasehold Purchase Agreement"), the Borrower has agreed to assign to ODI, and
ODI has agreed to assume, all of the Borrower's interest in that certain Lease
dated April 29, 1977 by and between the Borrower and Donasa N.V.; and
WHEREAS, in connection with the consummation of the assignment and
assumption under the Leasehold Purchase Agreement, the Borrower and ODI intend
to enter into an Indemnification Agreement in the form attached hereto as
Exhibit B (the "Indemnification Agreement");
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are incorporated herein as a part of this Waiver) and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Agent and the Senior Lenders agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive the provisions of
Section 8.04 of the Credit Agreement in respect (and solely in respect) of the
Borrower's incurrence of Accommodation Obligations in respect of indemnities
arising under the Leasehold Purchase Agreement and the Indemnification
Agreement.
2. Effective Date. This Waiver shall become effective as of
September 1, 1994 upon the date the following conditions have been satisfied:
(a) the Agent shall have received counterparts hereof signed by the
Borrower, the Requisite Senior Lenders and the Agent; and
<PAGE> 2
(b) the Agent shall have received payment in cash in same day funds in
the amount of $134,496.12 with respect to certain fees and expenses of the
Agent (including professional fees).
3. Representations and Warranties. The Borrower hereby represents
and warrants that, as of the date hereof, and after giving effect to this
Waiver:
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is continuing;
and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly speak
as of a different date) are true, correct and complete in all material
respects, except that such representations and warranties need not be true,
correct and complete to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or
permitted under the Credit Agreement.
4. Limitation on Waiver. This Waiver shall be limited solely to
the matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
5. Miscellaneous. This Waiver is a Loan Document and, together
with the Credit Agreement and the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
-2-
<PAGE> 3
6. Governing Law. This Amendment shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New York.
7. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC., as
Borrower
By: /s/ R. P. Springer
-----------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as Agent
By: /s/ Laura Knight
-----------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as a Senior Lender
By: /s/ Linda A. Carper
-----------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
-----------------------------------
Title: Vice President
-3-
<PAGE> 4
BARNETT BANK OF TAMPA (as successor in
interest to First Florida Bank, N.A.),
by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank of
Tampa
By: /s/ Kyle R. Beall
-----------------------------------
Title: Department Manager
NATIONSBANK OF FLORIDA, N.A.
By: /s/ Samuel P. McNeil
-----------------------------------
Title: Vice President
-4-
<PAGE> 5
EXHIBIT A
TO
LIMITED WAIVER
DATED AS OF SEPTEMBER 1, 1994
LEASEHOLD PURCHASE AGREEMENT
Attached.
<PAGE> 6
LEASEHOLD PURCHASE AGREEMENT
This Leasehold Purchase Agreement ("Agreement") is made this 11 day of
March, 1994 (the "Effective Date") by and between KASH N' KARRY FOOD STORES,
INC., a Delaware corporation ("Seller") and OFFICE DEPOT, INC., a Delaware
corporation ("Buyer").
RECITALS
A. Seller is the successor tenant under that certain Lease dated April
29, 1977, (the "Lease"), a Recording Indenture of which was recorded on March
7, 1984 in the Official Records of Pasco County in Official Records Book 1318,
at Page 0121, by and between LEO MARK and MICHAEL LYONS, as Landlord, and THE
GRAND UNION COMPANY, as tenant, pertaining to premises located in a shopping
center located at 9474 U.S. Highway 19, Port Richey, Florida (the "Premises").
DONASA N.V., a Netherlands Antilles corporation, is the successor landlord (the
"Landlord") under the Lease.
B. Seller desires to assign to Buyer all of its right, title and
interest in and to the Lease on the terms and conditions set forth in this
Agreement.
C. Buyer desires to take an assignment of the Lease, subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The Assignment. On the Closing Date (hereinafter defined), Seller
and Buyer shall each enter into an assignment and assumption agreement in the
form set forth on EXHIBIT "A" attached hereto (the "Assignment"), wherein
Seller assigns to Buyer all of its right, title and interest in and to the
Lease, and Buyer assumes all of the tenant obligations under the Lease from and
after the date of the Assignment.
2. Purchase Price. The total purchase price (the "Purchase Price") for
the Lease shall be the sum of Two Hundred Fifty Thousand Dollars ($250,000.00).
The Purchase Price shall be paid in immediately available funds at Closing.
3. Earnest Money Deposit. Within five (5) business days of the final
execution of this Agreement by both parties, Buyer shall deliver to the local
office of Lawyer's Title Insurance Company (the "Title Company"), to be held in
escrow, the sum of Twenty-Five Thousand Dollars ($25,000) as the earnest money
deposit (which deposit, together with all interest earned thereon, is
hereinafter referred to as the "Earnest Money"). The Earnest Money is to be
applied toward the total Purchase Price due at Closing. The balance of the
Purchase Price shall be paid by current funds or cashier's check at Closing.
The Earnest
1
<PAGE> 7
Money shall be refunded to Buyer if it elects within the Due Diligence Period
(hereinafter defined) to terminate this Agreement as provided in Section 4
hereof. If this Agreement has not been terminated by Buyer within the Due
Diligence Period, then the Earnest Money shall, subject to the satisfaction of
all the Closing Conditions (hereinafter described), become non-refundable
(unless Seller defaults hereunder).
4. Conditions Precedent to Closing. Buyer's obligation to close the
transaction contemplated hereunder shall be subject to the following conditions
(hereinafter referred to as the "Closing Conditions"):
4.1 Due Diligence Review. Buyer shall have a period commencing on
the date of this Agreement and continuing until the end of the sixtieth (60th)
day following the date on which Seller delivers to Buyer the last of the items
to be delivered by Seller to Buyer as specified in paragraph 4.1(f), below (the
"Due Diligence Period") in which to satisfy or waive Buyer's conditions to
Closing set forth hereinbelow. During the Due Diligence Period, Buyer, at its
sole cost and expense, may inspect, or cause its agents and representatives to
inspect, the Premises and conduct such tests thereon as Buyer may reasonably
deem appropriate. Such inspection shall take place in the presence of a
representative of the Seller, and at a mutually agreed-upon time which shall,
in any event, be after the regular business hours of the store. Buyer shall
provide the Seller with notice when such inspection has been completed and of
the results of such inspection. Buyer shall be responsible for repairing
damage caused by it during such inspections, which covenant shall survive the
termination of this Agreement. If Buyer is dissatisfied with the results of
any of the reviews, testing, studies or inspections referred to in this Section
4.1 for any reason whatsoever (in its sole and absolute discretion), then Buyer
shall have the right to terminate this Agreement prior to the end of the Due
Diligence Period, by written notice to Seller to that effect, and to recover
the Earnest Money and thereupon neither party shall have any further liability
to the other in connection with this Agreement. If Buyer fails to give notice
as required by the preceding sentence within the Due Diligence Period, Buyer
shall be deemed to have accepted all of the matters enunciated below to be
inspected and reviewed during the Due Diligence Period. Buyer's obligation to
proceed with the purchase of the Lease shall be conditioned upon satisfaction
(or Buyer's express written waiver) of each of the following conditions:
(a) Physical Condition and Suitability. Buyer's review and
approval of the physical condition of the Premises and all
building systems including but not limited to roof, structural,
electrical and mechanical systems, as well as the suitability of
the Premises for use as an Office Depot store.
(b) Zoning/Governmental Actions. Buyer's review and approval
of zoning and land use regulations applicable to the Premises,
and investigation and approval of any condemnation or other
governmental actions which may affect the use of the Premises.
2
<PAGE> 8
(c) Environmental Review. Buyer's approval of the environmental
condition of the Premises, to be based on Buyer's independent
examination (at its sole cost) for the presence or absence of
Hazardous Materials on, within, or below the Premises. Such
inspection shall, take place in the presence of a representative
of the Seller; at a mutually agreed-upon time which shall, in any
event, be after regular business hours of the store; and after
the Leasehold Purchase Agreement has been executed by the Buyer
and the Seller. Buyer shall provide the Seller with notice when
such inspection has been completed and the results of such
inspections. Buyer shall be responsible for repairing damage
caused by it during such inspections, which covenant shall survive
the termination of this Agreement. As used herein, the term
"Hazardous Materials" shall mean any material or substance that
is now or hereafter or regulated by any statute, law, rule,
regulation or ordinance or that is now or hereafter designated by
any governmental authority to be radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment,
including, without limitation, asbestos, asbestos containing
material, urea formaldehyde and urea formaldehyde containing
material.
(d) Utilities. Approval by Buyer of the availability of utility
services to the Premises adequate for Buyer's proposed use
thereof.
(e) Title. The Seller's leasehold title in and to the Leases
shall be good and marketable and subject to no liens,
restrictions, easements or other encumbrances having the effect
of diminishing the tenant rights or entitlements under the Lease,
except as may be approved by Buyer.
(f) Plans and Documents. Buyer's review and approval of the
following documents to be delivered by Seller to Buyer within
five (5) business days of the Effective Date of this
Agreement: (i) "as-built" plans for the buildings and other
improvements comprising the Premises (or, if "as-built" plans are
not available, and cannot be obtained with reasonable effort and
expense, the best plans as are available to Seller); (ii) legible
copies of the Lease, and any amendments thereto, and any lease
assignments, subleases or other documents constituting Seller's
"chain of title"; (iii) legible copies of all CAM, tax,
insurance, maintenance and repair, utilities, and all other
occupancy cost records for the two calendar years immediately
preceding the date of the Agreement; (iv) legible copies of all
service contracts, utility contracts, maintenance contracts,
presently effective warranties or guaranties received by Seller
from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alterations of the
Premises, certificates of occupancy, environmental reports, and
such other documents pertaining to the condition of the Premises,
and the use, occupancy, maintenance and repair thereof as are in
the possession or under the control of Seller.
3
<PAGE> 9
4.2 Representations and Warranties of Seller. All of the
representations and warranties of Seller, as set forth in Section 8, below, are
true and correct as of the Closing.
4.3 Building Permits. Buyer has procured, within forty-five (45)
days following the expiration of the Due Diligence Period, or is satisfied (in
its sole discretion) that it will be able to procure, any building, sign and
other permits required by governmental authorities in connection with Buyer's
contemplated improvements to the Premises (including without limitation
erection of pylon and/or building signs in accordance with Buyer's operational
standards).
4.4 Landlord's Consent. Prior to the Closing Date, Seller shall
use all reasonable efforts to obtain from the Landlord the fully executed (by
all parties thereto) consent and estoppel agreement in the form and content set
forth in EXHIBIT "B" attached hereto and incorporated herein by this reference,
or in form and content otherwise reasonably acceptable to Buyer, which
agreement is hereinafter referred to as the "Landlord Agreement".
5. Title. Title in and to the Lease shall be conveyed to Buyer subject
to no liens, encumbrances, restrictions, easements or other defects except as
may be approved in writing by Buyer. Buyer shall notify Seller in writing
within twenty (20) days from the receipt of a Title Report for the Premises (to
be obtained by Buyer at its sole cost but not later than ten (10) days prior to
the expiration of the Due Diligence Period) of its objection to title
exceptions. If Buyer fails to give written notice of objection to the
condition of title of the Premises at least five (5) days prior to the
expiration of the Due Diligence Period, Buyer shall be deemed to have approved
the condition of title of the Premises for which no notice was given. Seller
shall have until Closing to eliminate any exception to title objected to by
Buyer. In the event Seller cannot eliminate any exception to title objected to
by Buyer, it shall so notify Buyer in writing prior to expiration of the Due
Diligence period, in which case Buyer may elect (a) to terminate this
Agreement, or (b) to waive its objection(s) and proceed to Closing.
6. Delivery of Possession of the Premises. Seller shall deliver
possession of the Premises to Buyer at the time Closing. Prior to Closing,
Seller shall remove its furniture, trade fixtures and removable equipment (not
including HVAC equipment and trash compactors) from the Premises and shall
repair any damage caused by such removal. Seller shall deliver the Premises to
Buyer on or before the date of Closing in broom-clean condition.
7. Closing and Closing Costs.
7.1 Closing Date. The consummation of the assignment and transfer
contemplated hereunder (the "Closing") shall occur on or before 4:00 PM EST on
the tenth (10th) business day following the date Buyer obtains its Building
Permits or on such earlier
4
<PAGE> 10
date as may be mutually agreed upon by the parties.
7.2 [Deleted]
7.3 Closing Costs. Rents, real property taxes, and operating
costs including any such amounts paid or payable under any reciprocal casement
agreement shall be prorated as of the Closing Date. Seller and Buyer shall
each pay for one-half of the escrow costs. Buyer shall pay any title costs,
and Seller shall pay any excise or transfer taxes or fees. Any costs payable
to the Landlord in connection with obtaining the required consent of the
Landlord shall be paid by Seller. Commission costs shall be paid as provided in
paragraph 10 of this Agreement. All other closing costs, if any, shall be
divided evenly between the parties at Closing.
7.4 Assignment Effective Date. The date on which the Assignment
shall become effective shall be the date of Closing (the "Effective Date").
From and after the Effective Date, Buyer shall be entitled to all of the rights
of tenant under the Lease, and be obligated to comply with all of tenant
obligations under the Lease (including without limitation the payment of all
rental obligations under the Lease).
8. Representations and Warranties of Seller. To the best of Seller's
information and belief, as of the date hereof and as of the Effective Date,
Seller hereby represents and warrants to, and covenants with Buyer, as follows:
8.1 No Defaults. There exists no default or any condition which,
with the passage of time, the giving of notice, or both will become a default
under the Lease or any reciprocal easement agreement.
8.2 Documents. The plans, specifications, certificates of
occupancy, warranties, guaranties, occupancy cost records and other books,
records or documents delivered to Buyer in connection with this Agreement are
true, correct and complete copies of such documents.
8.3 Litigation. There is no litigation pending or, to the best of
Seller's knowledge, after due and diligent inquiry, threatened against Seller,
nor any basis therefore, that arises out of the Lease or Seller's use or
occupancy of the Premises, or that detrimentally affect the value of the
Premises, or the ability of Seller to perform its obligations under this
Agreement. Seller shall notify Buyer promptly of any such litigation of which
Seller becomes aware.
8.4 Enforceable Documents. This Agreement and all documents
executed by Seller which are to be delivered to Buyer at the Closing are and
will be duly authorized, executed and delivered by Seller, and be legal, valid
and binding obligations of Seller enforceable against Seller in accordance with
their respective terms, and sufficient to convey Seller's leasehold interest in
the Premises (if they purport to do so). This Agreement and
5
<PAGE> 11
such documents do not violate any provision of any Lease, agreement or judicial
order to which Seller is subject.
8.5 Lease. The copy of the Lease delivered by Seller to Buyer
contains all of the information pertaining to any rights of any parties to
occupy the Premises.
8.6 Changes to Shopping Center/Eminent Domain. There are no
pending plans by the landlord and/or governmental authorities to take or make
any material changes to the Shopping Center of which the Premises are a part
or any entrances/exits to and from adjoining roads serving the Shopping Center.
9. Indemnification.
9.1 Survival of Representations. All representations, warranties,
covenants and agreements made by either party under this Agreement or pursuant
hereto shall be true, complete and correct as of the date hereof and as of the
Closing as though such representations, warranties, covenants and agreements
were made at and as of the date of Closing. Each representation, warranty,
covenant and agreement shall survive the Closing.
9.2 Seller's Indemnifications. Seller agrees to indemnify,
protect, defend and hold Buyer and Buyer's directors, officers, stockholders,
employees, agents, representatives, affiliates and their respective successors
and assigns harmless from and against (i) any and all claims, expenses, or
liabilities arising from personal injuries which occurred or are alleged to
have occurred on or about the Premises prior to the date of Closing; and (ii)
any and all damages arising out of or resulting from (a) any breach or default
by Seller under the terms of the Leases or any reciprocal easement agreement
arising prior to the Closing, or (b) any breach of the warranties,
representations or covenants of Seller under this Agreement or the Assignment.
9.3 Buyer's Indemnification. Buyer agrees to indemnify, protect,
defend and hold Seller and Seller's directors, officers, stockholders,
employees, agents, representatives, affiliates and their respective successors
and assigns, harmless from and against (i) any and all claims, expenses, or
liabilities arising from personal injuries which occurred or are alleged to
have occurred on or about the Premises on or after the date of Closing; and
(ii) any and all damages arising out of or resulting from (a) any breach or
default by Buyer under the terms of the Lease or any reciprocal easement
agreement occurring from and after the Effective Date or (b) any breach of the
warranties, representations or covenants of Buyer under this Agreement or the
Assignments.
10. Brokers. Seller and Buyer represent and warrant to the other that
they have not had any dealings with any real estate broker, finder, or other
person, with respect to this Agreement, except for Commercial Corners, Inc. and
Lancore Realty, Inc. whose fees will be paid by the Seller and each party
hereby agrees to indemnify and hold harmless the other in connection with any
losses or damages sustained as a result of its breach of such representation
and warranty.
6
<PAGE> 12
11. [Deleted]
12. Miscellaneous.
12.1 Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under the present or
future laws effective during the term hereof, the legality, validity and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
12.2 Headings. The headings of sections or paragraphs contained
in the Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
12.3 Waiver. The failure of any party to insist, in any one or
more instances, upon performance of any of the terms, covenants or conditions of
this Agreement shall not be construed as a waiver or a relinquishment of any
right or claim granted or arising hereunder or of the future performance of any
such term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations to the parties hereto.
12.4 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without giving
effect to the conflict of laws, rules or choice of laws or rules thereof.
12.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same instrument not withstanding
that all parties are not signatories to each counterpart.
12.6 Assignability and Binding Effect. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
12.7 Amendments. This Agreement may not be modified, amended or
supplemented except by an agreement in writing signed by all of the parties
hereto.
12.8 Number and Gender of Words. When the masculine and
feminine are required in this Agreement, words of gender shall include either
or both genders and a singular number shall include the plural.
12.9 Attorney's Fees. In the event any suit or proceeding is
brought to enforce, construe, interpret, rescind or cancel this Agreement, or
any of its provisions, the prevailing party shall recover against the other
party all of its reasonable attorneys' fees and costs incurred in connection
with such action or proceeding, including any appellate proceedings.
7
<PAGE> 13
12.10 Integration. This Agreement and the exhibits attached
hereto, constitute the entire agreement of the parties hereto regarding the
assignment of the Leases and there are no other agreements, written or oral,
express or implied, in connection with the assignment of the Leases, between
the parties hereto, except as set forth herein.
12.11 Notices. All notices, requests, demand, instructions, or
other communications to be made hereunder to the parties hereto shall be in
writing (at the address set forth below) and shall be given by any of the
following means (a) personal service; (b) electronic facsimile; (c) certified
mail, postage prepaid, return receipt requested; or (d) commercial overnight
courier that guarantees next day delivery and provides a receipt, and such
notices or other communication shall be addressed as follows:
If to Seller: Kash n' Karry
6422 Harney Road
Tampa, FL 33680
Attn: Ronald E. Sarrett
with a copy to: [to be provided]
If to Buyer: Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL 33445
Attn: Vice President of Real Estate
with a copy to: Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL 33445
Attn: Legal Department
Any notice or other communication given as aforesaid shall be effective
upon receipt. Either party may change its address for notice by written notice
as aforesaid, which change of address shall be effective three (3) business
days following receipt by the party to whom such address change notice is sent.
12.11 Time is of the Essence. Time is expressly made of the
essence with respect to every term and provision of this Agreement. The parties
acknowledge that each will be relying upon the timely performance by the other
of its obligations hereunder as a material inducement to each party's execution
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
8
<PAGE> 14
BUYER: OFFICE DEPOT, INC., a Delaware corporation
By: /s/ David I. Fuente
-------------------------------------
Its: Chairman and CEO
-------------------------------------
SELLER: KASH N' KARRY FOOD STORES, INC., a Delaware
corporation
By: /s/ Ronald Sarrett
-------------------------------------
Its: VICE PRESIDENT
-------------------------------------
By: /s/ R. P. Springer
--------------------------------------
Its: Exec. Vice President
--------------------------------------
9
<PAGE> 15
EXHIBITS
EXHIBIT "A" FORM OF ASSUMPTION AND ASSIGNMENT AGREEMENT
EXHIBIT "B" CONSENT AND ESTOPPEL CERTIFICATE
10
<PAGE> 16
EXHIBIT A
ASSIGNMENT OF LEASE
This Assignment is made this____day of February, 1994, by and between
KASH N' KARRY FOOD STORES, INC., a Delaware corporation ("Assignor") and OFFICE
DEPOT, INC., a Delaware corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is currently the party-in-interest as lessee under,
in and to that certain lease agreement, together with all amendments,
supplements and modifications thereto and assignments thereof (collectively,
the "Lease"), dated April 29, 1977, between LEO MARK and MICHAEL LYONS, as
lessors, and THE GRAND UNION COMPANY, as lessee; and
WHEREAS, the premises demised under the Lease (the "Premises") consist
of a certain building or portion thereof (as particularly described in the
Lease) located on a certain tract of improved property located at 9474 U.S.
Highway 19, Port Richey, Florida, and legally described as set forth on
Schedule "A" attached hereto and made a part hereof; and
WHEREAS, Assignor desires to assign all of the lessee's interest under
the Lease to Assignee, and Assignee desires to assume all the lessee's
obligations under the Lease.
NOW THEREFORE, in consideration of the Premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns, transfers and conveys to
Assignee, its successors and assigns, all of Assignor's rights, title and
interest in and to the Lease, effective as of the date hereof (the "Effective
Date").
2. Assumption. Assignee hereby accepts this assignment of the Lease,
and hereby assumes and agrees to perform all of the obligations of Assignor, as
the lessee, under the Lease accruing from and after the Effective Date.
3. Assignor's Indemnification. Assignor agrees to indemnify, protect,
defend and hold Assignee and Assignee's respective directors, officers,
stockholders, employees, agents, representatives, affiliates and their
respective successors and assigns harmless from and against any and all damages
arising out of or resulting from any breach or default by Assignor under the
terms of the Lease arising prior to the Effective Date. Assignor shall
reimburse Assignee upon demand for any reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees and costs, which
Assignee actually incurs in fulfilling
A-1
<PAGE> 17
Assignor's obligations under this Agreement.
4. Assignee's Indemnification. Assignee agrees to indemnify, protect,
defend and hold Assignor and Assignor's respective directors, officers,
stockholders, employees, agents, representatives, affiliates and their
respective successors and assigns, harmless from and against any and all
damages arising out of or resulting from any breach or default by Assignee
under the terms of the Lease occurring from and after the Effective Date.
Assignee shall reimburse Assignor upon demand for any reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees and costs,
which Assignor actually incurs in fulfilling Assignee's obligations under this
Agreement.
5. Counterparts. This Assignment may be executed in counterparts, and
as so executed shall constitute one Assignment, binding on each of the parties
hereto, notwithstanding that each of the parties are not signatories to the
same counterpart.
6. Successors and Assigns. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
7. Modifications. This Assignment may not be amended, modified or
terminated except by agreement in writing duly executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the day and year first above written.
Attest (as to Assignor)
Assignor: KASH N' KARRY FOOD STORES,
INC., a Delaware corporation
- ----------------------- By:
Title: ---------------------------------
Its:
---------------------------------
- -----------------------
Title:
Attest (as to Assignee)
Assignee: OFFICE DEPOT, INC., a Delaware
Corporation
- ----------------------- By:
Title: ---------------------------------
Its:
---------------------------------
A-2
<PAGE> 18
COUNTY OF _______________ )
)ss.
STATE OF _______________ )
On this____ day of ________, 1994, before me, the undersigned a Notary
Public in and for said State, personally appeared _________________________,
and _________________ known to me to be (or proved to me on the basis of
satisfactory evidence) to be the persons who executed the within instrument as
the __________ and _________________ of KASH N' KARRY FOOD STORES, INC., a
Delaware corporation, the corporation that executed the within instrument
pursuant to its bylaws or a resolution of its Board of Directors.
WITNESS my hand and official seal.
____________________________
Signature
NOTARY STAMP
STATE OF FLORIDA )
)ss.
COUNTY OF PALM BEACH )
On this ____ day of ________________________, 1994, before me,
the undersigned, a Notary Public in and for said State, personally
appeared_________________________, personally known to me to be (or
proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument as the ____________ of OFFICE DEPOT, INC., a
Delaware corporation, the corporation that executed the within instrument, and
acknowledged to me that such corporation executed the within instrument
pursuant to its bylaws or a resolution of its Board of Directors.
WITNESS my hand and official seal.
____________________________
Signature
NOTARY STAMP
A-3
<PAGE> 19
Schedule A
LEGAL DESCRIPTION
A-4
<PAGE> 20
EXHIBIT B
CONSENT AND ESTOPPEL CERTIFICATION
THIS AGREEMENT is made and entered into as of the ____ day of February,
1994, by and between ________________________ a ___________________
(hereinafter "Lessor"), and OFFICE DEPOT, INC., a Delaware corporation
(hereinafter "Depot").
WITNESSETH:
WHEREAS, LEO MARK AND MICHAEL LYONS, as lessor, and KASH N' KARRY FOOD
STORES, INC. ("Lessee") as lessee, entered into a certain lease agreement dated
April 27, 1977, which lease, as amended, is hereinafter referred to as the
"Lease"; and
WHEREAS, the premises demised under the Lease consist of certain land
and improvements comprising Kash N' Karry Store # 205 (as particularly
described in the Lease) located on a certain tract of improved property located
in a shopping center located at 9474 U.S. Highway 19, Port Richey, Florida,
legally described as set forth on EXHIBIT A attached hereto and made a part
hereof (the "Leased Premises"); and
WHEREAS, Lessee desires to assign to Depot all of its rights, title and
interest in and to the Lease, and Depot desires to take an assignment of
Lessee's interest in the Lease and assume the Lessee's obligations thereunder
from and after the effective date of such assignment, provided that Lessor
shall agree and certify as provided herein, and
WHEREAS, it is the mutual desire of the Lessor and Depot to establish
certain contractual rights, obligations and agreements between each other
relative to the Leased Premises and the Lease.
NOW THEREFORE, knowing that this Consent and Certification will be
relied upon by Depot and by Lessee in consummating the assignment and assumption
of the Lease, Lessor hereby agrees and certifies to Depot, its successors and
assigns, as follows:
1. Estoppel. The Lease is currently in full force and effect, and no
defaults exist thereunder (either in connection with the obligations of lessor
or lessee), nor has any event or circumstance occurred which with the giving of
notice or passage of time would constitute a default under the Lease.
2. The Lease. A correct and complete copy of the Lease (inclusive of
all amendments, modifications and exhibits thereof) is attached hereto as
EXHIBIT B.
3. Consent. The undersigned (Lessor) hereby grants its consent to the
assignment and assumption of the Lease.
B-1
<PAGE> 21
4. Rental Obligations. All fixed rental obligations under the Lease
are current and paid through ____________, 199_; and all common area
maintenance charges (if any) are current and paid through __________, 199_; and
all tax charges payable to Lessor are current and paid through __________,
199_; and all charges for insurance premiums (if any) payable to Lessor are
current and paid through ______________, 199_ except as follows:
[None] _______________
5. Default. In the event of any default under the Lease prior to the
effective date of the assignment to Depot, Lessor shall give Depot ten (10)
business days notice prior to terminating the Lease. During such ten (10)
business day period, Depot shall have the right (but not the obligation) to
cure any default thereunder which is curable.
6. Signage. Lessor hereby agrees to allow Depot (subject to applicable
municipal codes) to install its standard logo signs in the same location(s),
and of at least the same size, as the signage (both building and pylon signage)
previously allotted to Lessee.
7. Alterations. Landlord understands that Depot will be performing
certain remodeling and alterations to the Premises in connection with the
opening of its Office Depot store therein, and that such alterations may
include (without limitation) any of the following:
(i) the installation of a non-penetrating roof mounted satellite
dish antennae (for transmission of sales and inventory information) as more
specifically described on Exhibit "B" attached hereto; and
(ii) any of the work described on Exhibit "C" attached hereto.
In connection with Depot's plans and working drawing for such
alterations (which are to be furnished to Landlord for its approval to the
extent required under the Lease), Landlord agrees not to unreasonably withhold
its approval thereof to the extent that the structural integrity of the
building is not impaired or the value thereof diminished, and that the roof is
not penetrated or otherwise adversely affected.
8. Use. That for so long as Depot remains liable under the Lease, the
use of the Premises may be changed to any other lawful retail use, subject to
Landlord's consent (not to be unreasonably withheld).
9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
10. Modifications. This Agreement may not be amended, modified or
terminated except by agreement in writing duly executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first above written.
B-2
<PAGE> 22
Witnesses (as to Lessor):
_________________________(LESSOR)
________________________ By: ____________________________
Its: ____________________________
________________________
Witnesses (as to Tenant): OFFICE DEPOT, INC., (Depot)
________________________ By: ____________________________
Richard Blews
________________________ Its: Assistant Secretary
STATE OF _______________ )
) SS:
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, duly authorized to administer
oaths and take acknowledgements, personally appeared ____________________ as
_____________________ of ________________________________________, a
________________________________, and acknowledged the foregoing in his/her
capacity as same for the purposes herein described on behalf of the
_______________________, this _____ day of _______________________, 1994.
_______________________(SEAL)
Notary Public
State of ___________________
My Commission Expires:
B-3
<PAGE> 23
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
BEFORE ME, the undersigned authority, duly authorized to administer
oaths and take acknowledgements, personally appeared Richard Blews as Assistant
Secretary of OFFICE DEPOT, INC., a Delaware corporation, and acknowledged the
foregoing in his capacity as same for the purposes herein described on behalf
of the corporation, this _______ day of _________________, 1994.
________________________(SEAL)
Notary Public
State of Florida
My Commission Expires:
B-4
<PAGE> 24
EXHIBIT B
TO
LIMITED WAIVER
DATED AS OF SEPTEMBER 1, 1994
INDEMNIFICATION AGREEMENT
Attached.
<PAGE> 25
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made this ________ day
of July, 1994, by and between KASH N' KARRY FOOD STORES, INC., a Delaware
corporation (hereinafter referred to as "Kash n' Karry"), and OFFICE DEPOT,
INC., a Delaware corporation (hereinafter referred to as "Office Depot").
WHEREAS, Kash n' Karry and Office Depot executed a certain Assignment
of Lease dated _______________, 1994 (the "Assignment"), pursuant to which Kash
n' Karry assigned to Office Depot all of its interest in that certain Lease
dated April 29, 1977, a short form of which was recorded in the Public Records
of Pasco County, Florida, on March 7, 1984, in Official Records Book 1318, Page
121, as modified by an unrecorded Modification of Lease Agreement dated August
31, 1977, and a Second Modification to Lease dated September 15, 1978
(hereinafter referred to as the "Lease"), pursuant to which Kash n' Karry
leases from Donasa Corp., as successor landlord (the "Landlord"), certain real
property and improvements located in Pasco County, Florida, and more
particularly described in the Lease (the "Premises"); and
WHEREAS, in consideration of Office Depot's execution of the Assignment
and its agreement to assume Kash n' Karry's duties and obligations under the
Lease, Kash n' Karry has agreed to indemnify Office Depot for certain costs and
damages that Office Depot may incur as a result of Kash n' Karry's assignment
to Office Depot and the improvements to be constructed on the Premises by
Office Depot;
NOW THEREFORE, in consideration of the sum of Ten and 00/100 Dollars
($10.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by all parties hereto, the parties
hereto agree as follows:
1. Kash n' Karry hereby agrees to indemnify and hold harmless
Office Depot from and against any and all loss, damage, claims, liability,
costs and expenses (including, but not limited to, reasonable attorneys' fees)
and other sums that Office Depot may reasonably pay or may become obligated to
pay in the event a lawsuit is initiated by the Landlord against Office Depot
within one (1) year following the date of this Agreement as a result of the
failure of the Landlord to provide a written consent to the assignment of the
Premises to Office Depot, as requested by Office Depot, or arising from the
construction of the improvements on the Premises by Office Depot, which
improvements have not been expressly approved in writing by the Landlord, as
requested by Office Depot; provided, however, that any amounts owed to Office
Depot by Kash n' Karry pursuant to this Agreement shall be offset against any
amounts paid by the Landlord to Office Depot pursuant to the Lease or by court
order as reimbursement for costs incurred by Office Depot in defending a
lawsuit initiated by the Landlord.
<PAGE> 26
2. Kash n' Karry's liability under this Agreement shall be limited
to the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00).
3. Execution and delivery of this Agreement by Kash n' Karry and
Office Depot shall not constitute an acknowledgment or admission that any
consent of the Landlord is required for the assignment from Kash n' Karry to
Office Depot or the construction of improvements on the Premises by Office
Depot.
4. In the event any amounts due from Kash n' Karry to Office Depot
hereunder are not paid within sixty (60) days after the same have been
incurred, demand made to Kash n' Karry on account thereof and reasonable
evidence of Office Depot having incurred the same being presented to Kash n'
Karry, such amount shall bear interest from the date of demand (after the
furnishing of such evidence) at an interest rate equal to the prime rate of
interest as reported in the Wall Street Journal.
5. Kash n' Karry agrees that, in the event the Landlord institutes
a lawsuit against Office Depot arising from the construction of the
improvements on the Premises by Office Depot, and an injunction against future
construction by Office Depot is issued in connection with such lawsuit, which
prevents Office Depot from constructing the improvements necessary to operate
an Office Depot on the Premises, Office Depot may terminate the Assignment and
Kash n' Karry will return all sums paid by Office Depot to Kash n' Karry
pursuant to said Assignment. Notwithstanding the foregoing, Kash n' Karry
shall have the right, in the event an injunction is issued, to attempt to have
the injunction dissolved and, if Kash n' Karry is successful in dissolving the
injunction within a period not to exceed sixty (60) days from the issuance of
such injunction, and Office Depot is allowed to continue construction of its
improvements on the Premises, the Assignment, and all rights and obligations
thereunder, shall continue in full force and effect, including, but not limited
to, Office Depot's obligation to pay to Kash n' Karry the Purchase Price (as
defined in that certain Leasehold Purchase Agreement dated March 11, 1994,
between Office Depot and Kash n' Karry).
6. Office Depot agrees that all improvements that it constructs on
the Premises will be substantially in compliance with the terms and conditions
of the Lease pertaining to the construction of improvements.
7. In connection with any litigation arising out of this
Agreement, the prevailing party shall be entitled to recover all costs and
expenses incurred, including reasonable attorneys' fees for services rendered
prior to trial, at trial, and on appeal.
2
<PAGE> 27
8. This Agreement shall be binding upon the successors and assigns
of Kash n' Karry and inure to the benefit of Office Depot and its successors
and assigns.
9. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
Signed, sealed and delivered
in the presence of: KASH N' KARRY FOOD STORES, INC.,
a Delaware corporation
_______________________________ By: ________________________________
Name: _________________________ Name: __________________________
Title:__________________________
_______________________________
Name: ________________________
_______________________________ By: ________________________________
Name: ________________________ Name: __________________________
Title:__________________________
_______________________________
Name: ________________________
OFFICE DEPOT, INC., a Delaware
corporation
_______________________________ By: ________________________________
Name: ________________________ Name: __________________________
Title:__________________________
_______________________________
Name: ________________________
3
<PAGE> 1
LIMITED WAIVER AND CONSENT
THIS LIMITED WAIVER AND CONSENT (this "Waiver"), dated as of
September 8, 1994, relates to that certain Credit Agreement dated as of October
12, 1988, and amended and restated as of September 14, 1989 (as further amended
through the date hereof, the "Credit Agreement"), among Kash n' Karry Food
Stores, Inc. (the "Borrower"), the Senior Lenders referred to therein and Bank
of America National Trust and Savings Association (as successor in interest to
Security Pacific National Bank) as agent (in such capacity, the "Agent") for
the Senior Lenders. Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein with the same meanings ascribed to them
therein.
RECITALS
WHEREAS, the Borrower intends to sell in separate transactions (i)
the vehicles (collectively, the "Vehicles") described in the letter dated
August 17, 1994 from the Borrower to the Agent, a copy of which is attached
hereto as Exhibit A and (ii) Florida 3PS Liquor License No. 46-004-40 issued in
Lee County, Florida for 1994 (the "Liquor License") pursuant to the Agreement
for Sale and Purchase of Liquor License dated August 5, 1994 between the
Borrower and Walgreen Co., a copy of which is attached hereto as Exhibit B (the
"Liquor License Purchase Agreement"); and
WHEREAS, the Borrower has requested that the Agent and the Collateral
Co-Agent release the Liens in favor of such Persons on the Vehicles and the
Liquor License;
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are incorporated herein as a part of this Waiver) and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Agent and the Senior Lenders agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive the provisions of:
(a) Section 8.02(a)(v) of the Credit Agreement in respect (and
solely in respect) of the Borrower's sale, in separate transactions, of (i)
the Vehicles and (ii) the Liquor License; and
(b) Section 8.04 of the Credit Agreement in respect (and
solely in respect) of the Borrower's incurrence of Accommodation Obligations
in respect of indemnities arising under the Liquor License Purchase
Agreement.
<PAGE> 2
2. Consent. The Requisite Senior Lenders hereby authorize the
Agent and the Collateral Co-Agent to release the Liens of such Persons on the
Vehicles and the Liquor License and to execute and deliver to the Borrower such
agreements, documents and instruments as the Borrower may reasonably request to
evidence the release of such Liens.
3. Effective Date. This Waiver shall become effective as of
September 8, 1994 upon the date the Agent shall have received counterparts
hereof signed by the Borrower, the Requisite Senior Lenders and the Agent.
4. Representations and Warranties. The Borrower hereby represents
and warrants that, as of the date hereof, and after giving effect to this
Waiver:
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is continuing;
and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly speak
as of a different date) are true, correct and complete in all material
respects, except that such representations and warranties need not be true,
correct and complete to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or
permitted under the Credit Agreement.
5. Limitation on Waiver. This Waiver shall be limited solely to
the matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
-2-
<PAGE> 3
6. Miscellaneous. This Waiver is a Loan Document and, together
with the Credit Agreement and the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
7. Governing Law. This Amendment shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New
York.
8. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC., as
Borrower
By: /s/ R. P. Springer
-----------------------------------
Title: Executive Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as Agent
By: /s/ Laura Knight
-----------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as a Senior Lender
By: /s/ Linda A. Carper
-----------------------------------
Title: Vice President
-3-
<PAGE> 4
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
-----------------------------------
Title: Vice President
BARNETT BANK OF TAMPA (as successor in
interest to First Florida Bank, N.A.),
by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank of
Tampa
By: /s/ Julie M. Smith
-----------------------------------
Title: Sr. Workout Officer
NATIONSBANK OF FLORIDA, N.A.
By:
-----------------------------------
Title:
-4-
<PAGE> 5
EXHIBIT A
TO
LIMITED WAIVER
DATED AS OF SEPTEMBER 8, 1994
AUGUST 17, 1994 LETTER TO THE AGENT
Attached.
<PAGE> 6
[LOGO]
August 17, 1994
Ms. Laura Knight
Bank of America
Global Agency #5596
1455 Market Street, 12th Floor
San Francisco, CA 94103
Dear Laura:
Please find enclosed eight (8) Lien Satisfaction Forms for your
signature. As is the past, prior to the sale of a vehicle we have submitted
these forms for your approval. The approximate values are as follows:
(4) 1983 trailers $2,500.00 each
(4) earlier model trailers 500.00 each
(1) 1988 Chevy Wagon 1,400.00
(2) 1988 Buicks 2,900.00
The sale of these vehicles is to take place in the near future so we
ask that you expedite the process.
Please do not hesitate to contact me if you have any questions.
Very truly yours,
/s/ Richard D. Coleman
--------------------------
Richard D. Coleman
Vice President, Controller
and Secretary
RDC:blu
enclosures
"WE PLEDGE TO KEEP OUR CUSTOMERS COMING BACK"
6422 HARNEY RD. - P.O. BOX 11675, TAMPA, FL 33680 - 813/621-0200
<PAGE> 7
EXHIBIT B
TO
LIMITED WAIVER
DATED AS OF SEPTEMBER 8, 1994
LIQUOR LICENSE PURCHASE AGREEMENT
Attached.
<PAGE> 8
AGREEMENT FOR SALE AND PURCHASE OF LIQUOR LICENSE
This AGREEMENT made this 5th day of August 1994 between KASH N' KARRY
FOOD STORES, INC., a Delaware Corporation, hereinafter called "Seller" and
WALGREEN CO., an Illinois corporation, hereinafter called "Buyer."
WHEREAS, Seller holds a state of Florida 3PS Quota Liquor License
issued in Lee County for the current year being License No. 46-00440 (the
"License"), said license currently being held in escrow at the Fort Myers
Office of the Division of Alcoholic Beverages.
WHEREAS, Seller is willing to sell, assign and transfer to Buyer all
of its interest in the aforedescribed retail liquor license (or renewal license
if this transfer is closed after the same has been renewed) upon the terms,
covenants and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter contained and the consideration as hereinafter stated, the Seller
and Buyer agree as follows:
1. Seller agrees to sell, assign and transfer to Buyer (or Buyer's
nominee or assigns) all of Seller's interest in that certain liquor license
described above issued in Lee County, Florida. Seller warrants and represents
that it is the sole owner of said license. Seller warrants and represents that
said license is in good standing; that said license authorizes and permits the
retail sale of packaged liquors, wines and beer; that there are no revocations
or suspensions against said license; that said license is capable of being
transferred legally to a qualified transferee; that Seller will commit no acts
that would be grounds for revocation or suspension pending closing; that said
license is free and clear of all liens and encumbrances, or that any liens and
encumbrances will be cleared at the time of closing; that Seller has not filed
a petition, or had a petition filed against Seller, under the bankruptcy laws
of the United States.
<PAGE> 9
2. The total consideration to be paid by Buyer to Seller for said
license and all rights to said license is the sum of FIFTY TWO THOUSAND DOLLARS
($52,000.00) to be paid in cash at the time of closing. Upon execution of the
contract Buyer and Seller agree to execute State of Florida transfer
application DBR 42-001 to transfer license to Buyer.
3. a. It is understood and agreed that the sole purpose for which
Buyer is buying said license and rights thereto is to engage in business
thereunder by conducting a package store business under said license and
renewal thereof at Buyer's location in Lee County Florida. The consummation of
this transaction and payment of the agreed upon consideration hereinabove
stated are both contingent upon the transfer of said license from Seller to
Buyer (or Buyer's nominee or assigns) and from Seller's present location to
escrow inactive status at the Fort Myers Office of the Division of Alcoholic
Beverages and Tobacco in Buyer's name or Buyer's nominee or assigns in such
manner that said license can be transferred at a later date to Buyer's location
in Lee County, by a transfer of location. Seller agrees to cooperate with
Buyer in every respect for the purpose of accomplishing the transfer of the
license.
b. The contemplated closing will be as soon as possible after
approval of the transfer by the Division of Alcoholic Beverages to Buyer's
name. Time is of the essence in this contract and both parties will diligently
move forward with all action necessary to obtain the needed approval of the
Division of Alcoholic Beverages at the earliest possible date.
4. Seller agrees to cooperate with Buyer in every aspect for the
purpose of accomplishing the transfer of the license to Buyer's name and agrees
to execute all applications, forms, bills of sale, and other documents
necessary to accomplish the transfer, including the doing of any such acts as
may be necessary after closing to accomplish such transfer, without any further
consideration therefore.
5. Seller shall be solely liable for the payment of all taxes,
including sales taxes, incurred as a consequence of or incident to the transfer
of the Seller's interest in the subject license. Seller further directs and
authorizes the Buyer to deduct from the purchase price the sum necessary to pay
such taxes at the time of closing; and Seller shall remain liable following
such closing for any tax liability thereafter asserted by any
2
<PAGE> 10
taxing authority, fully indemnifying Buyer from the liability thereof and
expense of such claims, including without limitations Buyer's attorney fees and
actual cost of defense.
6. Upon execution and delivery of this Agreement by each party,
Seller shall execute and deliver to Barnett, Bolt, Kirkwood & Long, P.A., as
Escrow Agent ("Escrow Agent"), a bill of sale conveying all of its right, title
and interest in the License, free and clear of all liens and encumbrances
whatsoever, and Buyer shall deliver to the Escrow Agent the $52,000.00 purchase
price by check. Buyer and Seller shall thereafter promptly schedule an
appointment with the Fort Myers Office of the Division of Alcoholic Beverages
for purposes of processing the transfer application. The obligations of Buyer
and Seller are each contingent upon the fulfillment of the following
conditions: (a) the Division of Alcoholic Beverages shall approve the transfer
of the permanent License to the Buyer, (b) Bank of America National Trust and
Savings Association shall release its lien on the License and, (c) all other
conditions of this contract are met. Upon receipt by the Escrow Agent of
satisfactory evidence that each of the conditions has been fulfilled (the date
of such receipt is referred to herein as the "closing date"), the Escrow Agent
is authorized and directed to deliver the bill of sale to the Buyer and to
deliver the sum of $52,000.00 plus accrued interest, if any, to the Seller.
The Seller and the Buyer agree to hold the Escrow Agent harmless from
any and all claims, demands, injuries and damages arising out of or in
connection with its duties thereunder as Escrow Agent. The Escrow Agent is
authorized and directed to report the payment of any interest on the deposit to
the Seller's tax identification number.
7. Seller agrees that it will promptly deliver to Buyer any and all
notices of renewal or other notices in any way pertaining to the license sold
to Buyer which may be received by Seller after closing.
8. If any creditor or other person files any suit against Seller in
any way connected with the property which is the subject matter of this
agreement, or which in any way jeopardizes Buyer's rights hereunder; or if any
writ of attachment of the property herein to be sold and purchased or a
restraining order forbidding or preventing consummation of this sale is issued;
or if any receiver, curator, or trustee is appointed for Seller's property;
Buyer, in addition to all other rights provided for by law, shall have the
right to terminate
3
<PAGE> 11
this agreement, and the parties shall be restored to the status quo.
9. Seller convenants that any and all encumbrances and liens, if any,
existing against said license shall be discharged prior to or if not then from
the proceeds of sale at the time of closing from the balance of the purchase
price. Such payments shall be paid before commissions are paid. In the event
that any encumbrances or lien exceeds the purchase price due from the Buyer,
Seller shall provide the funds in cash at closing to satisfy such encumbrances
and estoppel letters from the lien holders in form satisfactory to Buyer at
closing stating the total sum necessary to fully satisfy such encumbrance. If
Seller defaults in satisfying these requirements, Buyer shall have the option
of proceeding with closing, notwithstanding the default, or terminating the
Agreement.
10. From the consideration recited in Paragraph 2 of this Agreement
Seller shall pay a brokers' commission of FIVE THOUSAND TWO HUNDRED ($5,200.00)
to Tiller Realty, 4511 Springmeadow Road, Quincy, FL 32351. Said commission to
be paid at time of closing. Buyer and Seller warrant they have not engaged the
services of any other broker in this transaction.
11. Buyer does not assume, and in no event shall be liable for, any
obligations or indebtedness, lease obligations, rents or other commitments of
Seller, or for taxes assessed against Seller or its property, except as
specifically provided for in this agreement.
12. The parties shall pay their own legal fees and Buyer and Seller do
not assume any of the legal fees of the other.
13. Buyer shall pay the required transfer fee for transfer of location
and transfer of name.
14. In addition to the consideration stated in this contract, Buyer
shall be responsible for the prorata portion of the annual license fee as of
the date of closing.
15. Whenever this contract provides for a contingency to be resolved
through the efforts of either party, that party agrees to use all reasonable
diligence to resolve the contingency at the earliest possible date.
4
<PAGE> 12
16. This agreement shall be binding upon all parties hereto and their
heirs, legal representatives, successors, and assigns. The address of Buyer
and Seller for notice under this agreement shall be as follows unless a change
of address is given to the other in writing:
BUYER: SELLER:
Walgreens Co. Kash N' Karry Food Stores, Inc.
200 Wilmot Rd. 6422 Harney Road
Deerfield, IL 60015 Tampa, FL 33510
c/o P.A. Zambreno Attn: Burt Miller
ESCROW AGENT:
Barnett, Bolt, Kirkwood & Long
601 Bayshore Blvd.
Suite 700
Tampa, FL 33606
Attn: Leslie Wager Hudock, Esq.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals.
WALGREEN CO., BUYER
By: /s/ Julian A. Oettinger
--------------------------------
Vice President
KASH N' KARRY FOOD STORES, INC.
By: /s/ R. P. Springer
--------------------------------
Name:
Title:
5
<PAGE> 1
LIMITED WAIVER
THIS LIMITED WAIVER (this "Waiver"), dated as of September 14, 1994,
relates to that certain Credit Agreement dated as of October 12, 1988, and
amended and restated as of September 14, 1989 (as further amended through the
date hereof, the "Credit Agreement"), among Kash n' Karry Food Stores, Inc.
(the "Borrower"), the Senior Lenders referred to therein and Bank of America
National Trust and Savings Association (as successor in interest to Security
Pacific National Bank) as agent (in such capacity, the "Agent") for the Senior
Lenders. Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein with the same meanings ascribed to them therein. In addition to
the covenants and agreements made in the Credit Agreement and the other Loan
Documents, Borrower, the Senior Lenders and the Agent further covenant and
agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive:
(a) The provisions of Section 9.01 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Minimum Net Worth amount set forth therein for the fourth quarter of
Fiscal Year 1994;
(b) The provisions of Section 9.03 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Fixed Charge Coverage Ratio set forth therein for the fourth quarter of
Fiscal Year 1994; and
(c) The provisions of Section 9.04 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Interest Coverage Ratio set forth therein for the fourth quarter of
Fiscal Year 1994.
2. Expenses. In addition to the costs and expenses payable under
Section 12.03(b) of the Credit Agreement, the Borrower agrees to pay or
reimburse the Agent and the Senior Lenders (and any of their respective
Affiliates), promptly upon receipt of demand therefor, for costs and expenses
incurred or accrued in connection with the amendment, waiver, refinancing,
restructuring, reorganization, enforcement or collection of any of the
Obligations (including without limitation (a) appraisal fees, search fees and
other out-of-pocket expenses incurred or accrued by the Agent, (b) the
reasonable fees and expenses of any legal counsel, independent public
accountants and other outside experts retained by or on behalf of the Agent and
(c) reasonable
<PAGE> 2
travel expenses and allocated costs of internal legal counsel incurred or
accrued by the Agent or any of the Senior Lenders). The Borrower's agreements
and obligations under this Section 2 shall survive the Termination Date (as
defined below) and shall not be limited in any way by the passage of time or
occurrence of any event.
3. Effective Date. This Waiver shall become effective as of
September 14, 1994 (the "Effective Date") upon the Agent's receipt of
counterparts hereof signed by the Borrower, the Requisite Senior Lenders and
the Agent.
4. Termination Date. This Waiver (other than the Borrower's
agreements and obligations under Section 2) shall expire and cease to be of any
force or effect automatically (without any action by the Agent or any Senior
Lender) at 5:00 p.m., Los Angeles time, on the date (the "Termination Date")
which is the earlier of (a) September 30, 1994 and (b) the earliest date on
which any of the conditions set forth below fails to be satisfied:
(i) No Event of Default or Potential Event of Default
(including without limitation failure to pay costs and expenses upon
demand in accordance with Section 12.03 of the Credit Agreement) shall
have occurred (other than those expressly waived by this Waiver);
(ii) No event shall have occurred and be continuing (for at
least two Business Days after notice thereof from Agent to the
Borrower) which materially adversely affects the business, condition
(financial or otherwise), properties or prospects of the Borrower and
any Subsidiary of the Borrower, taken as a whole; and
(iii) None of the holders of any of the Senior Notes, the New
Senior Notes and the Junior Subordinated Debentures nor any
representative of any of them (including without limitation a trustee
under an indenture governing the terms of any of them) shall have
exercised any remedies available to any of them by reason of a default
under the Senior Notes, the New Senior Notes or the Junior
Subordinated Debentures or any of the indentures governing the terms
thereof.
5. Representations and Warranties. The Borrower hereby represents
and warrants that, as of the date hereof, and after giving effect to this
Waiver:
-2-
<PAGE> 3
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is continuing;
and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly speak
as of a different date) are true, correct and complete in all material
respects, except that such representations and warranties need not be true,
correct and complete to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or
permitted under the Credit Agreement.
6. Limitation on Waiver. This Waiver shall be limited solely to
the matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
7. Miscellaneous. This Waiver is a Loan Document and, together
with the Credit Agreement and the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
8. Governing Law. This Amendment shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New
York.
-3-
<PAGE> 4
9. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC.,
as Borrower
By: /s/ R. P. Springer
--------------------------------
Title: Executive Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as Agent
By: Laura Knight
--------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as a Senior Lender
By: H. G. Wheelock
--------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: Jeffrey P. Rose
--------------------------------
Title: Vice President
-4-
<PAGE> 5
BARNETT BANK OF TAMPA (as successor
in interest to First Florida Bank,
N.A.), by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank
of Tampa
By:
--------------------------------
Title:
NATIONSBANK OF FLORIDA, N.A.
By: /s/ Samuel P. McNeil
--------------------------------
Title: Vice President
-5-
<PAGE> 1
LIMITED WAIVER
THIS LIMITED WAIVER (this "Waiver"), dated as of September 29, 1994,
relates to that certain Credit Agreement dated as of October 12, 1988, and
amended and restated as of September 14, 1989 (as further amended, modified or
supplemented through the date hereof, the "Credit Agreement"), among Kash n'
Karry Food Stores, Inc. (the "Borrower"), the Senior Lenders referred to
therein and Bank of America National Trust and Savings Association (as
successor in interest to Security Pacific National Bank) as agent (in such
capacity, the "Agent") for the Senior Lenders. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein with the same meanings
ascribed to them therein. In addition to the covenants and agreements made in
the Credit Agreement and the other Loan Documents, Borrower, the Senior Lenders
and the Agent further covenant and agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive:
(a) The provisions of Section 2.02(a)(v) of the Credit
Agreement in respect (and solely in respect) of the Borrower's failure to
comply with the Revolver Cleandown requirement set forth therein for the
Fiscal Year ending in 1994 ("Fiscal Year 1994");
(b) The provisions of Section 9.01 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Minimum Net Worth amount set forth therein for the first, second, third
and fourth quarters of Fiscal Year 1994;
(c) The provisions of Section 9.03 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Fixed Charge Coverage Ratio set forth therein for the first, second,
third and fourth quarters of Fiscal Year 1994; and
(d) The provisions of Section 9.04 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply with
the Interest Coverage Ratio set forth therein for the first, second, third
and fourth quarters of Fiscal Year 1994; and
(e) The provisions of Section 10.01(e) of the Credit Agreement
in respect (and solely in respect) of the nonpayment of interest due on
August 1, 1994 to holders of the New Senior Notes and the Junior
Subordinated Debentures and the nonpayment of interest due on August 2,
1994 to
<PAGE> 2
holders of the Senior Note 9 (together with the New Senior Notes and the
Junior Subordinated Debentures, the "Public Debt").
Among other things, the effect of this Waiver is to extend, on the terms and
conditions set forth herein, the Limited Waivers dated as of December 15, 1993,
March 11, 1994, June 10, 1994, July 5, 1994 and September 14, 1994,
respectively, among the Borrower, the Agent and the Requisite Senior Lenders
for the period from the Effective Date to the Termination Date (in each case,
as defined herein). In addition to the foregoing, and for the duration of this
Waiver, none of the Senior Lenders shall be obligated to make a Fixed Rate
Loan.
2. Waiver Fee. The Borrower shall pay to the Agent (for the
benefit of the Senior Lenders in accordance with their respective Pro Rata
Shares) a waiver fee of $50,000 in cash in same day funds on or before
September 30, 1994. This waiver fee shall be in addition to, and not in lieu
of, any other fees and expenses now or hereafter payable by the Borrower to any
Senior Lender, including, without limitation, the waiver fee described in
Section 2 of the Limited Waiver dated as of July 5, 1994 among the Borrower,
the Agent and the Requisite Senior Lenders.
3. Expenses. In addition to the costs and expenses payable under
Section 12.03(b) of the Credit Agreement, the Borrower agrees to pay or
reimburse the Agent and the Senior Lenders (and any of their respective
Affiliates), promptly upon receipt of demand therefor, for costs and expenses
incurred or accrued in connection with the amendment, waiver, refinancing,
restructuring, reorganization, enforcement or collection of any of the
Obligations (including without limitation (a) appraisal fees, search fees and
other out-of-pocket expenses incurred or accrued by the Agent, (b) the
reasonable fees and expenses of any legal counsel, independent public
accountants and other outside experts retained by or on behalf of the Agent and
(c) reasonable travel expenses and allocated costs of internal legal counsel
incurred or accrued by the Agent or any of the Senior Lenders). The Borrower's
agreements and obligations under this Section 3 shall survive the Termination
Date (as defined below) and shall not be limited in any way by the passage of
time or occurrence of any event.
4. Interest Rates. From and after the Effective Date, the
Borrower hereby agrees that the Obligations shall bear interest as follows:
(a) subject to Section 4(b), all Loans and all Reimbursement
Obligations with respect to any Letter of Credit (for a period of one (1)
Business Day after the date of the relevant drawing under such Letter of
Credit) shall
-2-
<PAGE> 3
accrue interest at a per annum rate equal to the sum of 1.50% plus the Base
Rate then in effect; and
(b) any Obligation with respect to which the default rate of
interest is applicable pursuant to Section 2.04(d) of the Credit Agreement
shall accrue interest at a per annum rate equal to the sum of 3.50% plus
the Base Rate then in effect.
The Borrower's agreements and obligations under this Section 4 shall survive
the Termination Date (as defined below) and shall not be limited in any way by
the passage of time or occurrence of any event.
5. Repayment of Swing Loans. As of the Effective Date, the
Borrower shall be deemed to have requested Working Capital Loans pursuant to
Section 2.02 of the Credit Agreement in a principal amount equal to the sum of
(a) the principal amount of all Swing Loans then outstanding plus (b) accrued
and unpaid interest thereon. Upon receipt of the proceeds of such Working
Capital Loans, the Agent shall apply such proceeds to repay such Obligations.
From and after the Effective Date, the Borrower hereby agrees that it shall not
request, nor be entitled to receive any proceeds of, any Swing Loan pursuant to
Section 2.03 of the Credit Agreement. The Borrower's agreements and obligations
under this Section 5 shall survive the Termination Date (as defined below) and
shall not be limited in any way by the passage of time or occurrence of any
event.
6. Effective Date. This Waiver shall become effective upon the
date (the "Effective Date") on or before September 30, 1994 on which the Agent
has received each of the following:
(a) Counterparts hereof signed by the borrower, the Requisite Senior
Lenders and the Agent;
(b) Payment in cash in same day funds of all fees and expenses for
which the Borrower has received invoices for the payment thereof; and
(c) Payment in cash in same day funds of the waiver fee described in
Section 2 of this Waiver.
7. Termination Date. This Waiver (other than the Borrower's
agreements and obligations under Section 3, 4, 5 and 8) shall expire and cease
to be of any force or effect automatically (without any action by the Agent or
any Senior Lender) at 5:00 p.m., Los Angeles time, on the date (the
"Termination Date") which is the earlier of (a) October 31, 1994
-3-
<PAGE> 4
and (b) the earliest date on which any of the conditions set forth below fails
to be satisfied:
(i) No Event of Default or Potential Event of Default
(including without limitation failure to pay costs and expenses upon
demand in accordance with Section 12.03 of the Credit Agreement) shall
have occurred (other than those expressly waived by this Waiver);
(ii) No event shall have occurred and be continuing (for at
least two Business Days after notice thereof from Agent to the
Borrower) which materially adversely affects the business, condition
(financial or otherwise), properties or prospects of the Borrower and
any Subsidiary of the Borrower, taken as a whole;
(iii) None of the holders of any of the Public Debt nor any
representative of any of them (including without limitation a trustee
under an indenture governing the terms of any of them) shall have
exercised any remedies available to any of them by reason of a default
under the Senior Notes, the New Senior Notes or the Junior
Subordinated Debentures or any of the indentures governing the terms
thereof;
(iv) The Borrower shall not establish or maintain any deposit
account or lock box other than a deposit account or lock box
maintained with a Senior Lender;
(v) The Borrower shall not directly or indirectly make or own
any Investment in Cash Equivalents other than Cash Equivalents in the
possession of, subject to an investment account maintained with, or
otherwise subject to the control of, a Senior Lender; and
(vi) The Borrower shall not enter into any agreement with any
Person pursuant to which the Borrower, as debtor-in-possession in any
case under the Bankruptcy Code (a "Bankruptcy Case"), may become
directly or indirectly liable for any Indebtedness (the "DIP
Facility") such that the sum of (A) the maximum principal amount of
loans or other financial accommodations permitted to be outstanding
under the DIP Facility, plus (B) the Loans and Reimbursement
Obligations then outstanding, shall exceed the aggregate amount for
which the Borrower has then obtained written commitments to make
advances to the Borrower on the effective date of a plan of
reorganization to be approved in the Bankruptcy Case for the purpose
of paying in full all Obligations,
-4-
<PAGE> 5
together with all obligations payable under the DIP Facility. Nothing
in this Section 7(vi) shall be construed as a consent by the Agent or
any Senior Lender to a DIP Facility or any other terms or conditions
applicable thereto.
8. Termination of Automatic Stay. The Borrower hereby
acknowledges and agrees that the condition set forth in Section 7(vi) is a
material inducement to the Requisite Senior Lenders to enter into this Waiver
and that, in the event of the filing of a Bankruptcy Case, the failure of this
condition shall be deemed to constitute a lack of adequate protection pursuant
to Section 362(d)(1) of the Bankruptcy Code. The Borrower hereby stipulates
that the failure of this condition during a Bankruptcy Case shall cause the
immediate termination of the automatic stay under the Bankruptcy Code without
further notice to the Borrower or order of the bankruptcy court. The Borrower
agrees that a copy of this Waiver may serve as evidence of this stipulation in
any Bankruptcy Case. The Borrower agrees not to contest such termination of the
automatic stay or the consequences thereof. The Borrower's agreements and
obligations under this Section 8 shall survive the Termination Date (as defined
above) and shall not be limited in any way by the passage of time or occurrence
of any event.
9. Representations and Warranties. The Borrower hereby represents
and warrants that, as of the date hereof, and after giving effect to this
Waiver:
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is continuing;
and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly speak
as of a different date) are true, correct and complete in all material
respects, except that such representations and warranties need not be true,
correct and complete to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or
permitted under the Credit Agreement.
10. Acknowledgment of Indebtedness and Liens. The Borrower
acknowledges and stipulates that (a) as of the close of business on September
23, 1994, the aggregate unpaid principal
-5-
<PAGE> 6
amount of Loans outstanding is $56,766,233.75, and the aggregate undrawn face
amount of the Letters of Credit is $16,704,655.95, (b) the Loans, together with
the other Obligations, constitute legal, valid, binding and enforceable
obligations of the Borrower, not avoidable or subject to subordination by the
Borrower to any extent, and there are no defenses or counterclaims with respect
thereto in favor of the Borrower, (c) the Liens created by the Collateral
Documents are legal, valid, binding and enforceable against the Borrower and
are not avoidable or subject to subordination by the Borrower, and there are no
defenses thereto in favor of the Borrower, and (d) the Liens created by the
Collateral Documents are perfected under the Uniform Commercial Code as in
effect in any applicable jurisdiction or any other Requirement of Law
applicable to any Collateral.
11. Limitation on Waiver. This Waiver shall be limited solely to
the matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments agreements referred to therein, (ii) prejudice any right or rights
which the Agent or any of the Senior Lenders may now have or may have in the
future under or in connection with the Credit Agreement or any instruments or
agreements referred to therein, or (iii) require the Senior Lenders to agree to
a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
12. Miscellaneous. This Waiver is a Loan Document and, together
with the Credit Agreement and the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
13. Governing Law. This Amendment shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New
York.
-6-
<PAGE> 7
14. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC., as
Borrower
By: /s/ R. P. Springer
-----------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as Agent
By: /s/ Laura Knight
-----------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor in
interest to SECURITY PACIFIC NATIONAL
BANK), as a Senior Lender
By: /s/ H. G. Wheelock
-----------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
-----------------------------------
Title: Vice President
-7-
<PAGE> 8
BARNETT BANK OF TAMPA (as successor in
interest to First Florida Bank, N.A.),
by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank of
Tampa
By:
-----------------------------------
Title:
NATIONSBANK OF FLORIDA, N.A.
By:
-----------------------------------
Title:
-8-
<PAGE> 1
LIMITED WAIVER
THIS LIMITED WAIVER (this "Waiver"), dated as of October 27, 1994,
relates to that certain Credit Agreement dated as of October 12, 1988, and
amended and restated as of September 14, 1989 (as further amended, modified or
supplemented through the date hereof, the "Credit Agreement"), among Kash n'
Karry Food Stores, Inc. (the "Borrower"), the Senior Lenders referred to
therein and Bank of America National Trust and Savings Association (as
successor in interest to Security Pacific National Bank) as agent (in such
capacity, the "Agent") for the Senior Lenders. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein with the same meanings
ascribed to them therein. In addition to the covenants and agreements made in
the Credit Agreement and the other Loan Documents, Borrower, the Senior Lenders
and the Agent further covenant and agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive:
(a) The provisions of Section 2.02(a)(v) of the Credit
Agreement in respect (and solely in respect) of the Borrower's failure
to comply with the Revolver Cleandown requirement set forth therein
for the Fiscal Year ending in 1994 ("Fiscal Year 1994");
(b) The provisions of Section 9.01 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply
with the Minimum Net Worth amount set forth therein for the first,
second, third and fourth quarters of Fiscal Year 1994;
(c) The provisions of Section 9.03 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply
with the Fixed Charge Coverage Ratio set forth therein for the first,
second, third and fourth quarters of Fiscal Year 1994; and
(d) The provisions of Section 9.04 of the Credit Agreement in
respect (and solely in respect) of the Borrower's failure to comply
with the Interest Coverage Ratio set forth therein for the first,
second, third and fourth quarters of Fiscal Year 1994; and
(e) The provisions of Section 10.01(e) of the Credit Agreement
in respect (and solely in respect) of the nonpayment of interest due
on August 1, 1994 to holders of the New Senior Notes and the Junior
Subordinated Debentures and the nonpayment of interest due on August
2, 1994 to
<PAGE> 2
holders of the Senior Notes (together with the New Senior Notes
and the Junior Subordinated Debentures, the "Public Debt").
Among other things, the effect of this Waiver is to extend, on the
terms and conditions set forth herein, the Limited Waivers dated as of December
15, 1993, March 11, 1994, June 10, 1994, July 5, 1994, September 14, 1994, and
September 29, 1994 respectively, among the Borrower, the Agent and the
Requisite Senior Lenders for the period from the Effective Date to the
Termination Date (in each case, as defined herein). In addition to the
foregoing, and for the duration of this Waiver, none of the Senior Lenders
shall be obligated to make a Fixed Rate Loan.
2. Affirmation of Obligations. The Borrower hereby reaffirms its
obligations and agreements pursuant to Sections 3 and 4 of the Limited Waiver
dated as of September 29, 1994 among the parties hereto.
3. Effective Date. This Waiver shall become effective upon the date
(the "Effective Date") on or before October 31, 1994 on which the Agent has
received each of the following:
(a) Counterparts hereof signed by the Borrower, the Requisite
Senior Lenders and the Agent; and
(b) Payment in cash in same day funds of all fees and expenses
for which the Borrower has received invoices for the payment thereof.
4. Termination Date. This Waiver (other than the Borrower's agreements
and obligations under Sections 2 and 8) shall expire and cease to be of any
force or effect automatically (without any action by the Agent or any Senior
Lender) at 5:00 p.m., Los Angeles time, on the date (the "Termination Date")
which is the earlier of (a) November 10, 1994 and (b) the earliest date on
which any of the conditions set forth below fails to be satisfied:
(i) No Event of Default or Potential Event of Default
(including without limitation failure to pay costs and expenses
upon demand in accordance with Section 12.03 of the Credit
Agreement) shall have occurred (other than those expressly waived
by this Waiver);
(ii) No event shall have occurred and be continuing (for at
least two Business Days after notice thereof from Agent to the
Borrower) which materially adversely affects the business,
condition (financial or
-2-
<PAGE> 3
otherwise), properties or prospects of the Borrower and any
Subsidiary of the Borrower, taken as a whole;
(iii) None of the holders of any of the Public Debt nor any
representative of any of them (including without limitation a
trustee under an indenture governing the terms of any of them)
shall have exercised any remedies available to any of them by
reason of a default under the Senior Notes, the New Senior Notes
or the Junior Subordinated Debentures or any of the indentures
governing the terms thereof;
(iv) The Borrower shall not establish or maintain any deposit
account or lock box other than a deposit account or lock box
maintained with a Senior Lender;
(v) The Borrower shall not directly or indirectly make or own
any Investment in Cash Equivalents other than Cash Equivalents in
the possession of, subject to an investment account maintained
with, or otherwise subject to the control of, a Senior Lender;
and
(vi) The Borrower shall not enter into any agreement with any
Person pursuant to which the Borrower, as debtor-in-possession in
any case under the Bankruptcy Code (a "Bankruptcy Case"), may
become directly or indirectly liable for any Indebtedness (the
"DIP Facility") such that the sum of (A) the maximum principal
amount of loans or other financial accommodations permitted to be
outstanding under the DIP Facility, plus (B) the Loans and
Reimbursement Obligations then outstanding, shall exceed the
aggregate amount for which the Borrower has then obtained written
commitments to make advances to the Borrower on the effective
date of a plan of reorganization to be approved in the Bankruptcy
Case for the purpose of paying in full all Obligations, together
with all obligations payable under the DIP Facility. Nothing in
this Section 7(vi) shall be construed as a consent by the Agent
or any Senior Lender to a DIP Facility or any other terms or
conditions applicable thereto.
5. Termination of Automatic Stay. The Borrower hereby acknowledges and
agrees that the condition set forth in Section 7(vi) is a material inducement
to the Requisite Senior Lenders to enter into this Waiver and that, in the
event of the filing of a Bankruptcy Case, the failure of this condition shall
be deemed to constitute a lack of adequate protection pursuant to Section
362(d)(1) of the Bankruptcy Code. The Borrower hereby stipulates that the
failure of this condition during a Bankruptcy
-3-
<PAGE> 4
Case shall cause the immediate termination of the automatic stay under
the Bankruptcy Code without further notice to the Borrower or order of the
bankruptcy court. The Borrower agrees that a copy of this Waiver may serve as
evidence of this stipulation in any Bankruptcy Case. The Borrower agrees not to
contest such termination of the automatic stay or the consequences thereof. The
Borrower's agreements and obligations under this Section 8 shall survive the
Termination Date (as defined above) and shall not be limited in any way by the
passage of time or occurrence of any event.
6. Representations and Warranties. The Borrower hereby represents and
warrants that, as of the date hereof, and after giving effect to this Waiver:
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate
action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is
continuing; and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly
speak as of a different date) are true, correct and complete in all
material respects, except that such representations and warranties
need not be true, correct and complete to the extent that changes in
the facts and conditions on which such representations and warranties
are based are required or permitted under the Credit Agreement.
7. Acknowledgment of Indebtedness and Liens. The Borrower acknowledges
and stipulates that (a) as of the close of business on October 27, 1994, the
aggregate unpaid principal amount of Loans outstanding is at least
$53,466,233.75, and the aggregate undrawn face amount of the Letters of Credit
is $ 16,669,215.85, (b) the Loans, together with the other Obligations,
constitute legal, valid, binding and enforceable obligations of the Borrower,
not avoidable or subject to subordination by the Borrower to any extent, and
there are no defenses or counterclaims with respect thereto in favor of the
Borrower, (c) the Liens created by the Collateral Documents are legal, valid,
binding and enforceable against the Borrower and are not avoidable or subject
to subordination by the Borrower, and there are no defenses thereto in favor of
the Borrower, and (d) the Liens created by the Collateral Documents are
perfected under the Uniform Commercial Code as in effect in any applicable
-4-
<PAGE> 5
jurisdiction or any other Requirement of Law applicable to any Collateral.
8. Limitation on Waiver. This Waiver shall be limited solely to the
matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
9. Miscellaneous. This Waiver is a Loan Document and, together with the
Credit Agreement and the other Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof. The headings
herein are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
10. Governing Law. This Amendment shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
-5-
<PAGE> 6
11. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC.,
as Borrower
By: /s/ R.P. Springer
-------------------------------
Title: Executive Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as Agent
By: /s/ Laura Knight
------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as a Senior Lender
By: /s/ H.G. Wheelock
--------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
--------------------------------
Title: Vice President
-6-
<PAGE> 7
BARNETT BANK OF TAMPA (as successor
in interest to First Florida Bank,
N.A.), by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank
of Tampa
By:
-------------------------
Title:
NATIONSBANK OF FLORIDA, N.A.
By:
-------------------------
Title:
-7-
<PAGE> 1
LIMITED WAIVER AND CONSENT
THIS LIMITED WAIVER AND CONSENT (this "Waiver"), dated as of November
1, 1994, relates to that certain Credit Agreement dated as of October 12, 1988,
and amended and restated as of September 14, 1989 (as further amended, modified
or supplemented through the date hereof, the "Credit Agreement"), among Kash n'
Karry Food Stores, Inc. (the "Borrower"), the Senior Lenders referred to
therein and Bank of America National Trust and Savings Association (as
successor in interest to Security Pacific National Bank) as agent (in such
capacity, the "Agent") for the Senior Lenders. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein with the same meanings
ascribed to them therein. In addition to the covenants and agreements made in
the Credit Agreement and other Loan Documents, the Borrower, the Agent and the
Senior Lenders further covenant and agree as follows:
1. Limited Waiver. Subject to the terms and conditions set forth
herein, the Requisite Senior Lenders hereby agree to waive the provisions of
Section 6.01(c) 6.01(f) and 6.01(g) of the Credit Agreement in respect (and
solely in respect) of the Borrower's failure to comply with the preparation and
delivery of the annual financial statements, consisting of balance sheets,
income statements and cash flow statements, and related documents with respect
to the 1994 Fiscal Year.
2. Effective Date. This Waiver shall become effective upon the date
(the "Effective Date") on or before November 3, 1994 on which the Agent has
received counterparts hereof signed by the Borrower, the Requisite Senior
Lenders and the Agent.
3. Limitation on Waiver. This Waiver shall be limited solely to the
matters expressly set forth herein and shall not (i) constitute a waiver or
amendment of any other term or condition of the Credit Agreement, or of any
instruments or agreements referred to therein, (ii) prejudice any right or
rights which the Agent or any of the Senior Lenders may now have or may have in
the future under or in connection with the Credit Agreement or any instruments
or agreements referred to therein, or (iii) require the Senior Lenders to agree
to a similar waiver or grant a similar waiver for a similar transaction or on a
future occasion. Except to the extent specifically waived herein, the
provisions of the Credit Agreement shall not be amended, modified, impaired or
otherwise affected hereby, and the Credit Agreement and all of the Obligations
are hereby confirmed in full force and effect.
<PAGE> 2
4. Representations and Warranties. The Borrower hereby represents and
warrants that, as of the date hereof, and after giving effect to this Waiver:
(a) The execution, delivery and performance by the Borrower of
this Waiver has been duly authorized by all necessary corporate
action;
(b) No Event of Default or Potential Event of Default (other
than those expressly waived by this Waiver) has occurred or is
continuing; and
(c) The representations and warranties of the Borrower
contained in Section 5.03 of the Credit Agreement and any other Loan
Document (other than representations and warranties which expressly
speak as of a different date) are true, correct and complete in all
material respects, except that such representations and warranties
need not be true, correct and complete to the extent that changes in
the facts and conditions on which such representations and warranties
are based are required or permitted under the Credit Agreement.
5. Miscellaneous. This Waiver is a Loan Document and, together with the
Credit Agreement and the other Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof. The headings
herein are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
6. Governing Law. This Amendment shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
7. Counterparts. This Amendment may be executed in any number of
counterparts which, when taken together, shall be deemed to constitute one and
the same instrument.
WITNESS the due execution hereof as of the date first above written.
KASH N' KARRY FOOD STORES, INC.,
as Borrower
By: /s/ R. P. Springer
----------------------------
Title:
-2-
<PAGE> 3
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as Agent
By: /s/ Laura Knight
-------------------------------
Title: VICE PRESIDENT
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (as successor
in interest to SECURITY PACIFIC
NATIONAL BANK), as a Senior Lender
By: /s/ H.G. Wheelock
-------------------------------
Title: VICE PRESIDENT
WELLS FARGO BANK, N.A.
By: /s/ Jeffrey P. Rose
-------------------------------
Title: VICE PRESIDENT
BARNETT BANK OF TAMPA (as successor
in interest to First Florida Bank,
N.A.), by BARNETT BANKS, INC., as
attorney-in-fact for Barnett Bank
of Tampa
By:
-------------------------------
Title:
NATIONSBANK OF FLORIDA, N.A.
By:
-------------------------------
Title:
-3-
