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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 1, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 333-39813
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B&G Foods, Inc.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3916496
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Gatehall Drive, Suite 110, Parsippany, New Jersey 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 401-6500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if 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. [X].
The aggregate market value of the voting stock held by non-affiliates
of the registrant is not applicable as no public market for the voting stock of
the registrant exists.
As of March 2, 2000, B&G Foods, Inc. had one share of its common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
ITEM 1. BUSINESS
I. Company Overview
B&G Foods, Inc. and its subsidiaries (collectively, "B&G" or the "Company")
currently manufacture, market and distribute a diversified portfolio of
shelf-stable branded food products. Some of the products manufactured and
distributed by the Company include Bloch & Guggenheimer pickles and peppers,
Burns & Ricker and New York Style bagel chips, Regina vinegars, Polaner fruit
spreads, preserves and wet spices, B&M baked beans, Underwood meat spreads,
Ac'cent flavor enhancer, Las Palmas enchilada sauce and Joan of Arc dry canned
beans.
The Company was organized by Bruckmann, Rosser, Sherrill & Co., L.P.
("BRS") in November 1996 to acquire Bloch & Guggenheimer, Inc., Burns & Ricker,
Inc. and certain related entities (the "B&G and B&R Acquisition") from Specialty
Foods Corporation ("Specialty Foods"), which is not an affiliate of the Company.
The B&G and B&R Acquisition was consummated on December 27, 1996 as a purchase
of all of the outstanding capital stock of BGH Holdings, Inc., the parent of
Bloch & Guggenheimer, Inc. and BRH Holdings, Inc., the parent of Burns & Ricker,
Inc.
On June 17, 1997, the Company acquired certain assets relating to the
Regina wine vinegars and cooking wines, Wright's liquid smoke hickory flavoring,
Brer Rabbit molasses and Vermont Maid syrup brands (the "Nabisco Brands
Acquisition"), including trademarks, inventory and certain equipment used to
bottle the Regina wine vinegars and cooking wines, from Nabisco, Inc.
("Nabisco"), which is not an affiliate of the Company.
On August 15, 1997, through a subsidiary, the Company acquired from E.
McIlhenny's Son Corporation all of the outstanding capital stock of JEM Brands,
Inc. ("JEM") (the "Trappey's Acquisition"), the holding company of Trappey's
Fine Foods, Inc. (together with JEM, "Trappey's").
On July 17, 1998, through a subsidiary, the Company acquired all of the
outstanding capital stock of Maple Grove Farms of Vermont, Inc. and related
entities (the "Maple Grove Acquisition") from certain individual investors. The
Maple Grove Acquisition included the Maple Grove Farms of Vermont and UpCountry
Naturals labels of pure maple syrup.
On February 5, 1999, the Company acquired certain assets of the Polaner and
related brands (collectively, "Polaner") from International Home Foods,
Inc. ("IHF") and M. Polaner, Inc. (the "Polaner Acquisition"). Prior to the
consummation of the Polaner Acquisition, the Company had been the exclusive
manufacturer, or "co-packer," of the Polaner products for IHF, and had
distributed the Polaner products regionally under co-packing and distribution
contracts that were terminated upon consummation of the Polaner Acquisition. See
"--Co-Packing."
On March 15, 1999, through a subsidiary, the Company acquired the assets of
The Heritage Portfolio of Brands from The Pillsbury Company, Indivined B.V. and
IC Acquisition Corp. (the "Heritage Brands Acquisition"). The Heritage Portfolio
of Brands include Underwood meat spreads, B&M baked beans, Ac'cent flavor
enhancer, Sa-son Ac'cent flavor enhancer,
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Las Palmas Mexican sauces and food products and Joan of Arc dry bean products
businesses.
The Company is wholly-owned by B&G Foods Holdings Corp. ("Holdings"), which
in turn is owned by BRS and its affiliates, and members of the Company's
management and board of directors. See "Security Ownership of Certain Beneficial
Owners and Management." The Company maintains its corporate headquarters at 4
Gatehall Drive, Suite 110, Parsippany, New Jersey 07054.
II. Products and Markets
The Company manufactures, markets and distributes a diversified portfolio
of shelf-stable branded products with leading regional or national market
positions. Set forth below is a brief description of the Company's products:
B&G Pickles & Peppers
The Company manufactures and distributes shelf-stable pickles, relishes,
peppers, olives and other related specialty items ("Pickles & Peppers")
primarily under the B&G and Bloch & Guggenheimer brand names. The Company's
Pickles & Peppers have strong sales in the New York area, and the Company
believes they are the leading brand of shelf-stable pickles sold in the New York
metropolitan area.
The Company positions its Pickles & Peppers as a quality, competitively
priced product. The Company currently offers 77 distinct pickle products and 41
distinct pepper products. Nationally, pepper products have enjoyed modest sales
growth over the past five years driven by changes in consumer trends and eating
styles.
Trappey's Peppers and Sauces
Trappey's products fall into two major categories, shelf-stable peppers and
hot sauces. Trappey's, founded in 1898, was one of the first packers of pepper
hot sauce and the first to process peppers for pickling. Since its inception,
Trappey's has introduced many new products including Red Devil branded hot
sauce, Trappey's brand peppers, Torrido brand chili peppers and Italian
peperoncini peppers under the Dulcito brand.
Burns & Ricker Baked Snack Foods
The Company manufactures, markets and distributes bagel chips, snack mixes
and other baked specialty products ("Baked Snack Foods") primarily under the
Burns & Ricker and New York Style brands. Presently, the Burns & Ricker and New
York Style brands are the leading national brands of bagel chips.
Management believes that a key to growth in the highly competitive snack
foods market is the continual introduction of new products. The Company has
successfully introduced additional bagel chip flavors, snack mixes and the
Regina Panetini line of light Italian toasts. Management believes that these
initiatives will enable the Company to diversify and expand its snack food
business.
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Regina Vinegars and Cooking Wines
The Company manufactures and distributes vinegars and cooking wines under
the Regina label. The brand, which has been in existence since 1949, is most
commonly used in the preparation of salad dressings as well as in a variety of
recipe applications, including sauces, marinades, and soups. Regina's premium
packaging, reputation and product quality have allowed it to maintain its number
one position nationally and command premium pricing while outselling
competitors.
Wright's Liquid Smoke
The Company manufactures and distributes Wright's, a leading brand of
liquid smoke. Wright's liquid smoke is an all-natural hickory seasoning that
reproduces the flavor and aroma of hickory pit smoking in meats, chicken and
fish. Wright's is manufactured by a patented process and has one primary
national competitor. Since acquiring Wright's, the Company has sought to
increase the brand's marketing by adding recipes and incentives on package and
display shippers. Wright's liquid smoke is also used by commercial processors to
smoke hams, bacon, sausage and barbeque sauces.
Brer Rabbit Molasses
The Company markets and distributes molasses under its Brer Rabbit label,
which enjoys significant national market share. Brer Rabbit molasses is
typically used in baking, barbeque sauces and as a breakfast syrup. The Brer
Rabbit product comes in mild and full varieties. The mild molasses is designed
for table use as well as cooking, while the full flavor molasses has a stronger
flavor and is used primarily for cooking.
Vermont Maid Syrup
Vermont Maid was a regional brand of maple-flavored syrup in the Boston
area market when it was acquired by the Company in 1997. The Company has
reformulated the brand into a thicker, richer formula and contemporized its look
by introducing more appealing packaging. Vermont Maid syrup is available in two
flavors, regular and lite. The Company is attempting to increase the national
distribution of Vermont Maid syrup.
Maple Grove Products
The Company manufactures, markets and distributes pure maple syrup under
the Maple Grove Farms of Vermont label ("Maple Grove"). The Company's pure maple
syrup is processed and bottled at the Company's facility in St. Johnsbury,
Vermont. The Company also manufactures, markets and distributes a line of
gourmet salad dressings, marinades, fruit syrups, and confections and markets
and distributes pancake mixes under the Maple Grove label.
Hot Sauces
The Company manufactures, markets and distributes a variety of hot sauces
under the brand names Trappey's, Red Devil, Bull's and Louisiana Hot Sauce. The
Company processes its
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hot sauces in its plants in Louisiana. The market for hot sauces is very
competitive and the Company faces competition from a number of national,
regional and local competitors.
Polaner Fruit Spreads, Preserves and Wet Spices
The Company manufactures, markets and distributes the Polaner brand, which
is comprised of a broad array of fruit-based spreads as well as packed wet
spices such as bottled chopped garlic and basil. Polaner All-Fruit is the
leading national brand of fruit-juice sweetened fruit spread. The Polaner
products are manufactured by the Company at its facilities in Roseland, New
Jersey. The Company believes that the brand can be grown through focused
marketing efforts and new product introductions.
B&M Baked Beans
B&M is the original brand of brick-oven baked beans, having been produced
since 1927. The B&M line includes a variety of baked beans, brown bread (a
dense, traditional New England bread baked in the can), and also the Friends
brand of baked beans. To further increase the brand's image, B&M has been
re-staged with a re-styled label and a re-formulated recipe.
Underwood Meat Spreads
The Underwood brand markets meat spreads of several types, including
deviled ham, chicken and roast beef. Management believes that Underwood products
are unique because of their spreadable consistency, with no competitors offering
directly comparable products. Liver pate and sardines are also marketed under
the Underwood label. Granted in 1870, "Underwood Devil" is the oldest registered
food trademark in the U.S.
Ac'cent / Sa-son Flavor Enhancer
Ac'cent was introduced in 1947 as a flavor enhancer for meat preparation.
The product is an all-natural flavor enhancer primarily used on beef, poultry,
fish and vegetables. The brand is regionally strongest on the East Coast and is
marketed in the United States under the Ac'cent and the Ac'cent/Sa-son labels.
Las Palmas Sauces and Food Products
Las Palmas, started in 1923, is a leading provider of enchilada sauce in
the authentic Mexican foods segment. Besides enchilada sauce, the Las Palmas
brand is used in other canned products, including jalapenos, green chilies and
crushed tomatillo.
Joan of Arc Bean Products
The Joan of Arc label is used in a full range of dry canned beans packed in
salt water. The best selling products under this label are kidney and chili
beans.
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III. Co-Packing
The Company manufactures and packages food products for third parties under
other brand names, an industry practice commonly known as "co-packing." During
fiscal 1998, fiscal 1997 and prior to the Polaner Acquisition in 1999, the
Company had two co-packing contracts with IHF pursuant to which the Company
manufactured for IHF the Polaner lines of fruit spreads, preserves and wet
spices. In addition, the Company had a third contract with IHF under which the
Company distributed the Polaner lines of fruit spreads, preserves and wet spices
in the New York metropolitan area. The IHF contracts, in the aggregate,
accounted for $36.9 million and $46.2 million, or 20.5% and 30.5%, of the
Company's net sales for fiscal 1998 and fiscal 1997, respectively. These
contracts were terminated upon completion of the Polaner Acquisition.
IV. Distribution & Marketing
The Company uses several methods to distribute its products on a regional
and national basis. The Company distributes its products in the greater New York
metropolitan area primarily through its direct-store-organization ("DSO") sales
and distribution system. The Company distributes its products nationally through
direct sales to supermarket chains, specialty food distributors and direct sales
to mass merchants and warehouse clubs.
The Company's DSO sales and distribution system supports an organization of
sales personnel who directly service individual grocery stores with the
Company's products. The DSO system relies on account managers to work with
buyers at the grocery chain's headquarters level, introducing new products and
organizing promotional support for existing product lines, as well as sales
personnel to operate at the store level by calling on store and grocery
department managers on a weekly basis, writing orders for products, positioning
new products and selling product displays to support promotional activity.
Products are delivered directly to stores by a fleet of trucks operated by
independent owners/operators.
Products sold nationally to supermarket chains and food service outlets are
generally distributed through brokers or distributors. National and regional
food brokers sell the entire portfolio of the Company's products. Broker sales
efforts are coordinated by B&G regional sales managers, who supervise brokers'
activities with buyers or distributors and brokers' retail coverage of the
products at the store level.
Marketing support for the products distributed through the DSO system
consists primarily of trade promotions aimed at gaining display activity to
produce impulse sales. Trade advertising and coupons supplement this activity. A
variety of in-store support vehicles such as hang tags, racks, signs and shipper
displays are used by the individual sales personnel to highlight the Company's
products. Marketing support on a national basis typically consists of scheduled
trade promotions, targeted coupons and cross-promotions with supporting
products. Initially, advertising generally has consisted of magazine and trade
advertisements, to be supplemented at a later date with television advertising
for selected brands.
The Company did not export a significant amount of any of its products
during the 1999 or 1998 fiscal year.
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V. Competition
The food products business is highly competitive. The Company competes with
other producers of its products on the basis of price, convenience, quality and
product development expertise. The Company operates in markets that are highly
competitive, and the Company faces competition in each of its product lines. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies. Many of these
competitors have multiple product lines and may have substantially greater
financial and other resources.
During the 1999 fiscal year, the Company's most significant competitors for
its Pickles & Peppers were Vlasic and Mt. Olive branded products. In addition,
J.M. Smucker was and continues to be the main competitor of the Company's fruit
spread products marketed under the Polaner label. The Maple Grove Farms of
Vermont line of syrups and salad dressings compete directly with the Camp brand
in the pure maple syrup category but, along with the Company's Vermont Maid
syrup products, also have a number of competitors in the general pancake syrup
market, such as Aunt Jemima, Mrs. Buttersworth and Log Cabin. The B&M Baked Bean
products compete with Bush's products. The Company's bagel chips were and
continue to be the national market leader and have no one direct competitor.
In addition, the Company's products compete not only against other brands
in their product category, but also against products in similarly related
product categories. For example, the Company's shelf-stable pickles compete not
only with other brands of shelf-stable pickles, but also those found in the
refrigerated sections of grocery stores. Likewise, the bagel chips manufactured
and distributed by the Company compete not only with other brands of bagel
chips, but also with other kinds of baked snacks and snacks in general.
VI. Customers and Seasonality
Other than IHF, none of the Company's customers accounted for more than 10%
of its net sales in fiscal 1998 or fiscal 1997 and no one customer accounted for
more than 10% of net sales in fiscal 1999. The IHF contracts, in the aggregate,
accounted for $36.9 million and $46.2 million, or 20.5% and 30.5%, of the
Company's net sales for fiscal 1998 and fiscal 1997, respectively.
Sales of a number of the Company's products tend to be seasonal; however,
in the aggregate, the Company's sales are not heavily weighted to any particular
quarter.
The Company purchases most of the produce used to make its Pickles &
Peppers during the period from July 1 to October 31, and it purchases all of its
maple syrup requirements during the months of April through July. Consequently,
its liquidity needs are greatest during these periods.
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VII. Inflation
The Company does not believe that its operating results have been
materially affected by inflation during the preceding three years. There can be
no assurance, however, that the Company's operating results will not be affected
by inflation in the future.
VIII. Production
The Company purchases agricultural products and other raw materials from
growers, commodity processors and other food companies. The Company's principal
raw materials include peppers, cucumbers, vegetables, maple syrup, meat, flour,
vegetable oils, fruit concentrate and strawberries and other fruits. The Company
purchases its agricultural raw materials in bulk, from a variety of suppliers,
on an as-needed basis or pursuant to short-term supply contracts. Approximately
75% of B&G's pickle and pepper agricultural products come from sources near its
manufacturing facilities in order to minimize the high transportation costs
associated with transporting these products.
The Company currently has agreements for manufacture by third parties of
its Regina, Las Palmas, Underwood, Joan of Arc and Vermont Maid products. These
co-packing arrangements require the Company to pay a fixed price per unit of the
co-packed product, with prices subject to annual adjustments. The Company
believes that there are alternative sources of co-packing production readily
available for its products.
IX. Trademarks and Patents
The Company owns numerous trademarks which are registered in the United
States and abroad, including without limitation in Canada, Mexico, the United
Kingdom, Puerto Rico, the Dominican Republic, Japan, South Korea, the
Philippines and Thailand. As of December 31, 1999, the Company's trademarks
included B&G, Bloch & Guggenheimer, Bagel ChipMix, Brer Rabbit, Burns & Ricker,
New York Style, Regina, San-Del, Sandwich Toppers, Vermont Maid, Wright's, Joan
of Arc, B&M, Friend's, Las Palmas, Ac'cent and Underwood.
The Company considers its trademarks to be of significant importance to the
Company's business. The Company is not aware of any circumstances that would
have a material adverse effect on the Company's ability to use its trademarks.
X. Governmental Regulation
The operations of the Company are subject to extensive regulation by the
United States Food and Drug Administration ("FDA"), the United States Department
of Agriculture and other state and local authorities regarding the processing,
packaging, storage, distribution and labeling of the Company's products. The
Company's processing facilities and products are subject to periodic inspection
by federal, state and local authorities. The Company believes that it is
currently in substantial compliance with all material governmental laws and
regulations and maintains all material permits and licenses relating to its
operations. Nevertheless, there can be no assurance that the Company is in full
compliance with all such laws and regulations or that it will be able to comply
with any future laws and regulations in a cost-effective manner. Failure by the
Company to comply with applicable laws and regulations could subject it to civil
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remedies, including fines, injunctions, recalls or seizures, as well as
potential criminal sanctions, which could have a material adverse effect on the
business, financial condition or results of operation of the Company.
The Company also is subject to the Food, Drug and Cosmetic Act and the
regulations promulgated thereunder by the FDA. This comprehensive regulatory
program governs, among other things, the manufacturing, composition and
ingredients, labeling, packaging and safety of food. For example, the FDA
regulates manufacturing practices for foods through its current "good
manufacturing practices" regulations and specifies the recipes for certain
foods. In addition, the Nutrition Labeling and Education Act of 1990 prescribes
the format and content of certain information required to appear on the labels
of food products. The Company is subject to regulation by certain other
governmental agencies, including the U.S. Department of Agriculture. Management
believes that the Company's facilities and practices are sufficient to maintain
compliance with applicable governmental regulations, although there can be no
assurances in this regard.
XI. Environmental Matters
The Company has not made any material expenditures during the last three
fiscal years in order to comply with environmental laws or regulations. Based on
the Company's experience to date, the Company believes that the future cost of
compliance with existing environmental laws and regulations (and liability for
known environmental conditions) will not have a material adverse effect on the
Company's business, financial condition or results of operations. However, the
Company cannot predict what environmental or health and safety legislation or
regulations will be enacted in the future or how existing or future laws or
regulations will be enforced, administered or interpreted, nor can it predict
the amount of future expenditures that may be required in order to comply with
such environmental or health and safety laws or regulations or to respond to
such environmental claims.
XII. Employees
As of January 31, 2000, B&G's workforce consisted of 737 employees. Of that
total, 480 employees were engaged in manufacturing, 107 were engaged in
marketing and sales, 114 were engaged in distribution and 36 were engaged in
administration. Approximately 201 of the Company's 737 employees, as of January
31, 2000, were covered by a collective bargaining agreement. In general, the
Company considers its employee and union relations to be good and has not
experienced any work stoppages in over 30 years.
ITEM 2. PROPERTIES
The Company's plants are generally located near major customer markets and
raw materials. Management believes that the Company's manufacturing plants have
sufficient capacity to accommodate B&G's planned growth. As of February 29,
2000, the Company operated the manufacturing and warehouse facilities described
in the table below.
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Facility Location Description Approximate
Sq. Ft.
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Parsippany, NJ Headquarters 21,000
Hurlock, MD* Manufacturing/Warehouse 236,000
Portland, ME* Manufacturing/Warehouse 220,000
New Iberia, LA* Manufacturing/Warehouse 158,000
South Brunswick, NJ Manufacturing/Warehouse 144,000
Roseland, NJ Manufacturing/Warehouse 124,000
St. Johnsbury, VT* Manufacturing/Warehouse 92,000
La Vergne, TN Distribution Center 170,000
Houston, TX Warehouse 104,000
Hurlock, MD* Warehouse 80,000
Hurlock, MD Warehouse 66,000
Hurlock, MD Warehouse 35,000
St. Evariste, Quebec* Storage Facility 60,000
Sharptown, MD* Storage facility 3,000
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*Owned.
ITEM 3. LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is involved in various
legal proceedings. The Company does not believe the outcome of these proceedings
will have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal 1999, no matters were submitted to a vote of stockholders
through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Not applicable.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
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Jan. 1, Jan. 2, Jan. 3, Dec. 28, Dec. 30,
2000 1999 1998 1996 1995
(Successor) (Successor) (Successor) (Predecessor) (Predecessor)
---------------
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(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data (1):
Net sales........................ $ 336,112 $ 179,780 $ 151,615 $ 129,307 $ 112,245
Cost of goods sold............... 180,062 108,186 98,950 91,187 79,293
Gross profit................. 156,050 71,594 52,665 38,120 32,952
Sales, marketing and distribution
expenses..................... 107,242 49,430 36,884 28,414 23,863
General and administrative expenses
13,802 5,725 4,688 2,941 2,598
Management fees.................. 450 250 250 1,249 1,097
Operating income............. 34,556 16,189 10,843 5,516 5,394
Interest expense................. 29,874 13,908 9,578 4,649 3,780
Income before income tax
....expense and extraordinary
item...................... 4,682 2,281 1,265 867 1,614
Income tax expense (2)........... 2,429 1,431 833 591 896
Income before extraordinary
item...................... 2,253 850 432 276 718
Extraordinary item, net of income
tax benefit (3).............. -- -- (1,804) -- --
Net income (loss)............ $ 2,253 $ 850 $ (1,372) $ 276 $ 718
Balance Sheet Data (at period end) (1):
Total assets................. $ 477,057 $ 211,873 $ 180,035 $ 103,412 $ 82,012
Long-term debt, including
current portion........... 340,892 144,696 121,376 53,513 30,163
Total stockholder's equity... 58,073 20,820 18,628 12,500 29,979
Other Financial Data (1):
EBITDA (4)................... $ 49,704 $ 23,372 $ 16,263 $ 9,621 $ 8,905
======================================
</TABLE>
(1) The B&G and B&R Acquisition, the Nabisco Brands Acquisition, the Trappey's
Acquisition, the Maple Grove Acquisition, the Polaner Acquisition and the
Heritage Brands Acquisition were consummated on December 27, 1996, June 17,
1997, August 15, 1997, July 17, 1998, February 5, 1999 and March 15, 1999,
respectively, and were accounted for using the purchase method of
accounting. The selected financial data set forth above as of January 3,
1998, January 2, 1999 and January 1, 2000 (the "Successor") is presented on
a consolidated basis. The selected financial data set forth above as of all
periods ending on or prior to December 28, 1996 (the "Predecessor") is
presented on a combined basis because the Predecessor companies were under
common control. As a result of these acquisitions, the selected financial
data subsequent to the acquisitions is presented on a different cost basis
and uses certain different accounting policies than the selected financial
data prior to the acquisitions and, therefore, is not comparable. Further,
related party transactions affect the comparability of the selected
financial data. Additionally, the comparability of the data presented above
is affected by the acquisition by the Predecessor of the New York Style
brand in September 1995, which was accounted for using the purchase method
of accounting.
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(2) The Company was part of the consolidated federal income tax returns of its
parent from August 1993 through December 27, 1996. Income tax expense has
been computed as if the Company filed a separate federal income tax return
for each period presented.
(3) Reflects the write-off of deferred debt issuance costs in connection with
the debt repayments and amendments relating to the Company's prior credit
facility.
(4) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and extraordinary item and is presented because it is commonly
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance and to determine a company's ability to
service and incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure of
profitability or liquidity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The B&G and B&R Acquisition, the Nabisco Brands Acquisition, the Trappey's
Acquisition, the Maple Grove Acquisition, the Polaner Acquisition and the
Heritage Brands Acquisition were consummated on December 27, 1996, June 17,
1997, August 15, 1997, July 17, 1998, February 5, 1999 and March 15, 1999,
respectively. The above acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the results of operations of the acquired
companies are included in the Company's operating results from the dates of
acquisition. Operating results for the years ended January 1, 2000, January 2,
1999 and January 3, 1998 are presented on a consolidated basis. Such
acquisitions and the application of the purchase method of accounting affect
comparability between periods.
I. Year Ended January 1, 2000 Compared to Year Ended January 2, 1999
A. Net Sales
Net sales increased $156.3 million or 87.0% to $336.1 million for the 52
week period ended January 1, 2000 (the "1999 Period") from $179.8 million for
the 52 week period ended January 2, 1999 (the "1998 Period"). The net sales
increase included $152.9 million in the aggregate of incremental sales due to
the Maple Grove Acquisition, the Polaner Acquisition and the Heritage Brands
Acquisition that did not exist in the prior year before these acquisitions.
Sales of Regina, B&G retail Pickles & Peppers, Burns & Ricker Baked Snack Foods
and Trappey's products increased $2.3 million, $1.2 million, $0.7 million and
$0.6 million, or 17.9%, 3.7%, 2.8% and 3.7%, respectively, from the 1998 Period,
largely reflecting a higher unit volume of retail products sales. These sales
increases were partially offset by a decrease in sales of $1.5 million or 6.9%
of B&G food service sales due to a shortfall in sales to a national sandwich
chain. All other brands increased $0.1 million or 1.2%.
B. Gross Profit
Gross profit increased $84.5 million or 118.0% to $156.1 million for the
1999 Period from $71.6 million in the 1998 Period. Gross profit expressed as a
percentage of net sales increased to 46.4% in the 1999 Period from 39.8% in the
1998 Period. This was due to a favorable shift in the sales mix to higher gross
profit margins from sales of its Polaner and
11
<PAGE>
Heritage Portfolio of Brands products, along with reduced labor and overhead
costs at the Burns & Ricker Baked Snack Foods manufacturing facility.
C. Sales, Marketing and Distribution Expenses
Sales, marketing and distribution expenses increased $57.8 million or
117.0% to $107.2 million for the 1999 Period from $49.4 million for the 1998
Period. Such expenses as a percentage of net sales increased to 31.9% in the
1999 Period from 27.5% in the 1998 Period primarily as a result of the Maple
Grove Acquisition, the Polaner Acquisition and the Heritage Brands Acquisition.
These acquisitions accounted for $55.0 million of the increase. In addition,
promotional spending for B&G Pickles & Peppers, Burns & Ricker Baked Snack
Foods, and Regina brand products increased by $3.8 million in the aggregate and
$0.5 for all other brands. All other sales and marketing spending increased $0.3
million, while overall distribution costs decreased by $1.8 million.
D. General and Administrative Expenses
General and administrative expenses (including amortization of intangibles
and management fees) increased $8.3 million or 138.5% to $14.3 million in the
1999 Period from $6.0 million in the 1998 Period, primarily due to increased
operating expenses of $2.3 million and amortization of intangibles of $6.0
million associated with the Maple Grove Acquisition, the Polaner Acquisition and
the Heritage Brands Acquisition.
E. Operating Income
As a result of the foregoing, operating income increased $18.4 million or
113.5% to $34.6 million in the 1999 Period from $16.2 million in the 1998
Period. Operating income expressed as a percentage of net sales increased to
10.3% in the 1999 Period from 9.0% in the 1998 Period.
F. Interest Expense
Interest expense increased $16.0 million to $29.9 million in the 1999
Period from $13.9 million in the 1998 Period as a result of the additional debt
incurred by the Company to fund the Maple Grove Acquisition, the Polaner
Acquisition and the Heritage Brands Acquisition.
G. Income Tax Expense
Income tax expense increased $1.0 million to $2.4 million in the 1999
Period from $1.4 million in the 1998 Period. The Company's effective tax rate
for the 1999 Period was 51.9% as compared with 62.7% for the 1998 Period.
Because of the highly leveraged status of the Company, EBITDA is an
important performance measure used by the Company and its stockholders. The
Company believes that EBITDA provides additional information for determining its
ability to meet future debt service requirements. However, EBITDA is not
indicative of operating income or cash flow from operations as determined under
generally accepted accounting principles. The Company's
12
<PAGE>
EBITDA from continuing operations for the 1999 Period and the 1998 Period is
calculated as follows (dollars in thousands):
1999 Period 1998 Period
----------- -----------
Net income $ 2,253 $ 850
Depreciation and amortization 15,148 7,183
Income tax expense 2,429 1,431
Interest expense 29,874 13,908
----------- -----------
EBITDA $ 49,704 $ 23,372
=========== ===========
II. Year Ended January 2, 1999 Compared to Year Ended January 3, 1998
A. Net Sales
Net sales increased $28.2 million or 18.6% to $179.8 million for the 1998
Period from $151.6 million for the 53 week period ended January 3, 1998 (the
"1997 Period"). The net sales increase included increases of $19.4 million for
Maple Grove, $10.3 million for the Nabisco Brands and $10.2 million for
Trappey's. Sales of B&G Pickles & Peppers products increased $0.9 million or
1.7% from the 1997 Period, largely reflecting a higher unit volume of food
service products sales. These sales increases were partially offset by a
decrease of $9.3 million or 20.1% in sales of co-packed Polaner products to IHF
and sales of Polaner products distributed by the Company in the northeastern
U.S., and a decrease in sales of $3.3 million or 11.2% of Burns & Ricker Baked
Snack Foods products, due primarily to a decline in sales to the deli
departments of grocery stores.
B. Gross Profit
Gross profit increased $18.9 million or 35.9% to $71.6 million for the 1998
Period from $52.7 million in the 1997 Period. Gross profit expressed as a
percentage of net sales increased to 39.8% in the 1998 Period from 34.7% in the
1997 Period. This was due to a favorable shift in the sales mix to higher gross
profit margin B&G Pickles & Peppers product sales and from lower gross profit
margin Polaner co-packing sales. The co-packing services provided under the IHF
contracts are on a significantly lower profit margin level than the Company's
base businesses.
C. Sales, Marketing and Distribution Expenses
Sales, marketing and distribution expenses increased $12.5 million or 34.0%
to $49.4 million for the 1998 Period from $36.9 million for the 1997 Period.
Such expenses as a percentage of net sales increased to 27.5% in the 1998 Period
from 24.3% in the 1997 Period due primarily to the Maple Grove Acquisition,
Nabisco Brands Acquisition and Trappey's Acquisition. These brands accounted for
$10.8 million of the increase. In addition, promotional spending increased by
$1.2 million on B&G Pickles & Peppers products and $0.7 million on
13
<PAGE>
Burns & Ricker Baked Snack Foods products, which was offset by a decrease in
promotional spending of $1.2 million for the Polaner brands. All other sales and
marketing expenses increased $0.2 million and overall distribution costs
increased $0.8 million.
D. General and Administrative Expenses
General and administrative expenses (including amortization of intangibles
and management fees) increased $1.0 million or 21.0% to $6.0 million in the 1998
Period from $4.9 million in the 1997 Period, primarily due to increased
operating expenses of $0.1 million and amortization of intangibles of $0.9
million associated with the Maple Grove Acquisition, Nabisco Brands Acquisition
and Trappey's Acquisition.
E. Operating Income
As a result of the foregoing, operating income increased $5.3 million or
49.3% to $16.2 million in the 1998 Period from $10.8 million in the 1997 Period.
Operating income expressed as a percentage of net sales increased to 9.0% in the
1998 Period from 7.2% in the 1997 Period.
F. Interest Expense
Interest expense increased $4.3 million to $13.9 million in the 1998 Period
from $9.6 million in the 1997 Period as a result of the additional debt incurred
by the Company to fund the Maple Grove Acquisition.
G. Income Tax Expense
Income tax expense for the 1998 Period was $1.4 million as compared with
$0.8 million in the 1997 Period. The Company's effective tax rate for the 1998
Period was 62.7% as compared with 65.8% in the 1997 Period.
Because of the highly leveraged status of the Company, EBITDA is an
important performance measure used by the Company and its stockholders. The
Company believes that EBITDA provides additional information for determining its
ability to meet future debt service requirements. However, EBITDA is not
indicative of operating income or cash flow from operations as determined under
generally accepted accounting principles. The Company's EBITDA from continuing
operations for the 1998 Period and the 1997 Period is calculated as follows
(dollars in thousands):
14
<PAGE>
1998 Period 1997 Period
----------- -----------
Net income (loss) $ 850 $ (1,372)
Depreciation and amortization 7,183 5,420
Income tax expense 1,431 833
Interest expense 13,908 9,578
----------- -----------
EBITDA $ 23,372 $ 14,459
=========== ===========
III. Liquidity and Capital Resources
Cash Flows
Cash provided by operations decreased $0.4 million or 2.8% to $13.2 million
in the 1999 Period from $13.6 million in the 1998 Period. This decrease is
primarily due to an increase in accounts receivable and inventory offset by an
increase in net income, trade accounts payable and accrued expenses. Working
capital at January 1, 2000 was $59.4 million, an increase of $28.8 million over
working capital at January 2, 1999 of $30.6 million. Cash provided by operations
increased $10.2 million or 305.1% to $13.6 million in the 1998 Period from $3.4
million in the 1997 Period. This increase is primarily due to improved working
capital management and an increase in net income. Working capital at January 2,
1999 was $30.6 million, an increase of $9.0 million over working capital at
January 3, 1998 of $21.6 million.
Net cash used in investing activities for the 1999 Period was $230.2
million as compared to $37.6 million for the 1998 Period. Investment
expenditures during the 1999 Period included $30.6 million for the Polaner
Acquisition and $194.1 million for the Heritage Brands Acquisition, while
investment expenditures during the 1998 Period consisted primarily of $34.1
million for the Maple Grove Acquisition. Capital expenditures during the 1999
Period of $5.5 million included purchases of manufacturing and computer
equipment. Net cash used in investing activities for the 1998 Period was $37.6
million as compared to $70.9 million for the 1997 Period. Investment
expenditures during the 1997 Period consisted of a final $4.0 million payment to
Specialty Foods for the B&G and B&R Acquisition and an aggregate expenditure of
$63.0 million for the Nabisco Brands Acquisition and Trappey's Acquisition.
Capital expenditures during the 1998 Period of $3.8 million included purchases
of manufacturing and computer equipment.
Net cash provided by financing activities for the 1999 Period was $224.1
million as compared to $23.9 million for the 1998 Period. The net cash provided
by financing activities for the 1999 Period was obtained primarily from proceeds
from the issuance of long-term debt and equity to finance the Polaner
Acquisition and the Heritage Brands Acquisition, while net cash provided by
financing activities for the 1998 Period was obtained primarily from the
issuance of long-term debt to finance the Maple Grove Acquisition. Net cash
provided by financing activities was $67.9 million in the 1997 Period. The net
cash provided by financing activities for
15
<PAGE>
the 1997 Period was obtained primarily from the issuance of long-term debt to
finance the Nabisco Brands Acquisition and the Trappey's Acquisition.
Acquisitions
The Company's liquidity and capital resources have been significantly
impacted by acquisitions and may be impacted in the foreseeable future by
additional acquisitions. The Company has historically financed acquisitions with
borrowings and cash flow from operations. The Company's future interest expense
will increase significantly from prior year levels as a result of additional
indebtedness the Company has incurred as a result of its recent acquisitions,
and any additional indebtedness the Company may incur to finance potential
future acquisitions, if any. To the extent future acquisitions, if any, are
financed by additional indebtedness, the resulting increase in debt and interest
expense could have a negative impact on liquidity.
IV. Future Capital Needs
The Company is highly leveraged. On January 1, 2000, the Company's total
debt and stockholder's equity was $340.9 million and $58.1 million,
respectively.
The Company's primary sources of capital are cash flows from operations and
borrowings under a $60 million revolving credit facility. The Company's primary
capital requirements include debt service, capital expenditures, working capital
needs and financing for acquisitions. The Company's ability to generate
sufficient cash to fund its operations depends generally on the results of its
operations and the availability of financing. Management believes that cash flow
from operations in conjunction with the available borrowing capacity under the
revolving credit facility, net of outstanding letters of credit, of
approximately $58.7 million at January 1, 2000, and possible future debt
financing will be sufficient for the foreseeable future to meet debt service
requirements, make future acquisitions, if any, and fund capital expenditures.
However, there can be no assurance in this regard or that the terms available
for any future financing, if required, would be favorable to the Company.
V. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting
for derivative instruments by requiring that an entity recognize derivatives as
assets or liabilities in the statement of financial position and measure them at
fair value. In June 1999, the Financial Accounting Standards Board issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Dates of FASB Statement No. 133 and Amendment of FASB Statement
No. 133." SFAS No. 137 defers the effective date of SFAS No. 133, requiring
implementation of the provisions of SFAS No. 133 for all quarters of all fiscal
years beginning after June 15, 2000. These Statements should have no material
impact on the Company's consolidated financial statements.
16
<PAGE>
VI. Year 2000
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits, rather than four, to define the applicable year.
Mistaking "00" for the year 1900 could result in miscalculations and errors and
cause significant business interruptions for the Company, as well as for the
government and most other companies.
As of February 29, 2000, the Company has not experienced any significant
business interruption related to the Y2K issue nor is it aware of any business
interruptions at any of its primary suppliers or customers. There can be no
assurance, however, that the Company will not be affected in the future by any
existing non-disclosed Y2K non-compliance of material third parties. In
addition, certain computer programs that are date sensitive may not process the
Year 2000 as a leap year and any negative consequential effects remain unknown.
As a result, the Company will continue to monitor its Year 2000 compliance and
the Year 2000 compliance of its suppliers and customers. Total Y2K costs were
not material to the Company's results of operations or financial condition.
V. Forward-Looking Statements
This report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Statements in
this report regarding future events or conditions, including statements
regarding industry prospects and the Company's expected financial position,
business and financing plans, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations are disclosed in this report,
and include the Company's substantial leverage, the risks associated with the
expansion of the Company's business, the possible inability of the Company to
integrate the businesses it has acquired, lower sales volumes for the Company's
products and higher costs of food product raw materials, as well as factors that
affect the food industry generally. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. The Company undertakes no obligations to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of operations, the Company is exposed to market risks
arising from adverse changes in interest rates. Market risk is defined for these
purposes as the potential change in the fair value resulting from an adverse
movement in interest rates. In connection with the Heritage Brands Acquisition,
the Company entered into a $280.0 million senior secured credit facility (the
"Senior Secured Credit Facility"). The Senior Secured Credit Facility comprised
of a $60.0 million five-year revolving credit facility, a $70.0 million
five-year term loan facility ("Term Loan A") and a $150.0 million seven-year
term loan facility ("Term Loan B" and together with Term Loan A, the "Term Loan
Facilities"). As of February 29, 2000, the
17
<PAGE>
Company's only variable rate borrowings were under the Term Loan Facilities that
bear interest at several alternative variable rates as stipulated in the Senior
Secured Credit Facility. A 100 basis point increase in interest rates, applied
to the Company's borrowings at February 29, 2000, would result in an annual
increase in interest expense and a corresponding reduction in cash-flow of
approximately $2.2 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets at January 1, 2000 and January 2, 1999 and
the consolidated statements of operations and cash flows for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998 and related notes thereto
are set forth below.
18
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholder
B&G Foods, Inc.:
We have audited the accompanying consolidated balance sheets of B&G Foods,
Inc. and its subsidiaries as of January 1, 2000 and January 2, 1999, and the
related consolidated statements of operations and cash flows for the years ended
January 1, 2000, January 2, 1999, and January 3, 1998. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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.
As further described in note 1, on February 5, 1999, the Company acquired
Polaner and related brands, and on March 15, 1999, the Company acquired The
Heritage Portfolio of Brands.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
B&G Foods, Inc. and its subsidiaries as of January 1, 2000 and January 2, 1999,
and the results of their operations and their cash flows for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Short Hills, New Jersey
February 22, 2000
19
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Assets Jan. 1, 2000 Jan. 2, 1999
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,745 599
Trade accounts receivable, less allowance for doubtful
accounts of $517 and $229 in 1999 and 1998, respectively 25,852 15,656
Inventories 71,913 39,764
Prepaid expenses 2,297 1,646
Deferred income taxes 5,063 2,938
------------ ------------
Total current assets 112,870 60,603
Property, plant and equipment, net 41,615 26,486
Intangible assets, net 312,143 119,542
Other assets 10,429 5,242
------------ ------------
Total assets $ 477,057 211,873
============ ============
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Current installments of long-term debt, including amounts
payable to related parties of $1,038 in 1998 11,552 1,431
Trade accounts payable 23,640 17,508
Accrued expenses 18,057 10,335
Due to related parties 208 705
------------ ------------
Total current liabilities 53,457 29,979
Long-term debt 329,340 143,265
Other liabilities 51 -
Deferred income taxes 36,136 17,809
------------ ------------
Total liabilities 418,984 191,053
------------ ------------
Stockholder's equity:
Common stock, $.01 par value per share. Authorized
1,000 shares; issued and outstanding 1 share in
1999 and 1998 - -
Additional paid-in capital 56,342 21,342
Retained earnings (accumulated deficit) 1,731 (522)
------------ ------------
Total stockholder's equity 58,073 20,820
------------ ------------
Commitments and contingencies (notes 6, 12 and 13)
Total liabilities and stockholder's equity $ 477,057 211,873
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------ ------ --------
<S> <C> <C> <C>
Net sales $ 336,112 179,780 151,615
Cost of goods sold 180,062 108,186 98,950
------------- ------- -------
Gross profit 156,050 71,594 52,665
Sales, marketing and distribution expenses 107,242 49,430 36,884
General and administrative expenses 13,802 5,725 4,688
Management fees - related parties 450 250 250
------------- ------- -------
Operating income 34,556 16,189 10,843
Other expense:
Interest expense - related parties 15 74 811
Interest expense 29,859 13,834 8,767
------------- ------- -------
Income before income tax expense
and extraordinary item 4,682 2,281 1,265
Income tax expense 2,429 1,431 833
------------- ------- -------
Income before extraordinary item 2,253 850 432
Extraordinary item, net of income tax benefit of
$1,138 - - (1,804)
------------- ------- --------
Net income (loss) $ 2,253 850 (1,372)
============= ======= ========
See accompanying notes to consolidated financial statements.
</TABLE>
21
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,253 850 (1,372)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 15,148 7,183 5,420
Amortization of deferred debt issuance costs 1,477 589 630
Deferred income tax expense (benefit) (268) 1,069 (310)
Extraordinary item - - 2,942
Provision for doubtful accounts 596 43 687
Changes in assets and liabilities, net of effects
from businesses acquired:
Trade accounts receivable ( 10,792) (587) (4,510)
Inventories ( 5,026) 5,491 (2,612)
Prepaid expenses and other current assets (651) 1,014 (1,286)
Other assets (53) 38 (46)
Trade accounts payable 6,132 1,068 953
Accrued expenses 4,851 (3,664) 3,142
Due to related parties (497) 508 197
Other liabilities 51 - (477)
--------- --------- --------
Net cash provided by operating activities 13,221 13,602 3,358
--------- --------- --------
Cash flows from investing activities:
Paid for Successor Acquisitions ( 224,700) (34,137) (63,019)
Paid for Acquired Companies - - (4,009)
Capital expenditures (5,500) (3,780) (4,022)
Proceeds from sales of property, plant and equipment - 351 162
--------- --------- --------
Net cash used in investing activities (230,200) (37,566) (70,888)
--------- --------- --------
(continued)
</TABLE>
22
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Year Year
ended Ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------ ------ -------
<S> <C> <C> <C>
Cash flows from financing activities:
Payments of long-term debt (24,264) (318) (68,453)
Proceeds from issuance of long-term debt 220,000 22,975 143,000
Proceeds from issuance of equity and capital
contributions 35,000 1,345 500
Payments of debt issuance costs (6,611) (127) (7,117)
---------- ---------- ---------
Net cash provided by financing
activities 224,125 23,872 67,930
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents 7,146 (92) 400
Cash and cash equivalents at beginning of period 599 691 291
---------- ---------- ---------
Cash and cash equivalents at end of period $ 7,745 599 691
========== ========== =========
Supplemental disclosure of cash flow information -
cash paid for:
Interest $ 26,093 13,290 4,261
========== ========== =========
Income taxes $ 2,179 146 209
========== ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
23
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 1, 2000 and January 2, 1999
(Dollars in thousands)
(1) Business Acquisitions and Nature of Operations
Organization, Acquisition and Financing
B&G Foods, Inc. was incorporated on November 13, 1996 to acquire (the "B&G
and B&R Acquisition") BGH Holdings, Inc., the holding company of Bloch &
Guggenheimer, Inc. and related companies, and BRH Holdings, Inc., the holding
company of Burns & Ricker, Inc., subsidiaries of Specialty Foods Corporation
("SFC"). B&G Foods, Inc. and its subsidiaries subsequent to the B&G and B&R
Acquisition are hereinafter referred to as the "Company". The B&G and B&R
Acquisition was structured as a stock purchase with an aggregate purchase price
of approximately $70,000, including transaction costs, and was consummated on
December 27, 1996. As part of the B&G and B&R Acquisition, SFC guaranteed the
Company's trade receivables at December 27, 1996. On December 27, 1996, the
Company issued one share of common stock to, and became a wholly-owned
subsidiary of, B&G Foods Holdings Corp. ("Holdings"), which in turn is majority
owned by Bruckmann, Rosser, Sherrill and Co., L.P. ("BRS"), a private equity
investment firm, and minority owned by management and certain other investors.
In addition to initial equity of $12,500, the financing of the B&G and B&R
Acquisition was provided by a $50,000 senior secured credit facility which
consisted of a revolving credit facility of $23,500 and term loan facilities A
and B of $14,500 and $12,000, respectively. Additionally, the Company issued
$13,000 of 12% Senior Subordinated Notes due 2004 to BRS and other certain
investors (the "BRS Note").
Nature of Operations
The Company operates in one industry segment, the manufacturing, marketing
and distribution of branded, shelf-stable food products. The Company's products
include pickles, peppers, jams and jellies, canned meats and beans, spices,
syrups, bagel chips, hot sauces, maple syrup, salad dressings and other
specialty food products which are sold to retailers and food service
establishments. The Company distributes these products to retailers in the
greater New York metropolitan area through a direct-store-organization sales and
distribution system and elsewhere in the United States through a nationwide
network of independent brokers and distributors. Sales of a number of the
Company's products tend to be seasonal; however, in the aggregate, the Company's
sales are not heavily weighted to any particular quarter.
24
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
Restructuring
As part of the 1996 B&G and B&R Acquisition, management authorized and
committed to a plan to undertake certain restructuring moves, principally
involving the consolidation of several warehouse and production facilities
resulting in restructuring accruals at December 28, 1996 of $1,536 as part of
the allocation of the purchase price. The restructuring consisted primarily of
approximately $952 of estimated lease and other tenancy costs through 1998, $228
in severance and termination benefits for approximately 100 warehouse and
production employees, and the remaining portion relating to charges resulting
from changes in the production process as part of the consolidation, which was
completed in June 1997. As of January 3, 1998, the restructuring reserve balance
was reduced to $656 as a result of cash expenditures of $880 relating primarily
to tenancy costs, severance payments, and charges resulting from changes in the
production process, which was completed in June 1997. In fiscal 1998, the
Company concluded its restructuring plan and, as of January 2, 1999, the
restructuring reserve balance was reduced to $0 as a result of cash expenditures
relating primarily to tenancy costs. During the year ended January 1, 2000, the
Company did not incur any incremental costs related to the restructuring.
Acquisitions and Accounting
On June 17, 1997, the Company acquired certain assets from Nabisco, Inc.
("Nabisco") for a purchase price of approximately $50,557, including transaction
costs (the "Nabisco Brands Acquisition"). Financing for this acquisition and
certain related transaction fees and expenses was provided by $35,000 of new
borrowings under an amended and restated senior secured credit facility, and
$17,000 of the proceeds from the issuance of $23,000 of 12% Senior Subordinated
Notes due December 16, 1997 (the "Interim Notes"), with $6,000 used to repay a
portion of the BRS Note.
On August 15, 1997, the Company acquired all of the outstanding capital stock of
JEM Brands, Inc. ("JEM"), a manufacturer of peppers and branded hot sauces, for
approximately $12,462, including transaction costs. Financing for this
acquisition and certain related transaction fees and expenses was provided by
the proceeds from the issuance of $120,000 Senior Subordinated Notes on August
11, 1997.
On July 2, 1998, BGH Holdings, Inc. (the "Buyer"), a subsidiary of the Company,
entered into a Stock Purchase Agreement by and among the Buyer, Maple Grove
Farms of Vermont, Inc., Up Country Naturals of Vermont, Inc. and Les Produits
Alimentaires Jacques et Fils, Inc. (collectively, "Maple Grove"), and William F.
Callahan and Ruth M. Callahan (collectively, the "Sellers"), pursuant to which
the Buyer would acquire all of the issued and outstanding capital stock of Maple
Grove (the "Maple Grove Acquisition") for aggregate consideration of $34,137,
consisting of $14,170 in cash, 1,000 shares of common stock of Holdings having
an aggregate value of $10, and 990 shares of the 13% Series A Cumulative
Preferred Stock of Holdings, having an initial aggregate liquidation preference
of $990, plus the assumption of $17,325 in
25
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
in debt which was paid at closing and transaction costs of $1,265. The closing
under the Stock Purchase Agreement occurred on July 17, 1998. Financing for this
acquisition and certain related transaction fees and expenses was provided by
borrowings from the Company's amended and restated senior secured credit
facility.
On February 5, 1999, the Company acquired certain assets of the Polaner and
related brands (collectively, "Polaner") from International Home Foods, Inc.
("IHF") for approximately $30,574, including transaction costs (the "Polaner
Acquisition"). Financing for the Polaner Acquisition and certain related
transaction fees and expenses was provided by borrowings from the Company's then
$50,000 senior secured credit facility.
On March 15, 1999, through a subsidiary, the Company acquired the assets of The
Heritage Portfolio of Brands ("Heritage") from The Pillsbury Company, Indivined
B.V. and IC Acquisition Corp. for approximately $194,126, including transaction
costs (the "Heritage Brands Acquisition"). In connection with this transaction,
the Company entered into a $280,000 senior secured credit facility (the "Senior
Secured Credit Facility"). The Senior Secured Credit Facility comprised of a
$60,000 five-year revolving credit facility (the "Revolving Credit Facility"), a
$70,000 five-year term loan facility ("Term Loan A") and a $150,000 seven-year
term loan facility ("Term Loan B" and collectively with Term Loan A, the "Term
Loan Facilities"). The borrowings under the Senior Secured Credit Facility,
together with an additional $35,000 of equity from BRS, were used to fund the
Heritage Brands Acquisition and refinance borrowings under the Company's then
existing $50,000 senior secured credit facility.
The acquisitions described above have been accounted for using the purchase
method and, accordingly, the assets acquired, liabilities assumed, and results
of operations are included in the consolidated financial statements from the
respective date of the acquisitions. The excess of the purchase price over the
fair value of identifiable net assets acquired, representing goodwill, is
included in intangible assets. Goodwill and trademarks resulting from the above
acquisitions are being amortized over 40 and 31-32 years, respectively.
The costs of the Maple Grove Acquisition as of January 2, 1999, and the costs of
the Polaner Acquisition and the Heritage Brands Acquisition as of January 1,
2000 have been allocated to tangible and intangible assets as follows:
Jan. 1, Jan. 2,
2000 1999
------ --------
Property, plant and equipment $ 15,100 2,908
Intangible assets - trademarks 128,600 12,970
Intangible assets - goodwill 72,318 8,985
Other assets, principally net current assets 25,152 13,862
Deferred income tax liabilities, net (16,470) (4,588)
----------- ---------
$ 224,700 34,137
=========== =========
26
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
Pro Forma Summary of Operations
The following unaudited pro forma summary of operations for the fiscal
years ended January 1, 2000 and January 2, 1999 presents the results of
operations of the Company as if the Maple Grove Acquisition, Polaner Acquisition
and Heritage Brands Acquisition had occurred as of the beginning of each of the
respective fiscal years in which each acquisition occurred. In addition to
including the results of operations of such acquisitions, the pro forma
information gives effect primarily to interest on additional borrowings and
changes in depreciation and amortization of intangible assets.
Year Year
ended ended
Jan. 1, Jan. 2,
2000 1999
------ ------
Net sales $ 362,101 347,938
Income before extraordinary item $ 4,664 8,754
=========== =======
The unaudited pro forma information presented above does not purport to be
indicative of the results that actually would have been attained if such
acquisitions, and related financing transactions had occurred at the beginning
of the years presented and is not intended to be a projection of future results.
(2) Summary of Significant Accounting Policies
(a) Fiscal Year and Basis of Presentation
The Company utilizes a 52-53 week fiscal year ending on the Saturday
closest to December 31. Fiscal years are designated in the consolidated
financial statements and notes by the calendar year in which the fiscal
year ends. Fiscal year 1997 contains 53 weeks. Fiscal year 1999 and
fiscal year 1998 contain 52 weeks.
The financial statements are presented on a consolidated basis. All
significant intercompany balances and transactions have been
eliminated.
(b) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, all highly
liquid debt instruments with original maturities of three months or
less are considered to be cash and cash equivalents.
27
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out and average cost methods.
(d) Property, Plant and Equipment
Property, plant, and equipment are stated at cost. Plant and equipment
under capital leases are stated at the present value of minimum lease
payments. Depreciation on plant and equipment is calculated using the
straight-line method over the estimated useful lives of the assets,
generally 12 to 20 years for buildings and improvements, 5 to 10 years
for machinery and equipment, and 3 to 5 years for office furniture and
vehicles. Plant and equipment held under capital leases and leasehold
improvements are amortized on a straight-line basis over the shorter of
the lease term or estimated useful life of the asset. Expenditures for
maintenance, repairs and minor replacements are charged to current
operations. Expenditures for major replacements and betterments are
capitalized.
(e) Intangible Assets
Intangible assets consist of goodwill and trademarks. Goodwill is
amortized on a straight-line basis over 40 years. Trademarks are
amortized on a straight-line basis over 20 to 40 years. The Company
assesses the recoverability of the intangible assets by determining
whether the amortization of the intangible assets over their remaining
lives can be recovered through undiscounted future operating cash
flows. The amount of impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting
the Company's average cost of funds. The assessment of the
recoverability of intangible assets will be impacted if estimated
future operating cash flows are not achieved.
(f) Deferred Debt Issuance Costs
Deferred debt issuance costs are amortized using the straight-line
method over the term of the related debt agreements and are classified
as other non-current assets. Amortization of deferred debt issuance
costs for fiscal years 1999, 1998 and 1997 was $1,477, $589 and $630,
respectively.
As a result of the debt repayments and amendments described in note 7,
during fiscal year 1997, the Company recorded an extraordinary charge
of $1,804, net of income tax benefit of $1,138, to write off deferred
debt issuance costs relating to its then existing senior secured credit
agreement and the Interim Notes.
28
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(g) Revenue Recognition
Revenues are recognized when products are shipped.
(h) Advertising Costs
Advertising costs are expensed as incurred. Advertising costs amounted
to approximately $2,641, $988 and $121 during the fiscal years 1999,
1998 and 1997, respectively.
(i) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities of the Company are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(j) Pension Plans
The Company has defined benefit pension plans covering substantially
all of its employees. The Company's funding policy is to contribute
annually the amount recommended by its actuaries.
(k) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses are reflected in the consolidated financial statements
at carrying value, which approximates fair value due to the short-term
nature of these instruments. The fair value on the $120,000 Senior
Subordinated Notes at January 1, 2000, based on quoted market prices,
was $108,000. The carrying value of the Company's remaining borrowings
approximates the fair value based on the current rates available to the
Company for similar instruments.
(l) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions relating to the
29
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
reporting of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". This statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less
costs to sell.
(n) Reclassifications
Certain amounts in the January 3, 1998 consolidated financial
statements have been reclassified to conform with the January 2, 1999
consolidated financial statement presentation.
(o) Statements of Cash Flows - Noncash Financing and Investing Activities
Capital lease obligations of $460, $469 and $122 were incurred during
fiscal years 1999, 1998 and 1997, respectively, when the Company
entered into leases for new machinery and equipment. As described in
note 7, on June 17, 1997, $7,000 of the BRS Note was contributed to
capital. Notes payable were issued in payment of rent owed to a related
party in the amounts of $194 and $194 during the fiscal years 1998 and
1997, respectively.
(3) Inventories
Inventories consists of the following:
Jan. 1, Jan. 2,
2000 1999
------ ------
Raw materials and packaging $ 19,319 10,337
Work in process 1,513 2,862
Finished goods 51,081 26,565
----------- --------
$ 71,913 39,764
=========== ========
30
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(4) Property, Plant and Equipment
Property, plant and equipment, net consists of the following:
Jan. 1, Jan. 2,
2000 1999
------- -------
Land $ 2,990 2,309
Buildings and improvements 13,524 8,359
Leasehold improvements 653 653
Machinery and equipment 31,432 17,111
Office furniture and vehicles 4,069 2,443
Leased property under capital leases 1,837 1,377
Construction in progress - 1,194
----------- --------
54,505 33,446
Less accumulated depreciation and
amortization
12,890 6,960
----------- --------
$ 41,615 26,486
========== ========
Plant and equipment includes amounts under capital leases as follows:
Jan. 1, Jan. 2,
2000 1999
------- -------
Machinery and equipment $ 591 591
Office furniture and vehicles 1,246 786
----------- --------
1,837 1,377
Less accumulated amortization 1,055 654
----------- --------
$ 782 723
=========== =======
Amortization of assets held under capital leases is included with depreciation
expense.
31
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(5) Intangible Assets
Intangible assets consists of the following:
Jan. 1, Jan. 2,
2000 1999
------- -------
Goodwill $ 130,192 57,874
Trademarks 195,874 67,274
----------- ---------
326,066 125,148
Less accumulated amortization 13,923 5,606
----------- ---------
$ 312,143 119,542
=========== =========
(6) Leases
The Company has several noncancelable operating leases, primarily for its
corporate headquarters, warehouses, transportation equipment and machinery.
These leases generally require the Company to pay all executory costs such as
maintenance, taxes and insurance.
Future minimum lease payments under noncancelable operating leases (with initial
or remaining lease terms in excess of one year) for the periods set forth below
are as follows:
Years ended December:
2000 $ 3,319
2001 3,190
2002 3,121
2003 2,480
2004 2,207
Thereafter 8,065
-----------
$ 22,382
===========
32
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(6) Continued
Future minimum capital lease payments (included in long-term debt) as of January
1, 2000 are as follows:
Years ended December 31:
2000 $ 365
2001 374
2002 163
Thereafter 118
-----------
Total minimum lease payments 1,020
Less amount representing interest (at 9% to 13%) 128
-----------
Present value of net minimum capital
lease payments 892
Less current installments of obligations under
capital leases 302
-----------
Obligations under capital leases, excluding
current installments (included in long-
term debt) $ 590
===========
Total rental expense was $2,275, $2,157 and $1,543 for the fiscal years 1999,
1998 and 1997, respectively.
The Company leases a manufacturing and warehouse facility from the Chairman of
the Board of Directors of the Company under an operating lease which expired in
April 1999 and was amended with a new expiration date of April 2009. Total rent
expense associated with this lease for the fiscal years 1999, 1998 and 1997 was
$639, $477 and $463, respectively.
33
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(7) Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Jan. 1, Jan. 2,
2000 1999
------- -------
<S> <C> <C>
Revolving credit facility $ - 22,975
Term Loan A with interest at 9.31% 70,000 -
Term Loan B with interest at 9.34% 150,000 -
9.625% Senior Subordinated Notes due
August 1, 2007 120,000 120,000
Obligations under capital leases with interest at 9%
to 13% collateralized by certain machinery,
equipment and vehicles 892 683
Unsecured notes payable to related party with various
interest rates ranging from 6.20% to 6.68%, due
April 1999 - 1,038
------- --------
Total long-term debt 340,892 144,696
Less current installments 11,552 1,431
------- -------
Long-term debt, excluding current
installments $ 329,340 143,265
========== =======
</TABLE>
In connection with the B&G and B&R Acquisition, the Company entered into a
$50,000 credit agreement which consisted of a $23,500 revolving credit facility,
term loan A of $14,500 and term loan B of $12,000. In connection with the
Nabisco Brands Acquisition on June 17, 1997, the credit agreement was amended
and restated to increase the Company's revolving credit facility by $1,500 and
increase term loan A and term loan B by $33,500 in the aggregate, with new
repayment terms beginning September 1997 on the term loans. Additionally, on
June 17, 1997, $6,000 of the BRS Note was repaid (plus accrued interest) and
$7,000 of the BRS Note was contributed to capital. In connection with the
issuance of the 9.625% $120,000 Senior Subordinated Notes on August 11, 1997
(described below), the term loans were repaid in full, and the credit agreement
was further amended and restated to provide for, among other things, a maximum
$50,000 revolving credit facility due August 31, 2002. In connection with the
Maple Grove Acquisition, a consent, waiver and first amendment to the $50,000
credit facility was entered into, which included, among other things, a
prospective change in certain financial covenants and a consent by the lender
regarding the purchase of Maple Grove. In connection with the Heritage Brands
Acquisition on March 15, 1999, the Company entered into the Senior
34
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(7) Continued
Secured Credit Facility (see note 1) and refinanced all borrowings under the
$50,000 credit facility.
Interest on the Senior Secured Credit Facility is determined based on several
alternative rates as stipulated in the Senior Secured Credit Facility, including
the base lending rate per annum plus an applicable margin or LIBOR plus an
applicable margin. The Senior Secured Credit Facility is secured by
substantially all of the Company's assets. The Senior Secured Credit Facility
also provides for mandatory prepayment requirements based on asset dispositions
and issuance of securities, as defined. The Senior Secured Credit Facility
contains covenants that will restrict, among other things, the ability of the
Company to incur additional indebtedness, pay dividends and create certain
liens. The Senior Secured Credit Facility also contains certain financial
covenants which, among other things, specify maximum capital expenditure limits,
a minimum fixed charge coverage ratio, a minimum total interest coverage ratio
and a maximum indebtedness to EBITDA ratio, each ratio as defined. Proceeds of
the Senior Secured Credit Facility are restricted to funding the Company's
working capital requirements, capital expenditures and acquisitions of companies
in the same line of business as the Company, subject to certain criteria. The
Senior Secured Credit Facility limits acquisitions to $20,000 in fiscal 1999,
$30,000 in fiscal 2000 and $40,000 thereafter.
The Revolving Credit Facility requires an annual commitment fee of an amount
equal to 0.50% of the average daily unused portion of the Revolving Credit
Facility. The Revolving Credit Facility also provides a maximum commitment for
letters of credit of $5,000. At January 1, 2000 and January 2, 1999, letters of
credit of approximately $1,267 and $593, respectively, have been issued under
the Revolving Credit Facility.
On May 12, 1999, the Company entered into a two-year interest rate cap agreement
with a notional amount of $50,000 in order to reduce the exposure of changes in
interest rates on the Senior Secured Credit Facility. The interest rate cap
agreement consists of a cap rate of 11.25%. The cost of the interest rate cap
agreement was $70, which is recorded in deferred financing fees (other assets)
in the accompanying consolidated balance sheets at January 1, 2000 and is being
amortized over the life of the Senior Secured Credit Facility. The fair value of
the agreement at January 1, 2000 is not materially different than the carrying
amount. Borrowings under the Revolving Credit Facility are not limited by
percentages of underlying assets.
On August 11, 1997, the Company issued $120,000 of 9.625% Senior Subordinated
Notes (the "Notes") due August 1, 2007 with interest payable semiannually on
February 1 and August 1 of each year, commencing February 1, 1998. The proceeds
of the Notes were used to repay the outstanding balances together with accrued
and unpaid interest with respect to the term loans under the then existing
$50,000 credit facility and the Interim Notes, to finance the Trappey's
Acquisition, to pay certain related fees and expenses, and for general corporate
purposes. The
35
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(7) Continued
indenture for the Notes contains certain covenants that, among other things,
limit the ability of the Company to incur additional debt, issue preferred
stock, pay dividends or make certain other restricted payments, enter into
transactions with affiliates, make certain asset dispositions, merge or
consolidate with, or transfer substantially all of its assets to, another
person, as defined, encumber assets under certain circumstances, restrict
dividends and other payments from subsidiaries, engage in sale and leaseback
transactions, issue capital stock, as defined, or engage in certain business
activities.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after August 1, 2002 at 104.813% of their principal amount plus
accrued and unpaid interest and Liquidated Damages, as defined, if any,
beginning August 1, 2002, and thereafter at prices declining annually to 100% on
or after August 1, 2005. In addition, at any time prior to August 1, 2000, the
Company may, at its discretion, redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption price equal to 109.625% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, as defined, if any, to the date of redemption, with the net proceeds of
one or more Public Equity Offering, as defined; provided that at least 65% of
the original aggregate principal amount of the Notes remains outstanding
immediately after each redemption. Upon the occurrence of a Change in Control,
as defined, the Company will have the option, at any time on or prior to August
1, 2002, to redeem the Notes, in whole but not in part, at a redemption price
equal to 100% of the principal amount plus the Applicable Premium, as defined,
plus accrued and unpaid interest and Liquidated Damages, as defined, if any, to
the date of redemption, and if the Company does not so redeem the Notes or if
such Change in Control, as defined, occurs after August 1, 2002, the Company
will be required to make an offer to repurchase the Notes at a price equal to
101% of the principal amount, together with accrued and unpaid interest and
Liquidated Damages, as defined, if any, to the date of repurchase. The Notes are
not subject to any sinking fund requirements.
B&G Foods, Inc. has no assets or operations independent of its subsidiaries. All
of B&G Foods, Inc's. subsidiaries (the "Guarantors") are wholly-owned, and all
of B&G Foods, Inc's. subsidiaries jointly and severally, and fully and
unconditionally, guarantee the Notes (the "Subsidiary Guarantees").
Consequently, separate financial statements have not been presented for the
guarantor subsidiaries because management has determined that they would not be
material to investors. The Subsidiary Guarantee of each Guarantor is subordinate
to the prior payment in full of all Senior Debt, as defined. As of January 1,
2000, B&G Foods, Inc. and its subsidiaries had Senior Debt and additional
liabilities (including trade payables, accrued expenses, amounts due to related
parties, deferred income taxes and other liabilities) aggregating approximately
$79.0 million.
As part of the registration rights agreement dated August 11, 1997 entered into
with the initial purchasers of the Notes, the Company agreed to offer to
exchange an aggregate principal amount
36
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(7) Continued
of up to $120,000 of its 9.625% Senior Subordinated Notes due 2007 (the "New
Notes") for a like principal amount of the Notes outstanding (the "Exchange
Offer").
The terms of the New Notes are identical in all material respects to those of
the Notes (including principal amount, interest rate, maturity and guarantees),
except for certain transfer restrictions and registration rights relating to the
Notes. The Exchange Offer was completed on February 6, 1998.
As described in note 6, the Company leases a manufacturing and warehouse
facility from the Chairman of the Board of the Company. Under the original lease
which expired April 1, 1999, the Company paid $44 per month in rent in cash and,
pursuant to a Memorandum of Agreement, an additional amount in the form of
unsecured notes payable, which are issued in an aggregate principal amount of
$188. The Company's liability under the issued unsecured notes as of January 2,
1999 was $1,038. The notes were paid in full in April 1999, the date of the
lease expiration.
At January 1, 2000 and January 2, 1999, accrued interest of $9,178 and $5,397,
respectively, was included in accrued expenses in the accompanying consolidated
balance sheets.
The aggregate maturities of long-term debt are as follows:
Years ended December:
2000 $ 11,552
2001 16,087
2002 19,894
2003 21,069
2004 59,290
Thereafter 213,000
-----------
$ 340,892
===========
37
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(8) Income Tax Expense (Benefit)
Income tax expense (benefit) has been classified in the accompanying
consolidated statements of operations as follows:
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------ ------ -------
Income before extraordinary item $2,429 1,431 833
Extraordinary item - - (1,138)
------ -------- ---------
$2,429 1,431 (305)
====== ======== =========
Income tax expense (benefit) consists of the following:
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------ ------ -------
Current:
Federal $2,071 - -
State 765 113 5
------ -------- ---------
2,836 113 5
------ -------- ---------
Deferred:
Federal (163) 1,228 (295)
State (244) 90 ( 15)
(407) 1,318 (310)
------ --------- --------
$2,429 1,431 (305)
====== ========= ========
38
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(8) Continued
Income tax expense (benefit) differs from the expected income tax expense
(benefit) (computed by applying the U.S. federal income tax rate of 34% to
pretax income) as a result of the following:
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Computed expected tax expense (benefit) $ 1,592 776 (570)
State income taxes, net of federal
income tax benefit 344 134 (7)
Nondeductible expenses, principally amortiza-
tion of goodwill 572 224 172
Change in valuation allowance for deferred
income taxes allocated to income tax
expense (34) 84 5
Other (45) 213 95
------ ------ ------
$ 2,429 1,431 (305)
====== ====== ======
</TABLE>
39
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(8) Continued
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
Jan. 1, Jan. 2,
2000 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance $ 207 92
Inventories, principally due to additional costs
capitalized for tax purposes 834 748
Accruals and other liabilities not currently
deductible 4,516 2,202
Net operating loss carryforwards 3,407 4,034
Deferred financing costs 776 990
-------- ---------
Total gross deferred tax assets 9,740 8,066
Less valuation allowance 867 934
-------- ---------
Net deferred tax assets 8,873 7,132
-------- ---------
Deferred tax liabilities:
Plant and equipment (2,190) (2,300)
Intangible assets (37,756) (19,703)
-------- ---------
Total deferred tax liabilities (39,946) (22,003)
--------- ---------
Net deferred tax liability $(31,073) (14,871)
========= =========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it
is more likely than not that the Company will realize the benefits of these
deductible differences, net of the existing valuation allowances at January 1,
2000 and January 2, 1999. The amount of the deferred tax asset considered
realizable,
40
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(8) Continued
however, could be reduced in the near term if estimates of future taxable income
during the carryforward period are reduced. The valuation allowance at January
1, 2000 and January 2, 1999 of $867 and $934, respectively, represents the
allowance for certain state net operating loss carryforwards of $14,479 and
$15,600, respectively, which are available to offset future state taxable
income, if any, through 2005. The Company established a valuation allowance for
the deferred tax assets associated with state net operating loss carryforwards
at January 1, 2000 and January 2, 1999 because management believes that based
upon historical and projected state taxable income, it is not more likely than
not that the deferred tax asset related to such net operating loss carryforwards
will be realized. Any future utilization of these state net operating loss
carryforwards will result in an adjustment to goodwill to the extent it reduces
the valuation allowance. The change in the valuation allowance in fiscal 1999
and 1998 was primarily due to the utilization of state net operating loss
carryforwards. In fiscal 1999, the Company has new state net operating loss
carryforwards of $831 which are available to offset future state taxable income
through 2006.
At January 1, 2000, the Company has net operating loss carryforwards for federal
income tax purposes of $7,324 which are available to offset future federal
taxable income, if any, through 2018. As a result of the acquisitions described
in note 1, the annual utilization of the net operating loss carryforwards is
limited under certain provisions of the Internal Revenue Code.
(9) Pension Benefits
The Company has defined benefit pension plans covering substantially all of its
employees. The benefits are based on years of service and the employee's
compensation, as defined. The Company makes annual contributions to the plans
equal to the maximum amount that can be deducted for income tax purposes. The
following table sets forth the Company's defined benefit pension plans' benefit
obligation, fair value of plan assets and funded status recognized in the
consolidated balance sheets:
41
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(9) Continued
<TABLE>
<CAPTION>
Jan. 1, Jan. 2,
2000 1999
------ ------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 7,785 6,824
Transfers in 640 -
Actuarial loss (1,785) 253
Service cost 807 470
Interest cost 538 478
Plan participants' contributions 29 -
Benefits paid (233) (240)
----------- ---------
Benefit obligation at end of year 7,781 7,785
----------- ---------
Change in plan assets
Fair value of plan assets at beginning of year 5,976 4,927
Actual return on plan assets 432 863
Employer contribution 74 426
Plan participants' contributions 29 -
Benefits paid (233) (240)
----------- ---------
Fair value of plan assets at end of year 6,278 5,976
----------- ---------
Funded status (1,503) (1,809)
Unrecognized prior service cost 600 -
Unrecognized net gain (2,113) (401)
----------- ---------
Accrued pension cost $ (3,016) (2,210)
=========== =========
Change in prepaid pension cost
Accrued benefit cost at beginning of year $ (2,210) (2,095)
Net periodic pension cost (889) (531)
Additional liability 9 (10)
Contributions 74 426
----------- ---------
Accrued pension cost at end of year $ (3,016) (2,210)
=========== =========
Weighted-average assumptions as of
January 1, 2000 and January 2, 1999
Discount rate 8.00% 6.75%
Rate of increase in compensation levels 4.00% to 4.50% 4.50%
Expected long-term rate of return on plan assets 7.75% to 8.50% 8.50%
</TABLE>
Plan assets are invested primarily in government securities and mutual funds.
42
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(9) Continued
Net periodic cost includes the following components:
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Jan. 1, Jan. 2, Jan. 3,
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the
period $ 807 470 464
Interest cost on projected benefit obligation 538 478 436
Expected return on plan assets (496) (472) (673)
Net amortization and deferral 40 55 322
-------- ------ ------
Net pension cost $ 889 531 549
==-===== ====== ======
</TABLE>
The Company sponsors several defined contribution plans covering substantially
all of its employees. Employees may contribute to these plans and these
contributions are matched at varying amounts by the Company. Company
contributions for the matching component of these plans amounted to $426, $226
and $225 for the fiscal years ended January 1, 2000, January 2, 1999 and January
3, 1998, respectively.
43
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(10) Changes in Stockholder's Equity
The changes in stockholder's equity for the fiscal years ended January 1, 2000,
January 2, 1999 and January 3, 1998 are as follows:
<TABLE>
<CAPTION>
Receivable Retained earnings
Common Stock Additional from stock (accumulated
Shares Amount paid-in capital issuance deficit) Total
------ ------ --------------- ---------- ---------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996
1 $ - 13,000 (500) - 12,500
Net loss - - - - (1,372) (1,372)
Capital contribution (note 7) - - 7,000 - - 7,000
Payment of receivable from
stock issuance - - - 500 -- 500
---- --------- ------ ---- ------- ------
Balance at January 3, 1998 1 - 20,000 - (1,372) 18,628
Net income - - - - 850 850
Proceeds from issuance of
equity - - 1,342 - - 1,342
---- --------- ------ ---- ------- ------
Balance at January 2, 1999 1 - 21,342 - (522) 20,820
Net income - - - - 2,253 2,253
Capital contribution (note 7) - - 35,000 - - 35,000
---- --------- ------ ---- ------ ------
Balance at January 1, 2000 1 $ - 56,342 - 1,731 58,073
==== ========= ====== ==== ====== ======
</TABLE>
44
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(11) Related-party Transactions
In conjunction with the B&G and B&R Acquisition, the Company entered into a
management agreement with BRS (the "Management Agreement"), pursuant to which
BRS is paid an annual fee of $250 for certain management, business and
organizational strategy, and merchant and investment banking services. In March,
1999, the annual fee was increased to $500 per year. Charges for such services
amounted to approximately $450 during fiscal year ended January 1, 2000 and $250
during the fiscal years ended January 2, 1999 and January 3, 1998. The
Management Agreement will expire either on December 27, 2006 or the date that
BRS owns less than 20% of the outstanding common stock of Holdings, if sooner.
The Company also entered into a Transaction Services Agreement pursuant to which
BRS will be paid a transaction fee for management, financial and other corporate
advisory services rendered by BRS in connection with acquisitions by the
Company, which fee will not exceed 1.0% of the total transaction value. In
connection with the Polaner Acquisition and the Heritage Brands Acquisition in
fiscal 1999, the Maple Grove Acquisition in fiscal 1998 and the Nabisco Brands
Acquisition and Trappey's Acquisition in fiscal 1997, the Company paid
transaction fees aggregating $300, $1,920, $250 and $620, respectively, which
were included in the cost of the respective acquisitions.
As described in notes 6 and 7, the Company leases a manufacturing and warehouse
facility from the Chairman of the Board of Directors of the Company.
"Due to related parties" at January 1, 2000 includes management fees to BRS.
"Due to related parties" at January 2, 1999 includes management fees to BRS,
accrued interest payable under the unsecured notes payable to related party,
which was paid in full in April 1999, and an amount due to the former owner of
Maple Grove (and current director of the Company) resulting from the Maple Grove
Acquisition.
Related party interest expense on the unsecured notes payable to related party
and the BRS Note was $15, $74 and $811 for the fiscal years ended January 1,
2000, January 2, 1999 and January 3, 1998, respectively.
45
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(12) Commitments and Contingencies
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
On January 1, 2000, the Company had purchase commitments with various suppliers
to purchase certain raw materials in the aggregate amount of approximately
$5,152. Management believes that all such commitments will be fulfilled within
one year.
The Company is subject to environmental regulations in the normal course of
business. Management believes that the cost of compliance with such regulations
will not have a material adverse effect on the Company's business, consolidated
financial position or results of operations.
(13) Business and Credit Concentrations
The Company's exposure to credit loss in the event of non-payment of accounts
receivable by customers is represented in the amount of those receivables. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from those customers. As of
January 1, 2000, the Company does not believe it has any significant
concentration of credit risk with respect to its trade accounts receivable.
The Company manufactured and packaged food products for third parties under
other brand names. Prior to the Polaner Acquisition, the Company had two
co-packing contracts with IHF pursuant to which the Company manufactured for IHF
the Polaner lines of fruit spreads, preserves and wet spices. In addition, the
Company had a third contract with IHF under which the Company distributed the
Polaner lines of fruit spreads, preserves and wet spices in the New York
metropolitan area. The IHF contracts, in the aggregate, accounted for $36.9
million and $46.2 million, or 20.5% and 30.5%, of the Company's net sales for
fiscal 1998 and fiscal 1997, respectively. Receivables due from IHF included in
trade accounts receivable at January 2, 1999 was $1,176. These contracts were
terminated upon completion of the Polaner Acquisition.
46
<PAGE>
B&G FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Dollars in thousands)
(14) Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------------ -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales
1999 $56,480 97,620 87,552 94,460 336,112
1998 38,398 42,633 46,477 52,272 179,780
Gross profit
1999 $23,769 46,655 42,156 43,470 156,050
1998 14,925 16,635 18,122 21,912 71,594
Net income (loss)
1999 $(375) 1,930 476 222 2,253
1998 (236) 433 224 429 850
</TABLE>
47
<PAGE>
Schedule II
B&G Foods, Inc. and Subsidiaries
Valuation and Qualifying Accounts
(dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
-------- -------- -------------------------------- -------- --------
Balance at Charged to costs Charged to
beginning of and expenses other accounts Deductions - Balance at end
Description period - describe describe of period
----------- ------------ ---------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
1999:
Allowance for doubtful
accounts $ 229 $ 596 - $ 308(a) $ 517
1998:
Allowance for doubtful
accounts $ 237 $ 43 - $ 51(a) $ 229
Restructuring accruals
$ 656 - - $ 656(b) $ 0
1997:
Allowance for doubtful
accounts $ 0 $ 237 - - $ 237
Restructuring accruals
$ 1,536 - - $ 880(c) $ 656
(a) Represents bad-debt write-offs.
(b) Cash expenditures relating primarily to tenancy costs.
(c) Cash expenditures relating primarily to tenancy costs, severance
payments, and charges relating from changes in the production process.
</TABLE>
48
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of B&G.
Other officers may also be appointed to fill certain positions. Each director of
B&G holds office until the next annual meeting of shareholders of B&G or until
his successor has been elected and qualified.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C> <C>
Leonard S. Polaner 69 Chairman of the Board of Directors
David L. Wenner 50 President, Chief Executive Officer and Director
Robert C. Cantwell 43 Executive Vice President of Finance and Chief Financial
Officer
David H. Burke 57 Executive Vice President of Sales and Marketing
James H. Brown 57 Executive Vice President of Manufacturing
Thomas Baldwin 40 Director
William F. Callahan III 58 Director
Alfred Poe 50 Director
Harold O. Rosser II 51 Director
Stephen C. Sherrill 46 Director
Nicholas B. Dunphy 51 Director
</TABLE>
Leonard S. Polaner, Chairman of the Board: Leonard Polaner has been
Chairman of the Board of B&G since March 1993 when the Polaner business was sold
to IHF. Prior to that time, Mr. Polaner was President and Chief Executive
Officer of B&G, positions which he had assumed upon joining the Company in 1986.
Mr. Polaner began his career in the food products industry in 1956 when, after
earning his Masters Degree from Harvard Business School, he joined Polaner, a
family-run business. He has been active in many industry trade groups, including
the New York Preservers Association and the International Jelly and Preservers
Association, organizations in which he served as President and a member of the
Board, respectively.
David L. Wenner, President and Chief Executive Officer: David Wenner is the
President and Chief Executive Officer of the Company, positions he has held
since March 1993. Mr. Wenner joined B&G in 1989 as Assistant to the President,
directly responsible for the Company's distribution and Bloch & Guggenheimer
operations. In 1991, he was promoted to Vice President. He continued to be
responsible for distribution and assumed
49
<PAGE>
responsibility for all company operations. Prior to joining B&G, Mr. Wenner
spent 13 years at Johnson & Johnson in supervision and management positions
responsible for manufacturing, maintenance and purchasing. Mr. Wenner is active
in industry trade groups and has served as President of Pickle Packers
International.
Robert C. Cantwell, Executive Vice President of Finance and Chief Financial
Officer: Robert Cantwell is the Executive Vice President of Finance and Chief
Financial Officer of B&G. He joined the Company in 1983 as the Assistant Vice
President of Finance. In that position, Mr. Cantwell had responsibility for all
financial reporting, including budgeting. Mr. Cantwell was promoted to his
current position in 1991, assuming full responsibility for all financial
matters, as well as MIS, Data Processing, Administration and Corporate Human
Resources. Prior to joining the Company, Mr. Cantwell spent four years at
Deloitte & Touche, where he received accreditation as a Certified Public
Accountant.
David H. Burke, Executive Vice President of Sales and Marketing: David
Burke is the Executive Vice President of Sales and Marketing of the Company. Mr.
Burke has an extensive background with major consumer products companies. His
experience includes eight years with Procter & Gamble in sales and sales
management and 12 years at Quaker Oats, where he was a Regional Sales Manager
and later the director of Broker Sales. Mr. Burke also spent four years with Pet
Inc. as Vice President for their frozen foods business. Mr. Burke joined B&G in
1990 as Vice President of Sales responsible for sales and marketing of all B&G
brands.
James H. Brown, Executive Vice President of Manufacturing: James Brown is
the Senior Vice President of Manufacturing and has 24 years of experience in
manufacturing with B&G and Polaner. He has been responsible for all
manufacturing at the Roseland facility since 1981. In 1994, he assumed
responsibility for B&G's other manufacturing facilities. Prior to joining B&G
(Polaner) in 1972, Mr. Brown worked at Kraft Foods for two years as a project
engineer and spent four years in the U.S. Navy.
Thomas J. Baldwin, Director: Since 1997, Thomas Baldwin has been a Director
of B&G. Since 1995, Thomas Baldwin has been the Chief Executive Officer and a
founding stockholder of Christmas Corner, Inc., a specialty retail chain that
owns and operates seasonal Christmas stores. Mr. Baldwin is also a principal and
co-founder of PB Ventures. From 1993 through 1995, Mr. Baldwin was a Managing
Director of the leveraged buyout firm Invus Group, Ltd.
William F. Callahan III, Director: William Callahan has been a Director of
B&G since B&G acquired Maple Grove in 1998 Mr. Callahan was the C.E.O. and owner
of Maple Grove. Mr. Callahan began his career in the specialty foods business in
1975 when he acquired Maple Grove. Prior to the Maple Grove Acquisition, Mr.
Callahan was Vice President, Sales of Blyth, Eastman, Dillon and Co. in New York
and a trial attorney for the U.S. Securities and Exchange Commission in New
York. Mr. Callahan is a graduate of Georgetown University and the Boston
University Law School. He is a member of the State of Vermont Chamber of
Commerce, a member of the Vermont
50
<PAGE>
Maple Industry Council and the State of Vermont Agriculture Commissioner's Task
Force.
Alfred Poe, Director: Alfred Poe has been a director since 1997. He is
Chairman of the Board of the MenuDirect Corporation, a provider of specialty
meals for people on restricted diets and has been the Chief Executive Officer
since 1997. Mr. Poe was a Corporate Vice President of Campbell's Soup Company
from 1991 through 1996. From 1993 through 1996, he was the President of
Campbell's Meat Enhancement Group. Previously, from 1982 to 1991, Mr. Poe held
various positions, including Vice President, Brands Director and Commercial
Director, with Mars, Inc.
Harold O. Rosser II, Director: Since its formation in 1995, Harold Rosser
has been a Managing Director of BRS. Mr. Rosser was an officer of Citicorp
Venture Capital from 1987 through 1994. Previously, he spent 12 years with
Citicorp/Citibank in various management and corporate finance positions. Mr.
Rosser is a director of Jitney-Jungle Stores of America, Inc., American Paper
Group, Inc., Acapulco Restaurants, Inc., California Pizza Kitchen, Inc. and
Penhall International, Inc.
Stephen C. Sherrill, Director: Since its formation in 1995, Stephen
Sherrill has been a Managing Director of BRS. Mr. Sherrill was an officer of
Citicorp Venture Capital from 1983 through 1994. Previously, he was an associate
at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr.
Sherrill is a director of Galey & Lord, Inc., Jitney-Jungle Stores of America,
Inc., Doane Pet Care Enterprises, Inc., Mediq Incorporated, Health Plus
Corporation and Alliance Laundry Systems LLC.
Nicholas B. Dunphy, Director: Mr. Dunphy is a Managing Partner of
Canterbury Capital II, LLC, with more than 20 years' business and investment
banking experience. Prior to co-founding Canterbury Capital II, LLC, in 1996, he
was managing director and founding partner of Barclays Mezzanine Group. Before
joining Barclays in 1980, Mr. Dunphy qualified as a Chartered Accountant in
Canada and subsequently spent five years with Toronto Dominion Bank. Mr. Dunphy
earned a B.Sc. from Manchester University in England and a Masters in Business
Administration from York University in Canada.
ITEM 11. EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation earned by the Company's Chief Executive Officer and the four other
most highly paid executive officers of the Company, including the Chairman
(collectively, the "Named Executive Officers"), for services rendered in all
capacities to the Company for fiscal 1999:
51
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary Bonus Other Compensation
--------------------------- ---- ------ ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
(1) (2) (3)
Leonard S. Polaner
Chairman of the Board 1999 $100,516 $31,500 $13,800 $9,250
David L. Wenner
President and Chief Executive Officer 1999 240,981 96,750 10,000 11,200
Robert C. Cantwell
Executive Vice President of Finance and Chief
Financial Officer 1999 192,289 53,550 10,000 11,200
David H. Burke
Executive Vice President of Sales and
Marketing 1999 192,289 53,550 10,000 11,200
James H. Brown
Executive Vice President of
Manufacturing 1999 167,520 50,400 10,850 11,200
(1) Includes annual bonus payment under the Company's Annual Bonus Plan.
(2) Includes personal use of a Company automobile or automobile allowances.
(3) Includes the Company's matching contributions to the 401(k) Plan and
contribution to the Company's Pension Plan.
</TABLE>
Director Compensation and Arrangements
- --------------------------------------
Directors of the Company receive compensation for their services as
directors in the amount of $1,000 per meeting of the Board of Directors.
Directors of the Company are entitled to reimbursement of their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the Board of Directors or committees thereof.
Annual Bonus Plan
- -----------------
The Company also maintains an Annual Bonus Plan that provides for annual
incentive awards to be made to key executives upon the Company's attainment of
pre-set annual financial objectives. The amount of the annual award to each
executive is based upon a percentage of the executive's annualized base salary.
Awards are paid in cash in a lump sum following the close of each plan year. The
plan provides for forfeiture of proration of awards in the event of certain
circumstances such as the executive's promotion or demotion, death, retirement
or resignation.
Stock Option Plan
- -----------------
In order to attract, retain and motivate selected employees and officers of
the Company, Holdings adopted the B&G Foods Holdings Corp. 1997 Incentive Stock
Option Plan (the "Option Plan") for key employees of the Company and its
subsidiaries.
52
<PAGE>
The Option Plan provides that it may be administered by Holdings' Board of
Directors or a committee designated by the Board of Directors of Holdings.
Holdings' Board of Directors has designated a committee comprised initially of
Stephen C. Sherrill and Harold O. Rosser II. Options granted under the Option
Plan will be exercisable in accordance with the terms established by the
Holdings' Board of Directors. Options will expire on the date determined by the
Holdings' Board of Directors, which shall not be later than the tenth
anniversary of the date of grant.
No grants of options were made under the Option Plan during fiscal 1999 and
1998.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Board of Directors of the Company has appointed a Compensation
Committee comprised of Mr. Sherrill and Mr. Rosser. Mr. Sherrill is a former
officer of the Company, for which position he received no compensation; Mr.
Rosser is not and has not been an officer of the Company. Each of Mr. Sherrill
and Mr. Rosser are principals of BRS.
Employment Agreements
- ---------------------
The Company has no employment agreements.
401(k) Plan
- -----------
The Company maintains a tax-qualified defined contribution plan with a cash
or deferred arrangement intended to qualify under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Company employees become eligible
to participate in the plan upon reaching age 21 and completing one year of
employment with the Company. Each participant in the plan may elect to defer, in
the form of contributions to the plan, up to 17% of compensation that would
otherwise be paid to the participant in the applicable year, which percentage
may be increased or decreased by the administrative committee of the plan, but
is otherwise not to exceed the statutorily prescribed annual limit ($10,000 in
1999). The Company makes a 50% matching contribution with respect to each
participant's elective contributions, up to six percent of such participant's
compensation. Matching contributions vest over a rolling five-year period.
53
<PAGE>
Pension Plan
- ------------
PENSION PLAN TABLE
Years of Service
---------------------------------------------------------------
Renumeration 15 20 25 30 35
- ------------ ------- ------- ------- -------- ---------
40,000 $ 4,916 $ 6,555 $ 8,194 $ 9,833 $11,472
60,000 $ 8,366 $11,155 $13,944 $16,733 $19,522
80,000 $11,816 $15,755 $19,694 $23,633 $27,572
100,000 $15,266 $20,355 $25,444 $30,533 $35,622
120,000 $18,716 $24,955 $31,194 $37,433 $43,672
140,000 $22,166 $29,555 $36,944 $44,333 $51,722
160,000 $25,616 $34,155 $42,694 $51,233 $59,772
Benefits under the plans are calculated generally under a formula of 0.75%
of final average earnings multiplied by service plus 0.4% of final average
earnings in excess of covered compensation multiplied by service limited to 35
years. The compensation covered by the pension plan is W-2 earnings and any
amounts contributed to any tax qualified profit sharing plan or cafeteria plan
limited to $160,000 as required by Section 401(a)(17) of the Code. As of January
1, 2000, the years of credited service for each of the Named Executive Officers
were: Mr. Polaner, 12; Mr. Wenner, 10; Mr. Cantwell, 16; Mr. Burke, 9; and Mr.
Brown, 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The Company is a wholly owned subsidiary of Holdings. The following table
sets forth certain information as of February 29, 2000 with respect to the
beneficial ownership of the 13% Series A Cumulative Preferred Stock, par value
$0.01 per share, of Holdings ("Series A Preferred"), 13% Series B Cumulative
Preferred Stock, par value $0.01 per share, of Holdings ("Series B Preferred"),
Series C Senior Preferred Stock, par value $0.01 per share, of Holdings ("Series
C Preferred") and the common stock, par value $0.01 per share, of Holdings
("Common Stock") by (i) each person or entity who owns five percent or more
thereof, (ii) each director of the Company who is a stockholder, (iii) the Named
Executive Officers and (iv) all directors and officers of the Company as a
group. Unless otherwise specified, all shares are directly held.
54
<PAGE>
<TABLE>
<CAPTION>
Number and Percent of Shares
----------------------------
Name of Beneficial Owner Common Stock(1) Series A Preferred Series B Preferred Series C Preferred
- ------------------------ --------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Bruckmann, Rosser, Sherrill & Co., 100,021.57 18,774.99 12,310.54 5,000.00
L.P. (2)(3) 85.1% 92.4% 100.0% 20.0%
Two Greenwich Plaza
Suite 100
Greenwich, CT 06830
Canterbury Mezzanine Capital II, L.P. 9,857.92 ----- ----- 15,000.00
(4) (5) 8.8% 60.0%
600 Fifth Avenue
23rd Floor
New York, NY 10019
The CIT Group/Equity Investments, Inc. 3,285.97 ----- ----- 5,000.00
(6) 3.1% 20.0%
650 CIT Drive
Livingston, NJ 07039
Leonard S. Polaner (7) 3,000 145 ----- -----
2.9% *
David L. Wenner (7) 3,000 20 ----- -----
2.9% *
David H. Burke (7) 3,000 20 ----- -----
2.9% *
James H. Brown (7) 3,000 20 ----- -----
2.9% *
Robert C. Cantwell (7) 3,000 20 ----- -----
2.9% *
Thomas J. Baldwin (7) 500 110.44 ----- -----
* *
Alfred Poe (7) 500 110.44 ----- -----
* *
William F. Callahan III (7) 1,450 1,050.94 ----- -----
1.4% 5.2%
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Number and Percent of Shares
----------------------------
Name of Beneficial Owner Common Stock(1) Series A Preferred Series B Preferred Series C Preferred
- ------------------------ --------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Harold O. Rosser II (7)(8)(9) 381.56 71.61 47.01 19.09
* * * *
Stephen C. Sherrill (7)(8)(10) 1,958.69 367.59 241.32 98.01
1.9% 1.8% 2.0% *
Nicholas B. Dunphy (11)(12) ----- ----- ----- -----
All directors and officers as a group
(11 persons) (7)(8) 19,790.25 1,936.02 288.33 117.10
19.2% 9.5% 2.3% *
- --------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of Common Stock subject
to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of February 29, 2000 are
deemed outstanding. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other
person.
(2) Includes shares held by certain other entities and individuals
affiliated with BRS (together with BRS, the "BRS Investors"). BRS
disclaims beneficial ownership of such shares. BRS is a limited
partnership, the sole general partner of which is BRS Partners, Limited
Partnership ("BRS Partners") and the manager of which is Bruckmann,
Rosser, Sherrill & Co., Inc. ("BRS & Co."). The sole general partner of
BRS Partners is BRSE Associates, Inc. ("BRSE Associates"). Bruce C.
Bruckmann, Harold O. Rosser II and Stephen C. Sherrill are stockholders
of BRS & Co. and BRSE Associates and may be deemed to share beneficial
ownership of the shares shown as beneficially owned by BRS. Such
individuals disclaim beneficial ownership of any such shares.
(3) With respect to the Common Stock, such amount includes warrants to
purchase 15,021.58 shares of Common Stock, exercisable within 60 days
of February 29, 2000, with an exercise price of $0.01 per share and an
expiration date of December 22, 2009.
(4) Canterbury Mezzanine Capital II, L.P. ("Canterbury Mezzanine") is a
limited partnership, the sole general partner of which is Canterbury
Capital II, LLC ("Canterbury Capital"). Nicholas B. Dunphy holds a
minor membership interest in Canterbury Mezzanine and a membership
interest in Canterbury Capital and may be deemed to share beneficial
ownership of the
56
<PAGE>
shares shown as beneficially owned by Canterbury Mezzanine. Mr. Dunphy
disclaims beneficial ownership of any such shares.
(5) With respect to the Common Stock, such amount includes warrants to
purchase 9,857.92 shares of Common Stock, exercisable within 60 days of
February 29, 2000, with an exercise price of $0.01 per share and an
expiration date of December 22, 2009.
(6) With respect to the Common Stock, such amount includes warrants to
purchase 3,285.97 shares of Common Stock, exercisable within 60 days of
February 29, 2000, with an exercise price of $0.01 per share and an
expiration date of December 22, 2009.
(7) The address of such person is c/o B&G Foods, Inc., 4 Gatehall Drive,
Suite 110, Parsippany, New Jersey, 07054.
(8) With respect to Mr. Sherrill and Mr. Rosser, directors of the Company,
excludes shares held by BRS and certain other entities and individuals
affiliated with BRS, of which shares Mr. Sherrill and Mr. Rosser
disclaim beneficial ownership.
(9) With respect to the Common Stock, such amount includes warrants to
purchase 57.36 shares of Common Stock, exercisable within 60 days of
February 29, 2000, with an exercise price of $0.01 per share and an
expiration date of December 22, 2009.
(10) With respect to the Common Stock, such amount includes warrants to
purchase 294.46 shares of Common Stock, exercisable within 60 days of
February 29, 2000, with an exercise price of $0.01 per share and an
expiration date of December 22, 2009.
(11) Excludes shares held by Canterbury Mezzanine, of which shares Mr.Dunphy
disclaims beneficial ownership.
(12) The address of such person is c/o Canterbury Mezzanine Capital II,
L.P., 600 Fifth Avenue, 23rd Floor, New York, New York 10019.
</TABLE>
57
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement and Registration Rights Agreement
- --------------------------------------------------------
The BRS Investors and certain members of the Company's Board of Directors
and executive officers of the Company (collectively, the "Management
Stockholders") are parties to that certain Amended and Restated Securities
Holders Agreement dated December 22, 1999 among Holdings, the BRS Investors
named therein, Canterbury Mezzanine Capital II, L.P., The CIT Group/Equity
Investments, Inc. and the Management Stockholders named therein (the "Securities
Holders Agreement") and the Registration Rights Agreement attached as Exhibit B
to the Securities Holders Agreement.
BRS Management and Transaction Services Agreements
- --------------------------------------------------
The Company and Holdings are party to a management services agreement (the
"BRS Management Agreement") with BRS & Co., the manager of BRS, pursuant to
which BRS & Co. is paid $500,000 per annum for certain management, business and
organizational strategy and merchant and investment banking services rendered to
the Company and Holdings, which services include, but are not limited to, advice
on corporate and financial planning, oversight of operations, including the
manufacturing, marketing and sales of the Company's products, development of
business plans, the structure of the Company's debt and equity capitalization
and the identification and development of business opportunities. Any future
increase in payments under the BRS Management Agreement are restricted by the
terms of the Company's indenture governing its 9 5/8% Senior Subordinated Notes
due 2007. The Company and BRS & Co. also are party to a transaction services
agreement pursuant to which BRS & Co. will be paid a transaction fee for
management, financial and other corporate advisory services rendered by BRS &
Co. in connection with acquisitions by the Company, which fee will not exceed
1.0% of total transaction value. Additional transaction fees which were paid in
fiscal 1998 and fiscal 1997 were (i) $500,000 upon the Nabisco Brands
Acquisition in May 1997, (ii) $120,000 upon the Trappey's Acquisition in August
1997, and (iii) $250,000 upon the Maple Grove Acquisition in July 1998. The
Company also paid transaction fees of $300,000 in connection with the Polaner
Acquisition and $1,920,000 for the Heritage Brands Acquisition.
Eagle Rock Notes
- ----------------
The Company's subsidiary, Roseland Distribution Company ("RDC"), is party
to a lease (the "Roseland Lease") for its Roseland facility with 426 Eagle Rock
Avenue Associates ("Eagle Rock"), a real estate partnership of which Leonard S.
Polaner, the Company's Chairman, is the general partner. The Company paid
$43,938 per month in rent in cash to Eagle Rock pursuant to a Memorandum of
Agreement entered into in connection with the Roseland Lease, and an additional
amount in the form of promissory notes payable to Eagle Rock (the "Eagle Rock
Notes"), which are issued in an annual aggregate principal amount of $187,740.
The Eagle Rock Notes matured and were paid off on the expiration date of the
Roseland Lease, April 18, 1999, and had an interest rate
58
<PAGE>
equal to the rate, as of the issue date of an Eagle Rock Note, for Treasuries
with a maturity of April 1999. The Eagle Rock Notes were not guaranteed by the
Company. RDC's liability under the Eagle Rock Notes as of January 2, 1999 was
$1,038,057. In the opinion of management, the terms of the Eagle Rock Notes and
the Roseland Lease are at least as favorable to the Company as the terms that
could have been obtained from unaffiliated third parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS.
Independent Auditors' Report
Consolidated Balance Sheets as of January 1, 2000 and January 2, 1999.
Consolidated Statements of Operations for the years ended January 1,
2000, January 2, 1999 and January 3, 1998.
Consolidated Statements of Cash Flows for the years ended January 1,
2000, January 2, 1999 and January 3, 1998.
Notes to Consolidated Financial Statements.
(2) FINANCIAL STATEMENT SCHEDULE.
Valuation and Qualifying Accounts.
(b) REPORTS ON FORM 8-K:
None.
59
<PAGE>
(c) EXHIBITS
EXHIBIT NO. DESCRIPTION
- -------------------- -------------------------------------------------------
2.1 Stock Purchase Agreement, dated July 2, 1998, by and
among BGH Holdings, Inc., Maple Grove Farms of Vermont,
Inc., Up Country Naturals of Vermont, Inc., Les
Produits Alimentaires Jacques et Fils Inc., William F.
Callahan and Ruth M. Callahan. (Filed with the
Securities and Exchange Commission as Exhibit 2.1 to
Commission Filing No. 333-39813 on August 3, 1998 and
incorporated herein by reference)
2.2 Asset Purchase Agreement, dated as of January 12, 1999,
by and among Roseland Distribution Company,
International Home Foods, Inc. and M. Polaner, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 1 to the Company's Report on Form 8-K filed
February 19, 1999 and incorporated herein by reference)
2.3 Asset and Stock Purchase Agreement, dated as of January
28, 1999, by and among The Pillsbury Company, Indivined
B.V., IC Acquisition Company, Heritage Acquisition
Corp. and, as guarantor, B&G Foods, Inc. (Filed as
Exhibit 2.1 to the Company's Report on Form 8-K filed
April 1, 1999 and incorporated herein by reference).
3.1 Certificate of Incorporation of B&G Foods, Inc. (Filed
with the Securities and Exchange Commission as Exhibit
3.1 to Amendment No. 1 to Registration Statement No.
333-39813 on January 14, 1998 and incorporated herein
by reference)
3.2 Bylaws of B&G Foods, Inc. (Filed with the Securities
and Exchange Commission as Exhibit 3.2 to Amendment No.
1 to Registration Statement No. 333-39813 on January
14, 1998 and incorporated herein by reference)
3.3 Certificate of Incorporation of BGH Holdings, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 3.3 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.4 Bylaws of BGH Holdings, Inc. (Filed with the Securities
and Exchange Commission as Exhibit 3.4 to Amendment No.
1 to Registration Statement No. 333-39813 on January
14, 1998 and incorporated herein by reference)
3.5 Intentionally omitted.
3.6 Intentionally omitted.
3.7 Certificate of Incorporation of Trappey's Fine Foods,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 3.7 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.8 Bylaws of Trappey's Fine Foods, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.8 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.9 Certificate of Incorporation for Bloch & Guggenheimer,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 3.9 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
60
<PAGE>
incorporated herein by reference)
3.10 Bylaws of Bloch & Guggenheimer, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.10 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.11 Certificate of Incorporation of RWBW Acquisition Corp.
(Filed with the Securities and Exchange Commission as
Exhibit 3.11 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.12 Bylaws of RWBW Acquisition Corp. (Filed with the
Securities and Exchange Commission as Exhibit 3.12 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
3.13 Intentionally omitted.
3.14 Intentionally omitted.
3.15 Certificate of Incorporation of Roseland Distribution
Company. (Filed with the Securities and Exchange
Commission as Exhibit 3.15 to Amendment No. 1 to
Registration Statement No. 333-39813 on January 14,
1998 and incorporated herein by reference)
3.16 Bylaws of Roseland Distribution Company. (Filed with
the Securities and Exchange Commission as Exhibit 3.16
to Amendment No. 1 to Registration Statement No.
333-39813 on January 14, 1998 and incorporated herein
by reference)
3.17 Intentionally omitted.
3.18 Intentionally omitted.
3.19 Certificate of Incorporation of Burns & Ricker, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 3.19 to Amendment No. 1 to Registration
Statement No. 333-39813 on January 14, 1998 and
incorporated herein by reference)
3.20 Bylaws of Burns & Ricker, Inc. (Filed with the
Securities and Exchange Commission as Exhibit 3.20 to
Amendment No. 1 to Registration Statement No. 333-39813
on January 14, 1998 and incorporated herein by
reference)
4.1 Indenture dated as of August 11, 1997 between B&G
Foods, Inc. (the "Company"), BGH Holdings, Inc., RWBW
Acquisition Corp., BRH Holdings, Inc., Bloch &
Guggenheimer, Inc., Roseland Distribution Company,
Burns & Ricker, Inc., Roseland Manufacturing, Inc., and
RWBW Brands Company (collectively, the "Guarantors")
and The Bank of New York, as trustee (the "Trustee").
(Filed with the Securities and Exchange Commission as
Exhibit 4.1 to Registration Statement No. 333-39813 on
November 7, 1997 and incorporated herein by reference)
4.2 Form of the Company's 9% Senior Notes due 2007. (Filed
with the Securities and Exchange Commission as Exhibit
4.1 to Registration Statement No. 333-39813 on November
7, 1997 and incorporated herein by reference)
10.1 Registration Rights Agreement dated as of August 11,
1997 by and among
61
<PAGE>
the Company, the Guarantors party thereto, Lehman
Brothers, Inc. and Lazard Freres & Co., LLC. (Filed
with the Securities and Exchange Commission as Exhibit
10.1 to Registration Statement No. 333-39813 on
November 7, 1997 and incorporated herein by reference)
10.2 Purchase Agreement dated August 6, 1997 among the
Company, the Guarantors party thereto, Lehman Brothers,
Inc., and Lazard Freres & Co., LLC. (Filed with the
Securities and Exchange Commission as Exhibit 10.2 to
Registration Statement No. 333-39813 on November 7,
1997 and incorporated herein by reference)
10.3 Intentionally omitted.
10.4 Intentionally omitted.
10.5 Amended and Restated Jams Manufacturing Agreement dated
as of March 3, 1997 by and between Roseland
Manufacturing, Inc., and International Home Foods, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 10.5 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.6 Sales and Distribution Agreement dated as of March 19,
1993 by and between M. Polaner, Inc. and DSD, Inc.
(Filed with the Securities and Exchange Commission as
Exhibit 10.6 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.7 Spices Supply Agreement dated as of March 19, 1993 by
and between Bloch & Guggenheimer, Inc. and M. Polaner,
Inc. (Filed with the Securities and Exchange Commission
as Exhibit 10.7 to Amendment No. 2 to Registration
Statement No. 333-39813 on February 4, 1998 and
incorporated herein by reference)
10.8 Transition Services Agreement, dated as of February 5,
1999, among International Home Foods, Inc., M. Polaner,
Inc. and Roseland Distribution Company. (Filed with the
Securities and Exchange Commission as Exhibit 2 to the
Company's Report on Form 8-K filed February 19, 1999
and incorporated herein by reference)
10.9 Guaranty, dated as of January 12, 1999, of B&G Foods,
Inc. in favor of International Home Foods, Inc. and M.
Polaner, Inc. (Filed with the Securities and Exchange
Commission as Exhibit 3 to the Company's Report on Form
8-K filed February 19, 1999 and incorporated herein by
reference)
10.10 Consent, Waiver and Second Amendment, dated as of
January 12, 1999, to the Second Amended and Restated
Credit Agreement, dated as of August 11, 1997, among
B&G Foods, Inc., the subsidiaries party thereto, Heller
Financial, Inc., as agent and lender, and the other
lenders party thereto. (Filed with the Securities and
Exchange Commission as Exhibit 4 to the Company's
Report on Form 8-K filed February 19, 1999 and
incorporated herein by reference)
10.11 Revolving Credit Agreement, dated as of March 15, 1999
among B&G Foods Holdings Corp., B&G Foods, Inc., as
borrower, the several lenders from time to time party
thereto, Lehman Brothers Inc., as Arranger, The
62
<PAGE>
Bank of New York, as Documentation Agent, Heller
Financial, Inc., as Co-Documentation Agent, and Lehman
Commercial Paper Inc. as Syndication Agent and
Administrative Agent (Filed as Exhibit 10.1 to the
Company's Report on Form 10-Q filed May 17, 1999 and
incorporated herein by reference).
10.12 Term Loan Agreement, dated as of March 15, 1999, among
B&G Foods Holdings Corp., B&G Foods, Inc., as borrower,
the several lenders from time to time party thereto,
Lehman Brothers Inc., as Arranger, The Bank of New
York, as Documentation Agent, Heller Financial, Inc.,
as Co-Documentation Agent, and Lehman Commercial Paper,
Inc., as Syndication Agent and Administrative Agent
(Filed as Exhibit 10.2 to the Company's Report on Form
10-Q filed May 17, 1999 and incorporated herein by
reference).
10.13 Guarantee and Collateral Agreement, dated as of March
15, 1999, by B&G Foods Holdings Corp., B&G Foods, Inc.,
and certain of its subsidiaries in favor of Lehman
Commercial Paper, Inc., as Administrative Agent (Filed
as Exhibit 10.3 to the Company's Report on Form 10-Q
filed May 17, 1999 and incorporated herein by
reference)
10.14 Amended and Restated Securities Holders Agreement dated
December 22, 1999 among B&G Foods Holdings Corp.,
Bruckmann, Rosser, Sherrill & Co., L.P., Canterbury
Mezzanine Capital II, L.P., The CIT Group/Equity
Investments, Inc. and the Management Stockholders named
therein (Filed herewith)
12.1 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
21.1 Subsidiaries of the Company and the Additional
Registrants. (Filed herewith)
27.1 Financial Data Schedule. (Filed herewith) I.
63
<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.
B&G FOODS, INC.
By: /s/ David L. Wenner
------------------------------------
David L. Wenner
Chief Executive Officer
Date: March 2, 2000
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.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME TITLE DATE
- --------------------------------- ------------------------------------------ -------------
/s/ David L. Wenner President, Chief Executive Officer and March 2, 2000
- --------------------------------- Director (Principal Executive Officer)
David L. Wenner
/s/ Robert C. Cantwell Executive Vice President of Finance and March 2, 2000
- --------------------------------- Chief Financial Officer (Principal
Robert C. Cantwell Financial and Accounting Officer)
/s/ Thomas Baldwin
- --------------------------------- Director March 2, 2000
Thomas Baldwin
/s/ William F. Callahan III Director March 2, 2000
- ---------------------------------
William F. Callahan III
/s/ Alfred Poe Director March 2, 2000
- ---------------------------------
Alfred Poe
/s/ Harold O. Rosser Director March 2, 2000
- ---------------------------------
Harold O. Rosser
/s/ Nicholas B. Dunphy Director March 2, 2000
- ---------------------------------
Nicholas B. Dunphy
/s/ Stephen C. Sherrill Director March 2, 2000
- ---------------------------------
Stephen C. Sherrill
/s/ Leonard S. Polaner Chairman of the Board of Directors March 2, 2000
- ---------------------------------
Leonard S. Polaner
</TABLE>
AMENDED AND RESTATED
SECURITIES HOLDERS AGREEMENT
dated as of December 22, 1999
among
B&G FOODS HOLDINGS CORP.
BRUCKMANN, ROSSER, SHERRILL & CO., L.P.,
CANTERBURY MEZZANINE CAPITAL II, L.P.,
THE CIT GROUP/EQUITY INVESTMENTS, INC.
and
MANAGEMENT STOCKHOLDERS
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDINGS CORP..............................................2
1.1 Representations, Warranties and Covenants of Holdings Corp...............................................2
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH STOCKHOLDER..........................................3
2.1 Representations, Warranties and Covenants of Each Stockholder............................................3
2.2 Legend...................................................................................................4
2.3 Provisions Regarding Transfers of Securities.............................................................4
2.4 Notation.................................................................................................6
2.5 Limitation on Repurchase of Securities...................................................................6
2.6 Reliance.................................................................................................6
ARTICLE III OTHER COVENANTS AND REPRESENTATIONS...................................................................6
3.1 Financial Statements and Other Information. So long as BRS, Canterbury or
CIT,
as the case may be, owns any of the Securities, Holdings Corp............................................6
3.2 Sale of Holdings Corp. or any of the Companies...........................................................7
3.3 Tag-Along Rights.........................................................................................7
3.4 Covenant Not to Compete..................................................................................9
3.5 Preemptive Rights.......................................................................................10
ARTICLE IV CORPORATE ACTIONS.....................................................................................11
4.1 Directors...............................................................................................11
4.2 Right to Remove Certain of Holdings Corp.'s Directors...................................................11
4.3 Right to Fill Certain Vacancies in Holdings Corp.'s Board...............................................12
4.4 Subsidiaries Governance.................................................................................12
4.5 Management Rights of BRS................................................................................12
4.6 Management Rights of Canterbury.........................................................................13
4.7 Confidentiality.........................................................................................13
ARTICLE V ADDITIONAL RESTRICTIONS ON TRANSFERS OF SECURITIES HELD BY MANAGEMENT STOCKHOLDERS.....................14
5.1 Certain Definitions.....................................................................................14
5.2 Restrictions on Transfer................................................................................16
5.3 Purchase Option.........................................................................................17
5.4 Right of First Refusal on Transfer of Management Stockholder Securities.................................20
5.5 Purchaser Representative................................................................................21
<PAGE>
5.6 Section 83(b) Elections.................................................................................21
5.7 Involuntary Transfers...................................................................................22
ARTICLE VI REGISTRATION RIGHTS...................................................................................23
ARTICLE VII MISCELLANEOUS........................................................................................23
7.1 Amendment and Modification..............................................................................23
7.2 Survival of Representations and Warranties..............................................................24
7.3 Successors and Assigns; Entire Agreement................................................................24
7.4 Separability............................................................................................24
7.5 Notices.................................................................................................24
7.6 Governing Law...........................................................................................26
7.7 Headings................................................................................................26
7.8 Counterparts............................................................................................26
7.9 Further Assurances......................................................................................26
7.10 Remedies................................................................................................26
7.11 Party No Longer Owning Securities.......................................................................26
7.12 No Effect on Employment.................................................................................26
7.13 Pronouns................................................................................................26
</TABLE>
<PAGE>
DEFINITIONS
-----------
AMENDED AND RESTATED SECURITIES HOLDERS AGREEMENT
AMENDED AND RESTATED SECURITIES HOLDERS AGREEMENT, dated as of December
22, 1999 (the "Agreement"), by and among (1) B&G FOODS HOLDINGS CORP., a
Delaware corporation ("Holdings Corp."), (2) BRUCKMANN, ROSSER, SHERRILL & CO.,
L.P., a Delaware limited partnership ("BRS"), the individuals listed on Exhibit
A hereto as the BRS Stockholders (the "BRS Stockholders" and, together with BRS
and their respective BRS Permitted Transferees, the "BRS Entities"), (3)
CANTERBURY MEZZANINE CAPITAL II, L.P., a Delaware limited partnership
("Canterbury" and, together with its Permitted Transferees, the "Canterbury
Entities"), (4) THE CIT GROUP/EQUITY INVESTMENTS, INC., a New Jersey corporation
("CIT" and, together with its Permitted Transferees, the "CIT Entities"), and
(5) the individuals listed on Exhibit A hereto as "Management Stockholders"
(such individuals, together with their Permitted Transferees, the "Management
Stockholders"). The BRS Entities, the Canterbury Entities, the CIT Entities and
the Management Stockholders are sometimes referred to hereinafter individually
as a "Stockholder" and collectively as the "Stockholders."
Background
A. Holdings Corp., the BRS Entities and the Management Stockholders are
parties to the Securities Purchase and Holders Agreement, dated as of March 27,
1997 (the "Original Shareholders Agreement"), and desire to amend and restate
the Original Shareholders Agreement in its entirety.
B. Each of the BRS Entities is the record owner of (i) the number of
shares of Common Stock, par value $.01 per share (the "Common Stock"), of
Holdings Corp. set forth opposite its name on Exhibit A hereto, (ii) the number
of shares of 13% Series A Cumulative Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"), of Holdings Corp. set forth opposite its name
on Exhibit A hereto, (iii) the number of shares of 13% Series B Cumulative
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), of
Holdings Corp. set forth opposite its name on Exhibit A hereto, (iv) the number
of shares of Series C Senior Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), of Holdings Corp. set forth opposite its name on
Exhibit A hereto and (v) the number of warrants to purchase shares of Common
Stock (the "Warrants") of Holdings Corp. set forth opposite its name on Exhibit
A hereto.
C. Canterbury is the record owner of (i) the number of shares of Series
C Preferred Stock of Holdings Corp. set forth opposite its name on Exhibit A
hereto and (ii) the number of Warrants of Holdings Corp. set forth opposite its
name on Exhibit A hereto.
D. CIT is the record owner of (i) the number of shares of Series C
Preferred Stock of Holdings Corp. set forth opposite its name on Exhibit A
hereto and (ii) the number of Warrants of Holdings Corp. set forth opposite its
name on Exhibit A hereto.
<PAGE>
E. Each of the Management Stockholders is the record owner of (i) the
number of shares of Common Stock of Holdings Corp. set forth opposite his name
on Exhibit A hereto, (ii) the number of shares of Series A Preferred Stock of
Holdings Corp. set forth opposite his name on Exhibit A hereto and (iii) the
number of stock options to purchase shares of Common Stock (the "Options") of
Holdings Corp. set forth opposite his name on Exhibit A hereto.
F. As used herein, the term "Companies" shall mean, collectively, (i)
B&G Foods, Inc., a Delaware corporation, (ii) BGH Holdings, Inc., a Delaware
corporation, (iii) Bloch & Guggenheimer, Inc., a Delaware corporation, (iv)
Burns & Ricker, Inc., a Delaware corporation, (v) Heritage Acquisition Corp., a
Delaware corporation, (vi) Les Produits Alimentaires Jacques Et Fils, Inc., a
Quebec corporation, (vii) Maple Grove Farms of Vermont, Inc., a Vermont
corporation, (viii) Roseland Distribution Company, a Delaware corporation, (ix)
RWBV Acquisition Corp., a Delaware corporation, (x) Trappey's Fine Foods, Inc.,
a Delaware corporation and (xi) all future subsidiaries of Holdings Corp., and
the term "Company" shall be construed accordingly. As used herein, the term
"Securities" shall mean the Common Stock, the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Warrants and the
Options now and hereafter held by any Stockholder, including shares of Common
Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, the Warrants, the Options and all other securities of Holdings Corp. (or
a successor to Holdings Corp.) received on account of ownership of the Common
Stock, the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Warrants or the Options including, without limitation, all
securities issued in connection with any merger, consolidation, stock dividend,
stock distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof. A reference to any class of Securities shall be
deemed to include reference to all Securities issued in respect thereof.
G. The Stockholders and Holdings Corp. wish to set forth certain
agreements regarding their future relationships and their rights and obligations
with respect to the Securities.
Terms
-----
In consideration of the mutual representations, warranties and
covenants contained herein, and intending to be legally bound hereby, the
parties hereto acknowledge and agree that this Agreement shall amend and
supersede in its entirety the Original Shareholders Agreement, and agree as
follows:
ARTICLE I
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF HOLDINGS CORP.
1.1 Representations, Warranties and Covenants of Holdings Corp.
Holdings Corp. represents and warrants to, and covenants and agrees with, each
of the Stockholders as follows:
(a) Holdings Corp. is a corporation validly existing and in good
standing under the laws of the State of Delaware.
<PAGE>
(b) Holdings Corp. has full corporate power and corporate
authority to make, execute, deliver and perform this Agreement and to carry out
all of the transactions provided for herein.
(c) Holdings Corp. has taken such corporate action as is necessary
or appropriate to enable it to perform its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of Holdings Corp.,
enforceable against Holdings Corp. in accordance with the terms hereof.
(d) As of the date hereof, the authorized capital stock of
Holdings Corp. consists of (i) 250,000 shares of Common Stock, of which
102,499.99 shares are issued and outstanding and (ii) 100,000 shares of
preferred stock, par value $0.01 per share (such shares, of any class whether
heretofore or hereafter designated, being referred to as "Preferred Stock"), of
which (A) 22,000 shares have been designated as Series A Preferred Stock, of
which 20,321.31 shares are issued and outstanding, (B) 35,000 shares have been
designated as Series B Preferred Stock, of which 12,310.54 shares are issued and
outstanding and (C) 25,000 shares have been designated as Series C Preferred
Stock, all of which are issued and outstanding. Except as provided in this
Agreement, in the foregoing sentence or as set forth in the terms of the capital
stock of Holdings Corp., and except for the Warrants and the Options, as of the
Closing Date (x) there will be no rights, subscriptions, warrants, options,
conversion rights, or agreements of any kind outstanding to purchase from
Holdings Corp., or otherwise require Holdings Corp. to issue, any shares of
capital stock of Holdings Corp. or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of Holdings
Corp.; (y) Holdings Corp. will not be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock; and (z) the Common Stock, the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock will constitute all of
the outstanding shares of Holdings Corp.'s capital stock.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH STOCKHOLDER
2.1 Representations, Warranties and Covenants of Each Stockholder. Each
of the Stockholders severally represents and warrants to, and covenants and
agrees with, Holdings Corp. that:
(a) Such Stockholder has full legal right, capacity, power and
authority (including the due authorization by all necessary corporate or
partnership action in the case of corporate or partnership Stockholders) to
enter into this Agreement and to perform such Stockholder's obligations
hereunder without the need for the consent of any other person or entity; and
this Agreement has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with the terms hereof.
(b) Such Management Stockholder's residence address and social
security number are as set forth below such Management Stockholder's signature
to this Agreement.
<PAGE>
(c) Such Stockholder will not effect a Transfer (as hereinafter
defined) of any Securities except in compliance with the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
(and applicable state securities laws) or pursuant to an available exemption
therefrom, and, without limiting the foregoing, will not effect a Transfer of
any Securities prior to the lapse of such period of time following acquisition
thereof as may be required to comply with applicable state securities laws.
2.2 Legend. The certificates representing the Securities, including
certificates issued upon any voluntary or involuntary transfer of such
Securities, unless such transfer is pursuant to a registered public offering of
the Securities or the conditions specified in Section 2.3 hereof are satisfied,
shall bear the following legend in addition to any other legend required under
applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL,
SATISFACTORY TO B&G FOODS HOLDINGS CORP., THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF AN AMENDED AND RESTATED SECURITIES HOLDERS
AGREEMENT BY AND AMONG B&G FOODS HOLDINGS CORP. AND THE HOLDERS
SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF B&G FOODS HOLDINGS CORP. THE SALE, TRANSFER OR
OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH
AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
2.3 Provisions Regarding Transfers of Securities. The following
provisions shall apply with respect to the Transfer (as hereinafter defined) of
any Securities owned by any Management Stockholder, Canterbury Entity or CIT
Entity:
(a) Except as provided in Sections 3.3 and 5.2 hereof and the
provisions set forth below in this Section 2.3, each Management Stockholder,
Canterbury Entity and CIT Entity is prohibited from Transferring any of his or
its Securities except in the following circumstances: (i) to Permitted
Transferees (as hereinafter defined), (ii) pursuant to an Approved Sale (as
hereinafter defined) and in accordance with Section 3.2 hereof and (iii)
pursuant to an effective registration statement under the Securities Act
following exercise of such Stockholder's registration rights under the
Registration Rights Agreement (as defined in Article VI); provided, however,
that, in the case of any such Transfer, except in the case of an Approved Sale
or sale pursuant to an effective registration statement, each such transferee
shall take such Securities subject to and be fully bound by the terms of this
Agreement applicable to it with the same effect as if it were a party hereto;
and provided, further, that no Transfer shall be effected except in compliance
with the registration requirements of the Securities Act (and applicable state
securities laws) or pursuant to an available exemption therefrom.
(b) No Transfer shall, in any event, except in the case of an
Approved Sale or sale pursuant to an effective registration statement, be made
by any Management
<PAGE>
Stockholder, Canterbury Entity or CIT Entity unless in connection with such
Transfer, the applicable transferee has complied with the terms and provisions
of this Agreement. No Management Stockholder, Canterbury Entity, CIT Entity or
transferee may effect any Transfer of Securities, whether to a Permitted
Transferee or otherwise, unless the transferee executes an agreement pursuant to
which such transferee agrees to be bound by the terms and provisions of this
Agreement applicable to the transferor (except in the case of an Approved Sale,
a sale pursuant to an effective registration statement under the Securities Act
or as otherwise specifically provided herein). Any purported Transfer in
violation of this covenant shall be null and void and of no force and effect and
the purported transferee shall have no rights or privileges in or with respect
to Holdings Corp. As used herein, "Transfer" means the making of any sale,
exchange, assignment, hypothecation, gift, security interest, pledge or other
encumbrance, or any contract therefor, any voting trust or other agreement or
arrangement with respect to the transfer of voting rights (including any proxy
or similar arrangement (whether or not revocable)) or any other beneficial
interest in any of the Securities, the creation of any other claim thereto or
any other transfer or disposition whatsoever, whether voluntary or involuntary,
affecting the right, title, interest or possession in or to such Securities.
Prior to any proposed Transfer of any Securities, the holder thereof
shall give written notice to Holdings Corp. describing the manner and
circumstances of the proposed Transfer accompanied, if requested by Holdings
Corp., by a written opinion of legal counsel reasonably satisfactory to Holdings
Corp., addressed to Holdings Corp. and the transfer agent, if other than
Holdings Corp., and reasonably satisfactory in form and substance to each
addressee, to the effect that the proposed Transfer of the Securities may be
effected without registration under the Securities Act and applicable state
securities laws. Each certificate evidencing the Securities transferred shall
bear the legend set forth in Section 2.2, except that such certificate shall not
bear such legend if the opinion of counsel referred to above is to the further
effect that such legend is not required in order to establish compliance with
any provision of the Securities Act or applicable state securities laws.
(c) As used herein, "Permitted Transferee" shall mean:
(i) in the case of any Management Stockholder, (A) Holdings
Corp. or any BRS Entity, (B) any spouse or lineal descendant of a Management
Stockholder, or any heir, executor, administrator, testamentary trustee, legatee
or beneficiary of a Management Stockholder or any of the foregoing persons
referred to in this clause (B) (collectively, "Management Stockholder
Associates") and (C) any trust, the beneficiaries of which, or any corporation,
limited liability company or partnership, the stockholders, members or general
and limited partners of which include only such Management Stockholders and
their respective Management Stockholder Associates;
(ii) in the case of any Canterbury Entity, (A) any other
Canterbury Entity, (B) any Affiliate (as hereinafter defined) of any Canterbury
Entity, (C) any member or partner of Canterbury, provided that, in the case of a
distribution to Canterbury's members or partners, such distribution shall be
made pro rata to all such members or partners in accordance with the terms of
its agreement of limited partnership and (D) one or more banks or other
financial institutions or entities which are not then in direct competition with
Holdings Corp. or any of the Companies, but only if Canterbury is required to
make a Transfer of its Securities to such bank or financial institution or
entity pursuant to Canterbury's agreement of limited partnership or in
connection with any dissolution of Canterbury pursuant to its agreement of
limited partnership; and
<PAGE>
(iii) in the case of any CIT Entity, (A) any other CIT Entity
and (B) any Affiliate of any CIT Entity.
(d) As used herein, "Affiliate" of any person means any person,
directly or indirectly, controlling, controlled by or under common control with
such person, and includes any person who is an officer, director or employee of
such person and any person who would be deemed to be an "affiliate" or an
"associate" of such person, as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended. As used in this definition, "controlling" (including, with its
correlative meanings, "controlled by" and "under common control with") means
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities, partnership or
other ownership interests, by contract or otherwise).
2.4 Notation. A notation will be made in the appropriate transfer
records of Holdings Corp. with respect to the restrictions on transfer of the
Securities referred to in this Agreement.
2.5 Limitation on Repurchase of Securities. Each Stockholder
understands that Holdings Corp. has entered into certain financing agreements
which contain prohibitions, restrictions and limitations on the ability of
Holdings Corp. to purchase any of the Securities and to pay dividends on the
Common Stock and Preferred Stock.
2.6 Reliance. Each Stockholder acknowledges that Holdings Corp. and
each of the other Stockholders is entering into this Agreement in reliance upon
such Stockholder's representations and warranties and other covenants and
agreements contained herein.
ARTICLE III
OTHER COVENANTS AND REPRESENTATIONS
3.1 Financial Statements and Other Information. So long as BRS,
Canterbury or CIT, as the case may be, owns any of the Securities, Holdings
Corp. shall deliver to BRS, Canterbury or CIT, as the case may be:
(a) as soon as practicable and in any event within 30 days after
the end of each of the first eleven monthly accounting periods of each fiscal
year of Holdings Corp. (other than the monthly accounting periods in which
quarterly accounting periods end), monthly reports which shall include the
consolidated balance sheets of Holdings Corp. and its subsidiaries as of the end
of such period, and consolidated statements of income and cash flows of Holdings
Corp. and its subsidiaries for the period then ended prepared in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein, and subject to the absence of footnotes and to
year-end adjustments;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarterly accounting periods of each fiscal year
of Holdings Corp., consolidated balance sheets of Holdings Corp. and its
subsidiaries as of the end of such period, and consolidated statements of income
and cash flows of Holdings Corp. and its subsidiaries for the period then ended
prepared in conformity with generally accepted accounting principles applied on
<PAGE>
a consistent basis, except as otherwise noted therein, and subject to the
absence of footnotes and to year-end adjustments; and
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of Holdings Corp., a consolidated balance sheet of
Holdings Corp. and its subsidiaries as of the end of such year, and consolidated
statements of income and cash flows of Holdings Corp. and its subsidiaries for
the year then ended prepared in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise noted therein,
together with an auditor's report thereon of a firm of established national
reputation.
3.2 Sale of Holdings Corp. or any of the Companies.
(a) If the Board of Directors of Holdings Corp. and holders of at
least a majority of Holdings Corp.'s Common Stock then outstanding approve the
sale of Holdings Corp. or any of the Companies to an unaffiliated third person
(whether by merger, consolidation, reorganization, sale of all or substantially
all of its assets or sale of a majority of the outstanding capital stock) (an
"Approved Sale"), each Stockholder and his or its transferees (including
Permitted Transferees, but excluding transferees who receive such shares of
Common Stock unrestricted as to transfer under the Securities Act)
("Transferees") will consent to, vote for, and raise no objections against, and
waive dissenters and appraisal rights (if any) with respect to, the Approved
Sale, and will sell all of his or its Securities in such Approved Sale upon the
terms and conditions approved by the Board of Directors of Holdings Corp. and
the holders of a majority of the Common Stock then outstanding, provided that
all Stockholders receive the same form and amounts of consideration per share of
the applicable Securities. Each Stockholder and Transferee will take all
necessary and desirable actions in connection with the consummation of an
Approved Sale.
(b) The obligations of each of the Stockholders and the
Transferees with respect to an Approved Sale are subject to the satisfaction of
the conditions that: (i) upon the consummation of the Approved Sale, all of the
Stockholders and the Transferees will receive the same form and amount of
consideration per share of the applicable Securities, or if any holder of
Securities is given an option as to the form and amount of consideration to be
received, all Stockholders and Transferees will be given the same option and
(ii) the terms of the Approved Sale shall not include any provisions subjecting
a Stockholder or its Transferees to any indemnification obligation or other
liability that is beyond the value of the consideration received in the Approved
Sale by such Stockholder or Transferees or that is not ratable with respect to
all such Stockholders and Transferees.
3.3 Tag-Along Rights.
(a) Except in connection with an Approved Sale, each of the BRS
Entities covenants and agrees with the other Stockholders and their Transferees
and assigns that he, she or it will not effect a Transfer of shares of Common
Stock and/or Preferred Stock in, or otherwise participate in, any transaction
that constitute a "Significant Transfer" (as hereinafter defined) unless all
other Stockholders and their Transferees and assigns (collectively, the
"Tag-Along Rightholders") are offered an equal opportunity (the "Tag-Along
Right") to participate in such transaction or transactions on a pro rata basis
(based on the number of shares of Common Stock or Preferred Stock outstanding on
a fully-diluted basis) and on identical terms. As used herein, a "Significant
Transfer" means a Transfer, which either alone or taken together with all prior
Transfers by any BRS Entity, to any person or persons other than a BRS Permitted
Transferee (as hereinafter defined), aggregate to
<PAGE>
one-tenth (1/10) or more of the total number of shares of Common Stock or
Preferred Stock set forth opposite the name of such Stockholder on Exhibit A
hereto. A "BRS Permitted Transferee" shall mean, (A) any other BRS Entity or
other Stockholder, (B) any general partner of a BRS Entity (a "BRS Partner") and
any corporation, partnership or other entity that is an Affiliate of any BRS
Entity or BRS Partner (collectively, "BRS Affiliates"), (C) any managing
director, director, general partner, limited partner, officer or employee of any
BRS Entity or any BRS Affiliate, or any spouse, lineal descendant, sibling or
immediate family member of any BRS Entity or any heir, executor, administrator,
testamentary trustee, legatee or beneficiary of a BRS Entity or any of the
foregoing persons described in this clause (C) (collectively, "BRS Associates")
and (D) any trust, the beneficiaries of which, or any corporation, limited
liability company or partnership, the stockholders, members or general and
limited partners of which include only BRS Entities, BRS Affiliates or BRS
Associates; and
(b) Prior to any sale of Common Stock and/or Preferred Stock
subject to the provisions of Section 3.3(a), the seller (the "Tag-Along Seller")
shall notify Holdings Corp. in writing of the proposed sale. Such notice (the
"Tag-Along Sale Notice") shall set forth: (i) the number of shares of Common
Stock and/or Preferred Stock subject to the proposed sale; (ii) the name and
address of the proposed purchaser; and (iii) the proposed amount of
consideration and terms and conditions of payment offered by such proposed
purchaser. Holdings Corp. shall promptly, and in any event within ten days, mail
or hand deliver or cause to be mailed or hand delivered the Tag-Along Sale
Notice to the Tag-Along Rightholders. Each Tag-Along Rightholder may exercise
the Tag-Along Right by delivery of a written notice (the "Tag-Along Acceptance
Notice") to the Tag-Along Seller within fifteen days of the date Holdings Corp.
mailed or caused to be mailed the Tag-Along Sale Notice. The Tag-Along
Acceptance Notice shall state the number of shares of Common Stock and/or
Preferred Stock that the Tag-Along Rightholder proposes to include in the
proposed sale. If no Tag-Along Acceptance Notice is received during the
fifteen-day period referred to above, the Tag-Along Seller shall have the right
for a 90-day period to effect the proposed sale of shares of Common Stock and/or
Preferred Stock on terms and conditions no more favorable than those stated in
the Tag-Along Sale Notice. Any Stockholder delivering a Tag-Along Acceptance
Notice shall participate in the proposed transaction as set forth in Section
3.3(a). Concurrently with the consummation of the Significant Transfer, the
Tag-Along Seller shall (i) notify each Tag-Along Rightholder who has delivered a
Tag-Along Acceptance Notice (an "Accepting Tag-Along Holder"), (ii) remit to the
Accepting Tag-Along Holder the aggregate consideration for the shares of Common
Stock and/or Preferred Stock to be sold by the Accepting Tag-Along Holders in
the Significant Transfer as contemplated pursuant to Section 3.3(a) hereof, and
(iii) furnish such other evidence of the completion and time of completion of
the Significant Transfer and the terms thereof as may be reasonably requested by
the Accepting Tag-Along Holders.
(c) (i) Notwithstanding the other requirements of this Section
3.3, a Tag-Along Seller may sell Common Stock and/or Preferred Stock at any time
without complying with the requirements of Section 3.3(b) so long as the
Tag-Along Seller deposits into escrow with a nationally recognized financial
institution at the time of sale that amount of consideration received in the
sale equal to the "Escrow Amount." As used herein, the "Escrow Amount" shall
equal that amount of consideration that all Tag-Along Rightholders would have
been entitled to receive if they had the opportunity to participate in the sale
on a pro rata basis, determined as if each Tag-Along Rightholder (A) delivered a
Tag-Along Acceptance Notice to the Tag-Along Seller in the time period set forth
in Section 3.3(b) and (B) proposed to include all of her, his or its shares of
Common Stock and/or Preferred Stock in such sale.
<PAGE>
(ii) The Tag-Along Seller shall notify Holdings Corp. in
writing of the proposed sale pursuant to this Section 3.3(c) no later than the
date of such sale. Such notice (the "Escrow Notice") shall set forth the
information required in the Tag-Along Sale Notice, and in addition, such notice
shall state the name of the escrow agent and, if the consideration (in whole or
in part) for the sale was cash, then the account number of the escrow account.
Holdings Corp. shall promptly, and in any event within ten days, mail or cause
to be mailed the Escrow Notice to each Tag-Along Rightholder. Such Tag-Along
Rightholder may exercise the Tag-Along Right by delivery to the Tag-Along
Seller, within fifteen days of the date Holdings Corp. mailed or caused to be
mailed the Escrow Notice, of (A) a written notice specifying the number of
shares of Common Stock and/or Preferred Stock it proposes to sell and (B) the
certificates for such Common Stock and/or Preferred Stock, with stock powers
duly endorsed in blank and with signatures guaranteed.
(iii) Promptly after the expiration of the fifteenth day
after Holdings Corp. has mailed or caused to be mailed the Escrow Notice, (A)
the Tag-Along Seller shall purchase that number of shares of Common Stock and/or
Preferred Stock as the Tag-Along Seller would have been required to include in
the sale had the Tag-Along Seller complied with the provisions of Section
3.3(b), (B) all shares of Common Stock and/or Preferred Stock not required to be
purchased by the Tag-Along Seller shall be returned to the Tag-Along
Rightholders thereof and (C) all funds and other consideration held in escrow
shall be released to the Tag-Along Seller. If the Tag-Along Seller received
consideration other than cash in his, her or its sale, the Tag-Along Seller
shall purchase the shares of Common Stock and/or Preferred Stock tendered by
paying to the Tag-Along Rightholders the same non-cash consideration and cash in
the same proportion as received by the Tag-Along Seller in the sale. The
Tag-Along Seller shall pay all costs and expenses of the escrow agent, and any
interest on the Escrow Amount shall accrue to the benefit of Holdings Corp.
(d) The Tag-Along Rights provided pursuant to this Section 3.3
shall terminate upon an Initial Public Offering or upon a distribution by BRS
upon its liquidation of all the Securities to its partners. An "Initial Public
Offering" shall mean the sale by Holdings Corp. pursuant to an effective
registration statement under the Securities Act of Common Stock for gross
offering proceeds of at least $20 million.
3.4 Covenant Not to Compete. Each Management Stockholder hereby agrees
that during the term of his employment by any of the Companies and for a period
of six (6) months after the Management Stockholder has incurred a Termination
Date (as defined in Section 5.3(a)) for any reason other than termination
without Cause (as defined in Section 5.1) (the "Restriction Period"), such
Management Stockholder shall not, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of, or be connected as an officer, director, employee, consultant, stockholder,
partner or otherwise with, any component of a business which at any relevant
time during such period directly or indirectly competes with any of the
Companies or their Affiliates in the Covered Business (as hereafter defined) in
the States of California, Delaware, Maryland, Michigan, New Jersey, New York or
Vermont or any other state in the United States in which any of the Companies or
their Affiliates are conducting business during the term of his employment. For
purposes hereof, the term "Covered Business" shall mean the purchase,
manufacture, marketing or selling of the products and the raw materials with
respect to such products as to which the Management Stockholder has assisted the
Companies or their Affiliates in purchasing, manufacturing, marketing or selling
during the term of the employment of the Management Stockholder, together with
any use or modification of any such products for the same, new or additional
purposes or applications. The restrictive covenant contained in this Section 3.4
is a covenant independent of any other provision of this Agreement, and the
existence of any
<PAGE>
claim which such Management Stockholder may allege against any of the Companies,
whether based on this Agreement or otherwise, shall not prevent the enforcement
of this covenant. Each of the Management Stockholders agrees that a breach by
him of this Section 3.4 shall cause irreparable harm to the Companies and their
Affiliates and that the Companies' and Holdings Corp.'s remedies at law for any
breach or threat of breach by any of the Management Stockholders of the
provisions of this Section 3.4 shall be inadequate, and that the Companies or
Holdings Corp. shall be entitled to an injunction or injunctions to prevent
breaches of this Section 3.4 and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which the Companies may be
entitled at law or in equity. The length of time for which this covenant not to
compete shall be in force shall not include any period of violation or any other
period required for litigation during which any of the Companies seeks to
enforce this covenant. In the event that this covenant not to compete shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the longest period of time for which it may be
enforceable, and/or over the largest geographical area as to which it may be
enforceable and/or to the maximum extent in all other aspects as to which it may
be enforceable, all as determined by such court in such action.
3.5 Preemptive Rights. Except for Exempt Issuances (as defined below),
if Holdings Corp. issues any equity securities or any securities containing
options or rights to acquire any equity securities or any securities convertible
or exchangeable for equity securities in each case, after the date hereof to any
person (the "Offeree"), Holdings Corp. will offer to sell to each Stockholder, a
number of such securities ("Offered Shares") so that the Ownership Ratio (as
defined below) immediately after the issuance of such securities for each
Stockholder would be equal to the Ownership Ratio for such Stockholder
immediately prior to such issuance of securities. Holdings Corp. shall give each
Stockholder at least 30 days prior written notice of any proposed issuance,
which notice shall disclose in reasonable detail the proposed terms and
conditions of such issuance (the "Issuance Notice"). Each Stockholder will be
entitled to purchase such securities at the same price, on the same terms, and
at the same time as the securities are issued to the Offeree by delivery of
written notice to Holdings Corp. of such election within 15 days after delivery
of the Issuance Notice (the "Election Notice"). If any of the Stockholders have
elected to purchase any Offered Shares, the sale of such shares shall be
consummated as soon as practical (but in any event within 10 days) after the
delivery of the Election Notice. In the event any Stockholder elects not to
exercise its rights pursuant to this Section 3.5, no other Stockholder shall
have the right to purchase the securities offered to such Stockholder. This
Section 3.5 will terminate automatically, and be of no further force and effect,
upon the consummation of an Initial Public Offering. As used herein, the term
"Exempt Issuances" mean (i) the issuance of equity securities pursuant to the
conversion or exercise of convertible or exercisable securities, (ii) the
issuance or sale of up to ten percent (10%) of equity securities or options or
warrants therefor (on a fully diluted basis and after giving effect to such
issuance or sale) to service providers of Holdings Corp. or its subsidiaries for
the primary purpose of soliciting or retaining their services or employment, or
otherwise providing compensation to such person, (iii) the issuance of
securities (other than to Affiliates of Holdings Corp.) in connection with a
bona fide business acquisition of or by Holdings Corp. or its subsidiaries,
whether by merger, consolidation, sale of assets, sale or exchange of stock or
otherwise and (iv) the issuance of up to ten percent (10%) of securities (on a
fully diluted basis and after giving effect to such issuance) to persons (other
than Affiliates of Holdings Corp.) with which Holdings Corp. or its subsidiaries
have bona fide business relationships, provided such issuances are for other
than equity financing purposes. As used herein, the term "Ownership Ratio"
means, as to a Stockholder at the time of determination, the percentage obtained
by dividing the amount of shares of Common Stock held by
<PAGE>
such Stockholder on a fully diluted basis at such time by the aggregate amount
of shares of Common Stock held by all shareholders of Holdings Corp. on a fully
diluted basis at such time.
ARTICLE IV
CORPORATE ACTIONS
4.1 Directors. (a) Each Stockholder and Permitted Transferee agrees
that it shall take, at any time and from time to time, all action necessary
(including voting the Common Stock owned by him, her or it, calling special
meetings of stockholders and executing and delivering written consents) to
ensure that the Board of Directors of Holdings Corp. is composed at all times of
such number of persons as the Board of Directors shall determine and that the
Board of Directors shall be composed of at least the following persons: one
individual designated by the Management Stockholders holding a majority of the
Common Stock owned by the Management Stockholders (who shall be, subject to the
rights of the Management Stockholders under Section 4.2, David L. Wenner for so
long as he is President of B&G Foods, Inc., a Delaware corporation); one
individual designated by Canterbury (until the later of (i) the date on which
the Canterbury Entities cease to own at least 50% of the Series C Preferred
Stock and 50% of the Warrants set forth opposite their names on Exhibit A hereto
and (ii) 455 days from the date hereof); and three individuals designated by BRS
(so long as the BRS Entities continue to own at least 50% of the Common Stock
set forth opposite their names on Exhibit A hereto).
(b) In accordance with the procedures established in Section 228
of the Delaware General Corporation Law, the Stockholders, being all of the
shareholders of Holdings Corp. entitled to vote, do hereby dispense with the
formality of a meeting and approve and ratify the election of the following
persons as the directors of Holdings Corp. to hold office until the next annual
meeting of stockholders and until their respective successors shall have been
elected and qualified or until resignation, removal or death as provided in the
Bylaws of Holdings Corp. and this Agreement:
Harold O. Rosser II
Stephen C. Sherrill
Walker Simmons
David L. Wenner
Patrick N. W. Turner
4.2 Right to Remove Certain of Holdings Corp.'s Directors. Each of BRS,
Canterbury and the Management Stockholders holding a majority of the Common
Stock owned by the Management Stockholders, as the case may be, may request that
any director designated by it be removed (with or without cause) by written
notice to the other Stockholders, and, in any such event, each Stockholder shall
promptly consent in writing or vote or cause to be voted all shares of Common
Stock now or hereafter owned or controlled by it for the removal of such person
as a director. In the event any person ceases to be a director, such person
shall also cease to be a member of any committee of the Board of Directors of
Holdings Corp.
4.3 Right to Fill Certain Vacancies in Holdings Corp.'s Board. In the
event that a vacancy is created on Holdings Corp.'s Board of Directors at any
time by the death, disability, retirement, resignation or removal (with or
without cause) of a director designated by BRS, Canterbury or the Management
Stockholders holding a majority of the Common Stock owned by the
<PAGE>
Management Stockholders, as the case may be, or if otherwise there shall exist
or occur any vacancy on Holdings Corp.'s Board of Directors in a directorship
subject to designation by BRS, Canterbury or the Management Stockholders holding
a majority of the Common Stock owned by the Management Stockholders, as the case
may be, such vacancy shall not be filled by the remaining members of Holdings
Corp.'s Board of Directors, but each Stockholder hereby agrees promptly to
consent in writing or vote or cause to be voted all shares of Common Stock now
or hereafter owned or controlled by it to elect that individual designated to
fill such vacancy and serve as a director, as shall be designated by BRS,
Canterbury or the Management Stockholders holding a majority of the Common Stock
owned by the Management Stockholders, as the case may be.
4.4 Subsidiaries Governance. Each Stockholder agrees that the board of
directors of each of the Companies shall be comprised of one individual
designated by BRS (so long as the BRS Entities continue to own at least 50% of
the Common Stock set forth opposite their names on Exhibit A hereto). Each
Stockholder agrees to vote all of its Securities and to cause its
representatives on the Board of Directors of Holdings Corp., subject to their
fiduciary duties, to vote and take other appropriate action to effectuate the
agreement set forth in this Sections 4.4 in respect of each of the Companies.
4.5 Management Rights of BRS. For so long as the BRS Entities own in
the aggregate at least 2% of the outstanding Common Stock on a fully diluted
basis and there has not been an Initial Public Offering:
(a) Right of Consultation. BRS shall have the right, and Holdings
Corp. shall cause each of the Companies to grant to BRS the right, to consult
with and advise the management of Holdings Corp. and its subsidiaries, at any
time or from time to time, on all matters relating to the operation of Holdings
Corp. and its subsidiaries, including, without limitation, significant changes
in management personnel and compensation or employee benefits, the introduction
of new products or new lines of business, important acquisitions or dispositions
of plant and equipment, significant research and development programs, the
purchase or sale of important patents, trademarks, licenses and concessions, and
the proposed compromise of any significant litigation.
(b) Observation Rights. BRS shall have the right, and Holdings
Corp. shall cause each of the Companies to grant to BRS the right, to have its
representatives (in addition to its representatives that are directors) attend
meetings of the Board of Directors (and committees thereof) of Holdings Corp.
and each of the Companies. Holdings Corp. shall give, or shall cause each of the
Companies to give, as appropriate, to BRS (i) at least three days' notice of
each regular meeting of the Board of Directors of Holdings Corp. and each of the
Companies, (ii) such notice as is necessary under the circumstances to enable
BRS's representatives to attend each special or emergency meeting of the Board
of Directors of Holdings Corp. and each of the Companies, (iii) on or prior to
the date of each meeting of the Board of Directors of Holdings Corp. and each of
the Companies all information given to the directors at such meeting and (iv)
within 90 days following each meeting of the Board of Directors of Holdings
Corp. and each of the Companies, copies of the minutes of such meeting.
(c) Inspection and Access. In addition to the reporting
requirements set forth in Section 3.1 hereof, Holdings Corp. shall provide to
BRS Entities true and correct copies of all quarterly and annual financial
reports of each of the Companies and budgets prepared by or on behalf of
Holdings Corp. and of each of the Companies, and such other documents, reports,
financial
<PAGE>
data and other information as BRS Entities may reasonably request. Holdings
Corp. shall permit any authorized representatives designated by BRS Entities to
visit and inspect any of the properties of Holdings Corp. or any of its
subsidiaries, including its and their books of account (and to make copies and
take extracts therefrom), and to discuss its and their affairs, finances and
accounts with its and their officers and their current and prior independent
public accountants (and by this provision Holdings Corp. authorizes such
accountants to discuss with such representatives the affairs, finances and
accounts of Holdings Corp. and its subsidiaries, whether or not a representative
of Holdings Corp. is present), all at such reasonable times and as often as BRS
Entities may reasonably request.
4.6 Management Rights of Canterbury. For so long as the Canterbury
Entities own in the aggregate at least 2% of the outstanding Common Stock on a
fully diluted basis and there has not been an Initial Public Offering,
Canterbury shall have the right, and Holdings Corp. shall cause each of the
Companies to grant to Canterbury the right, to have its representatives (in
addition to its representative that is a director) attend meetings of the Board
of Directors (and committees thereof) of Holdings Corp. and each of the
Companies. Holdings Corp. shall give, or shall cause each of the Companies to
give, as appropriate, to Canterbury (i) at least three days' notice of each
regular meeting of the Board of Directors of Holdings Corp. and each of the
Companies, (ii) such notice as is necessary under the circumstances to enable
Canterbury's representatives to attend each special or emergency meeting of the
Board of Directors of Holdings Corp. and each of the Companies, (iii) on or
prior to the date of each meeting of the Board of Directors of Holdings Corp.
and each of the Companies all information given to the directors at such meeting
and (iv) within 90 days following each meeting of the Board of Directors of
Holdings Corp. and each of the Companies, copies of the minutes of such meeting.
4.7 Confidentiality.
(a) Each Stockholder hereby agrees that Confidential Information
(as defined below) has been and will be made available to him or it in
connection with such Stockholder's interest in Holdings Corp. and its
subsidiaries. Each Stockholder agrees that he or it will not use the
Confidential Information in any way that is reasonably likely to result in a
material detriment to the business of Holdings Corp. and its subsidiaries. Each
Stockholder further acknowledges and agrees that he or it will not disclose any
Confidential Information to any person; provided that Confidential Information
may be disclosed (i) to such Stockholder's Representatives (as defined below) in
the normal course of the performance of their duties, (ii) to the extent
required by applicable statute, law, rule or regulation (including complying
with any oral or written questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process to which a
Stockholder is subject) or by generally accepted accounting principles, (iii) to
any third party to whom such Stockholder is contemplating a transfer of his or
its Securities, provided that such transfer would not be in violation of the
provisions of this Agreement and as long as such third party is advised of the
confidential nature of such information and agrees to be bound by a
confidentiality agreement in form and substance satisfactory to Holdings Corp.
and substantially similar to the provisions hereof or (iv) if the prior consent
of the Board of Directors of Holdings Corp. shall have been obtained. Nothing
contained herein shall prevent the use of Confidential Information in connection
with the assertion or defense of any claim by or against Holdings Corp. or any
Stockholder.
(b) "Confidential Information" means any information concerning
Holdings Corp., its financial condition, business, subsidiaries, operations or
prospects in the possession of or to be furnished to any Stockholder in his or
its capacity as a shareholder of Holdings
<PAGE>
Corp. or by virtue of his or its present or former position as, or right to
designate, a director of Holdings Corp.; provided that the term "Confidential
Information" does not include information which (a) was or becomes generally
available publicly other than as a result of a disclosure by a Stockholder or
his or its partners, directors, officers, employees, agents, counsel, investment
advisers, accountants, consultants or representatives (all such persons being
collectively referred to as "Representatives") in violation of this Section 4.7
or (b) was or becomes available to such Stockholder on a nonconfidential basis
from a source other than Holdings Corp., any regulatory entity or a Stockholder
or his or its Representatives, provided that such source is or was (at the time
of receipt of the relevant information) not, to the best of such Stockholder's
knowledge, bound by a confidentiality agreement with Holdings Corp. or another
person.
ARTICLE V
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
SECURITIES HELD BY MANAGEMENT STOCKHOLDERS
5.1 Certain Definitions. The terms defined below shall have the
following meanings when used in this Article V:
(a) "Accumulated Dividends" mean, with respect to any share of
Preferred Stock, the dividends that have accumulated on such share as of such
specific date for dividend periods ending on or prior to such date and that have
not previously been paid in cash;
(b) "Adjusted Cost Price" for each share of Common Stock or
Preferred Stock means the lower of (i) the relevant Fair Market Value Price and
(ii) the original purchase price per share for the Management Stockholder's
Common Stock or Preferred Stock, as the case may be (adjusted for any stock
dividend payable upon, or subdivision or combination of, the Common Stock or
Preferred Stock, as the case may be);
(c) "Cause", when used in connection with the termination of a
Management Stockholder's employment with any of the Companies, means that the
Management Stockholder shall have, in the judgment of a majority of the board of
directors of the relevant Company: (i) committed a felony, or committed an act
of fraud, embezzlement or theft in connection with his duties with such Company
or in the course of his employment with such Company; (ii) wrongfully caused
significant damage to property of such Company; (iii) engaged in conduct which
constitutes a material violation of published corporate policy of such Company,
(iv) been convicted of a criminal offense (whether felony or a misdemeanor) the
nature of which renders him unfit to serve in his present capacity with such
Company; or (v) persistently failed to adequately perform his duties and
responsibilities assigned in connection with his employment with such Company by
either the board of directors or a superior executive officer of such Company,
provided that in the case of Leonard S. Polaner such duties and responsibilities
shall be determined by the Board of Directors of Holdings Corp. and shall not
require Mr. Polaner to devote more than 100 days per year to the performance of
such duties and responsibilities (and it is understood that Mr. Polaner has
other responsibilities and conflicts that may require reasonable reconciliation
with his duties and responsibilities to the Companies; provided that, the
foregoing considerations in no way shall limit Mr. Polaner's obligations under
Section 3.4 hereof);
(d) "Consolidated Net Earnings" mean, for any period, the
consolidated net income of Holdings Corp. during such period determined in
accordance with generally accepted
<PAGE>
accounting principles, but excluding therefrom all extraordinary and/or
nonrecurring items of income or loss;
(e) "EBITDA" means, for any period, an amount equal to the sum of
(i) the Consolidated Net Earnings of Holdings Corp. for such period, plus (ii)
all amounts deducted in the computation thereof on account of (a) taxes, (b)
amortization and depreciation and (c) Interest Charges;
(f) "Fair Market Value Price" for each share of Common Stock or
Preferred Stock at any particular date of determination means (i) in the case of
the Common Stock, the price per share for the Management Stockholder's Common
Stock based on (a) multiplying Holdings Corp.'s EBITDA during the 12 full
calendar months immediately preceding such date by the number six (6), (b)
subtracting from the product obtained pursuant to clause (a) all Indebtedness
for Borrowed Money of Holdings Corp. and its subsidiaries outstanding on such
date and the aggregate liquidation preference (plus accrued and unpaid
dividends) of all shares of Preferred Stock of Holdings Corp. and its
subsidiaries outstanding on such date and (c) dividing the difference of the
foregoing clauses (a) and (b) (such difference being referred to herein as the
"Enterprise Value") by the total number of outstanding shares of Common Stock;
provided, that if any of the Common Stock is traded on a national securities
exchange or quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System, then the "Fair Market Value Price" shall equal for
each share of Common Stock the closing price per common share on such exchange,
or as so quoted, on the Management Stockholder's Termination Date; and (ii) in
the case of the Preferred Stock, the lesser of (a) the Liquidation Preference
(plus an amount equal to a pro rated dividend from the end of the last dividend
period to the particular date of determination) of each share of Preferred Stock
and (b) the price per share for the Management Stockholder's Preferred Stock
calculated by dividing the Enterprise Value (calculated without deducting the
aggregate Liquidation Preference of the outstanding Preferred Stock) by the
number of outstanding shares of Preferred Stock;
(g) "Indebtedness" includes all obligations, contingent and
otherwise, which in accordance with generally accepted accounting principles
should be classified upon the obligor's balance sheet as liabilities, or to
which reference should be made by footnotes thereto, including without
limitation, in any event and whether or not so classified: (i) all debt and
similar monetary obligations, whether direct or indirect; (ii) all liabilities
secured by any mortgage, pledge, security interest, lien, charge, or other
encumbrance existing on property owned or acquired subject thereto, whether or
not the liability secured thereby shall have been assumed; (iii) all guaranties,
endorsements and other contingent obligations whether direct or indirect in
respect of Indebtedness of others, including any obligation to supply funds to
or in any manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise;
and (iv) obligations to reimburse issuers of any letters of credit;
(h) "Indebtedness for Borrowed Money" means (i) all Indebtedness
of Holdings Corp. and its subsidiaries for borrowed money, whether current or
funded, or secured or unsecured, (ii) all Indebtedness of Holdings Corp. and its
subsidiaries for the deferred purchase price of property or services represented
by a note or other security, (iii) all Indebtedness of Holdings Corp. and its
subsidiaries created or arising under any conditional sale or other title
retention agreement with respect to property acquired by Holdings Corp. or its
subsidiaries (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to
<PAGE>
repossession or sale of such property), (iv) all Indebtedness of Holdings Corp.
and its subsidiaries secured by a purchase money mortgage or other lien to
secure all or part of the purchase price of property subject to such mortgage or
lien, (v) all obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which Holdings Corp. or its subsidiaries are liable as
lessee, (vi) any liability of Holdings Corp. or its subsidiaries in respect of
banker's acceptances or letters of credit, and (vii) all Indebtedness referred
to in clause (i), (ii), (iii), (iv), (v) or (vi) above which is directly or
indirectly guaranteed by Holdings Corp. or any of its subsidiaries or which
Holdings Corp. or any of its subsidiaries has agreed (contingently or otherwise)
to purchase or otherwise acquire or in respect of which it has otherwise assured
a creditor against loss;
(i) "Interest Charges" mean, for any period, the expenses of
Holdings Corp. and its subsidiaries for such period for interest on Indebtedness
(including the current portion thereof) and for commitment fees, agency fees,
facility fees, balance deficiency fees and similar expenses in connection with
the borrowing of money;
(j) "Liquidation Preference" means, on any specific date, with
respect to any share of Preferred Stock, the sum of (i) the original purchase
price per share of the Preferred Stock plus (ii) the Accumulated Dividends with
respect to such share; and
(k) "Purchase Option Period" means, as to a particular Management
Stockholder, (i) in the event such Management Stockholder does not incur a
Termination Date (as defined in Section 5.3(a)) on or prior to the fifth
anniversary of the date on which such Management Stockholder acquired or shall
have acquired the subject share(s) of Common Stock or Preferred Stock (the
"Acquisition Date"), the period beginning on the Acquisition Date and ending on
(and including) the fifth anniversary of the Acquisition Date, and (ii) in the
event such Management Stockholder incurs a Termination Date on or prior to the
fifth anniversary of the Acquisition Date, the period beginning on the
Acquisition Date and ending on (and including) the date which is 165 days after
the later of such Termination Date or the date Holdings Corp. receives the
notice of termination of such Management Stockholder referred to in Section
5.3(a).
5.2 Restrictions on Transfer. In addition to complying with the
conditions to Transfer imposed by Section 2.3, and notwithstanding anything to
the contrary contained herein, during the Purchase Option Period, no Management
Stockholder nor his Permitted Transferees shall effect a Transfer of any
Securities other than (i) pursuant to Section 3.2 in connection with an Approved
Sale, (ii) pursuant to Section 3.3 in connection with the exercise of Tag-Along
Rights, (iii) pursuant to the Registration Rights Agreement (as defined in
Article VI), (iv) pursuant to Section 5.3 in connection with the Purchase Option
(as hereinafter defined), (v) with the consent of Holdings Corp. (as evidenced
by a resolution duly adopted by at least a majority of the non-employee members
of Holdings Corp.'s Board of Directors) or (vi) to a Permitted Transferee of the
Management Stockholder in question. Following the Purchase Option Period, each
Management Stockholder and his Permitted Transferees agree that none of them
will effect a Transfer of any Securities without first complying with the
provisions of Section 5.4 hereof, if then in effect.
In exercising the consent and approval provided for in clause (v)
above, Holdings Corp. may employ its sole discretion in evaluating the nature of
the proposed transferee and Holdings Corp. may impose such conditions on
Transfer as it deems appropriate in its sole discretion, including, but not
limited to, requirements that the transferee be an employee of Holdings Corp. or
its subsidiaries and that the transferee purchase the Management Stockholder's
(or his Permitted
<PAGE>
Transferee's) Securities as a "Management Stockholder" subject to the
restrictions of this Agreement and, in particular, Section 2.3 and this Article
V. In the event any Transfer is authorized pursuant to clause (v) above to an
employee of Holdings Corp. or its subsidiaries as a "Management Stockholder,"
such employee shall execute an agreement, in form and substance satisfactory to
Holdings Corp., pursuant to which such employee shall agree to be bound by the
terms and conditions of this Agreement and such other provisions as Holdings
Corp. may determine, and upon such execution such employee shall be entitled to
the benefit of such provisions hereof and such other provisions as Holdings
Corp. determines and are set forth in such agreement. Any purported Transfer in
violation of this Agreement shall be null and void and of no force and effect
and the purported transferees shall have no rights or privileges in or with
respect to Holdings Corp. Notwithstanding the foregoing provisions, each
Management Stockholder agrees that he will not effect a Transfer of any
Securities prior to the lapse of such period of time following acquisition
thereof as may be required to comply with applicable state securities laws.
5.3 Purchase Option.
(a) General Terms. In the event that on or prior to the fifth
anniversary of the Acquisition Date, any Management Stockholder shall cease to
be employed by any of the Companies for any reason (including, but not limited
to, death, temporary or permanent disability, retirement, resignation or
termination by such Company with or without Cause), other than by reason of a
leave of absence approved by such Company, such Management Stockholder or such
Management Stockholder's Permitted Transferees (or, in the case of death, his or
their estate) shall give prompt notice to Holdings Corp. of such termination of
employment, and Holdings Corp., or one or more designee(s) selected by a
majority of the members of the Board of Directors of Holdings Corp., shall have
the right and option (the "Purchase Option") at any time within 120 days after
the later of the effective date of such termination of employment (the
"Termination Date") or the date of Holdings Corp.'s receipt of the aforesaid
notice, to purchase from such Management Stockholder, or such Management
Stockholder's Permitted Transferees, as the case may be, any or all of the
Securities then owned by such Management Stockholder and such Management
Stockholder's Permitted Transferees at the Option Purchase Price (as hereinafter
defined). Holdings Corp. or its designee(s) shall give notice to the terminated
Management Stockholder (or such Management Stockholder's Permitted Transferees)
of its intention to purchase the Securities not later than within 120 days after
the later of the Termination Date or the date of Holdings Corp.'s receipt of the
aforesaid notice. The Termination Date for a Permitted Transferee shall be the
Termination Date with respect to the Management Stockholder who first acquired
the Securities held by such Permitted Transferee.
(i) Exercise of Purchase Option. The Purchase Option shall be
exercised by written notice to the terminated Management Stockholder and
Permitted Transferees signed by an officer of Holdings Corp. on behalf of
Holdings Corp. or by its designee(s), as the case may be, prior to the end of
the 120-day period. Such notice shall set forth the number of shares of Common
Stock and Preferred Stock desired to be purchased and shall set forth a time and
place of closing which shall be no earlier than 10 days and no later than 60
days after the date such notice is sent. At such closing, the seller shall
deliver the certificates evidencing the number of shares of Common Stock and
Preferred Stock to be purchased by Holdings Corp. and/or its designee(s),
accompanied by stock powers duly endorsed in blank or duly executed instruments
of transfer, and any other documents that are necessary to transfer to Holdings
Corp. and/or its designee(s) good title to the Securities to be transferred,
free and clear of all pledges, security interests, liens, charges, encumbrances,
equities, claims and options of whatever nature other than those imposed under
this
<PAGE>
Agreement, and concurrently with such delivery, Holdings Corp. and/or its
designee(s) shall deliver to the seller the full amount of the Option Purchase
Price for such Securities in cash or by certified or bank cashier's check.
In the event that Holdings Corp. (or its designee(s)) does
not send the notice described above within such 120-day period or does not
exercise the Purchase Option with respect to all of the Securities subject to
the Purchase Option, Holdings Corp. (or if Holdings Corp. fails to give such
notice, the terminated Management Stockholder) shall give notice of such failure
to the other Stockholders, and the other Stockholders shall thereupon have the
right and option to purchase the Securities not to be purchased by Holdings
Corp. (or its designee(s)) and may give notice of such intention at any time not
later than 45 days after the date on which the notice is sent to the other
Stockholders. The notice to the Stockholders shall set forth the number and kind
of Securities available for purchase by such Stockholders and the applicable
purchase prices.
If the other Stockholders elect to purchase an aggregate
number of Common Stock and/or Preferred Stock in excess of the number of Common
Stock and/or Preferred Stock that are ultimately determined to be available for
purchase by them, such Common Stock and/or Preferred Stock shall be allocated
among the other Stockholders who desire to purchase such Common Stock and/or
Preferred Stock in proportion to the number of Common Stock and/or Preferred
Stock (on a fully diluted basis) owned by each of them; provided that no such
other Stockholder shall become bound to purchase a number of offered Common
Stock and Preferred Stock greater than the number of shares of such Common Stock
and/or Preferred Stock it or he had elected to purchase. If the foregoing
allocation procedure does not allocate all the Common Stock and/or Preferred
Stock (because one or more Stockholders would otherwise have been allocated more
than the number of shares of Common Stock and/or Preferred Stock it or he
elected to purchase), then the remaining such shares of Common Stock and/or
Preferred Stock shall be allocated among the other Stockholders who desire to
purchase such Common Stock and/or Preferred Stock in proportion to the number of
shares of Common Stock and/or Preferred Stock (on a fully diluted basis) owned
by each of them, and such allocation procedure shall continue until all such
Common Stock and/or Preferred Stock shall have been allocated. Promptly upon
determining the number and kind of shares of Common Stock and/or Preferred Stock
which each purchasing Stockholder will purchase and the purchase prices
therefor, Holdings Corp. shall send notices thereof to the terminated Management
Stockholder and each of the purchasing Stockholders. Such notices shall also set
forth a time and place of closing for the purchases by the other Stockholders,
which closing shall be no earlier than 10 days and no later than 60 days after
the date such notices are sent.
(ii) Option Purchase Price. If the Management Stockholder
shall be terminated by any of the Companies without Cause or shall cease to be
employed by any of the Companies by reason of death or temporary or permanent
disability, the "Option Purchase Price" for the Common Stock and/or Preferred
Stock to be purchased from such Management Stockholder or such Management
Stockholder's Permitted Transferees pursuant to the Purchase Option (such number
of shares of Common Stock and/or such number of shares of Preferred Stock, each
being referred to as the "Purchase Number") shall equal the price calculated as
set forth in the table below opposite the applicable Termination Date of such
Management Stockholder:
<PAGE>
Option
If the Termination Date Occurs: Purchase Price
- ------------------------------ --------------
On or prior to the first anniversary Adjusted Cost Price multiplied by
of the Acquisition Date the Purchase Number
After the first anniversary of the Adjusted Cost Price multiplied by
Acquisition Date, and on or prior 80% of the Purchase Number, plus Fair
to the second anniversary of the Market Value Price multiplied by 20%of
Acquisition Date the Purchase Number
After the second anniversary of the Adjusted Cost Price multiplied by 60% of
Acquisition Date, and on or prior to the Purchase Number, plus Fair Market
the third anniversary of the Value Price multiplied by 40% of the
Acquisition Date Purchase Number
After the third anniversary of the Adjusted Cost Price multiplied by 40% of
Acquisition Date, and on or prior the Purchase Number, plus Fair Market
to the fourth anniversary of the Value Price multiplied by 60% of the
Acquisition Date Purchase Number
After the fourth anniversary of the Adjusted Cost Price multiplied by 20% of
Acquisition Date, and on or prior the Purchase Number, plus Fair Market
to the fifth anniversary of the Value Price multiplied by 80% of the
Acquisition Date Purchase Number
After the fifth anniversary of the Fair Market Value Price multiplied by
Acquisition Date the Purchase Number
Notwithstanding anything to the contrary contained herein, if
the Management Stockholder shall cease to be employed by any of the Companies
for any reason other than those set forth in the first sentence of this Section
5.3(a)(ii) (including, but not limited to, termination for Cause), the Option
Purchase Price for all shares of Common Stock and/or Preferred Stock to be
purchased from the Management Stockholder (and such Management Stockholder's
Permitted Transferees) pursuant to the Purchase Option shall equal the Adjusted
Cost Price multiplied by the Purchase Number.
The Purchase Option will lapse upon the earliest to occur of
(i) the expiration of the Purchase Option Period with respect to all Securities
held by Management Stockholders, (ii) the 180th day following an Initial Public
Offering and (iii) a transfer of Securities by BRS as to which Tag-Along Rights
apply, but only with respect to Securities sold pursuant to such Tag-Along
Rights.
(iii) Sale In Public Offering. Common Stock sold pursuant to
an effective registration statement under the Securities Act will be sold free
of the restrictions contained in this Article V, but this Article V shall
continue to apply in accordance with its terms to all Common Stock not sold in
such offering. If less than all of a Management Stockholder's shares of Common
Stock are sold in such an offering, for purposes of any subsequent calculation
hereunder of
<PAGE>
the Option Purchase Price for the Common Stock, the Option Purchase Price for
the Common Stock shall equal: (a) the Adjusted Cost Price multiplied by the
product of the Adjusted Cost Price Percentage and the Adjusted Purchase Number
(as hereinafter defined); plus (b) the Fair Market Value Price multiplied by the
product of the Fair Market Value Price Percentage and the Adjusted Purchase
Number, less (c) the product of the Publicly-Sold Stock (as hereinafter defined)
and the Fair Market Value Price, where: (w) "Publicly-Sold Stock" means the
total number of shares of Common Stock previously sold by the respective
Management Stockholder in a public offering, (x) "Adjusted Purchase Number"
means the sum of the Purchase Number and the Publicly-Sold Stock, (y) "Fair
Market Value Price Percentage" means 20% multiplied by the number of full years
elapsed since the Closing Date, and (z) "Adjusted Cost Price Percentage" means
100% minus the Fair Market Value Price Percentage. Notwithstanding the
foregoing, the Option Purchase Price for the Common Stock at all times shall
equal or exceed the product of the Adjusted Cost Price and the Purchase Number.
5.4 Right of First Refusal on Transfer of Management Stockholder
Securities.
(a) Right of First Refusal. In the event that any time after the
expiration of the Purchase Option Period, a Management Stockholder (or his
Permitted Transferees) receives a bona fide offer (a "Transfer Offer") to
purchase any or all of the Securities (the "Transfer Securities") then owned by
the Management Stockholder (or his Permitted Transferees) from any person (the
"Offeror") which the Management Stockholder (or his Permitted Transferees)
wishes to accept, then the Management Stockholder (and his Permitted
Transferees) shall give Holdings Corp. and the other Stockholders written notice
thereof ("Transfer Notice"), which Transfer Notice shall state in reasonable
detail all material terms of such proposed sale or other transfer, the identity
of the Offeror, the price or other consideration for which the Securities are
proposed to be sold or transferred, and the number of Securities to be sold or
transferred, and shall also contain an irrevocable offer to sell the Transfer
Securities to Holdings Corp. at the price and on the terms contained in the
Transfer Offer. After its receipt of the Transfer Notice, Holdings Corp. and/or
its designee(s) shall have the right and option to purchase all, but not less
than all (unless other Stockholders purchase the remainder), of the Transfer
Securities at the price and on the terms of the Transfer Offer set forth in the
Transfer Notice. Within 45 days after receipt of the Transfer Notice, Holdings
Corp. and/or its designee(s) shall notify such Management Stockholder (or his
Permitted Transferees) whether or not it wishes to purchase the Transfer
Securities and, if so, indicating the number of Transfer Securities desired to
be purchased.
In the event that Holdings Corp. and/or its designee(s) does not
elect to purchase all such Transfer Securities, the selling Management
Stockholder (or his Permitted Transferees) shall give notice of such failure to
the other Stockholders, and the other Stockholders shall thereupon have the
right and option to purchase in the aggregate all, but not less than all, the
Transfer Securities not to be purchased by Holdings Corp. and/or its designee(s)
and may give notice to the selling Management Stockholder (or his Permitted
Transferees) (with a copy to Holdings Corp.) of such intention at any time not
later than 45 days after the date on which such notice is sent by the selling
Management Stockholder (or his Permitted Transferees) to such other
Stockholders. Each electing Stockholder's notice shall indicate the number of
Transfer Securities it desires to purchase. If the other Stockholders elect to
purchase an aggregate number of Transfer Securities in excess of the number of
Transfer Securities which Holdings Corp. and/or its designee(s) did not elect to
purchase, the Transfer Securities shall be allocated among the other
Stockholders who desire to purchase such Transfer Securities in accordance with
the allocation provisions which are set forth in Section 5.3(a)(i). Promptly
upon determining the number of the selling Management Stockholder's
<PAGE>
Securities which each purchasing Stockholder will purchase and the purchase
price therefor, Holdings Corp. shall send notices thereof to the selling
Management Stockholder and each of the purchasing Stockholders.
(b) Exercise and Nonexercise of Right of First Refusal. Exercise
of the option provided for in Section 5.4(a) shall be effected by the giving of
written notice to the Management Stockholder (and his Permitted Transferees) by
Holdings Corp. (on its own behalf and/or on behalf of its designee(s), as the
case may be), signed by an officer of Holdings Corp., and, if applicable, the
other Stockholders, prior to the end of the period during which the option is
exercisable (and such notice shall be effective when given). If Holdings Corp.
or Holdings Corp. and the other Stockholders in the aggregate elect to purchase
all of the Transfer Securities, the closing of the purchase and sale of the
Transfer Securities pursuant to any such option exercise shall be held at such
place and such date to be established by Holdings Corp. in the later of its
notice to the selling Management Stockholder in response to the Transfer Notice
and its notice to the other Stockholders of the allocation of the number of
Transfer Securities which such Stockholders are to purchase, which in no event
shall be earlier than 10 days or later than 60 days from the date of such
notice.
In the event Holdings Corp. and/or its designees and the other
Stockholders fail to exercise the purchase option provided for in Section
5.4(a), then, subject to the other provisions of this Agreement, for a period of
30 days, the Transfer Securities may be sold or transferred by or an behalf of
the Management Stockholder (or his Permitted Transferees) to the Offeror
specified in the Transfer Notice at a price not less than the price per
Securities specified therein and otherwise on terms no less favorable to the
Management Stockholder and no more favorable to the Offeror than those contained
in the Transfer Notice.
5.5 Purchaser Representative. If Holdings Corp. or any Stockholder
enters into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities and Exchange Commission under
the Securities Act may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), each
Stockholder will, at the request of Holdings Corp., appoint a purchaser
representative (as such term is defined in Rule 501(h) promulgated by the
Securities and Exchange Commission under the Securities Act) reasonably
acceptable to Holdings Corp. If any Stockholder appoints the purchaser
representative designated by Holdings Corp., Holdings Corp. will pay the fees of
such purchaser representative, but if any Stockholder declines to appoint the
purchaser representative designated by Holdings Corp., such Stockholder will
appoint, at his own expense, another purchaser representative (reasonably
acceptable to Holdings Corp.).
5.6 Section 83(b) Elections. Each Management Stockholder shall make the
election to include in his income, in the year he purchases the Common Stock and
the Preferred Stock, the excess, if any, of the fair market value of the Common
Stock and the Preferred Stock at that time over the Management Stockholder's
original purchase price for such Securities, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, in the manner and within the time
period specified by the regulations promulgated thereunder. Unless required by
law or by any taxing authority, each party to this Agreement agrees to file its
income tax returns on the basis that: (i) the fair market value of the Common
Stock at the time of its purchase by a Management Stockholder is equal to such
Management Stockholder's original purchase price for the Common Stock, and (ii)
the fair market value of the Preferred Stock at the time of its purchase by a
Management Stockholder is equal to such Management Stockholder's original
purchase price for the Preferred Stock. Unless required by law or by any taxing
authority, Holdings Corp. will not seek an income tax deduction for
<PAGE>
compensation for the services of a Management Stockholder on the basis that: (i)
the fair market value of the Common Stock at the time of its purchase by a
Management Stockholder exceeds such Management Stockholder's original purchase
price for the Common Stock, or (ii) the fair market value of the Preferred Stock
at the time of its purchase by a Management Stockholder exceeds such Management
Stockholder's original purchase price for the Preferred Stock.
5.7 Involuntary Transfers.
(a) Option to Purchase. In the event that the Securities owned by
a Management Stockholder (or his Permitted Transferees) shall be subject to sale
or other transfer by reason of any of the following events (a "Nonvolitional
Event"): (i) bankruptcy or insolvency proceedings, whether voluntary or
involuntary, or (ii) a divorce (whether in connection with a settlement of the
divorce or entry of a decree or judgment of divorce), or (iii) distraint, levy,
execution or other involuntary transfer, then the Management Stockholder (and
his Permitted Transferees) shall give Holdings Corp. written notice thereof
("Involuntary Transfer Notice") promptly upon the occurrence of such
Nonvolitional Event, which Involuntary Transfer Notice shall state the terms of
such proposed sale or other transfer, the identity of the proposed purchaser or
other transferee, the price or other consideration, if readily determinable, for
which the Securities are proposed to be sold or transferred, and the number of
Securities to be sold or transferred (the "Involuntarily Transferred
Securities"). After its receipt of the Involuntary Transfer Notice or, failing
such receipt, after Holdings Corp. otherwise obtains actual knowledge of such a
proposed sale or other transfer, Holdings Corp. and/or its designee(s) shall
have the right and option to purchase all, but not less than all (unless other
Stockholders purchase the remainder), of the Involuntarily Transferred
Securities, such option to be exercisable at any time within 120 days after
receipt of the Involuntary Transfer Notice or, failing such receipt, after
Holdings Corp. otherwise obtains actual knowledge of such a proposed sale or
other transfer.
In the event that Holdings Corp. and/or its designee(s) does not
elect to purchase all such Involuntarily Transferred Securities, the Management
Stockholder (or his Permitted Transferees) shall give notice of such failure to
the other Stockholders, and the other Stockholders shall thereupon have the
right and option to purchase in the aggregate all, but not less than all, the
Involuntarily Transferred Securities not to be purchased by Holdings Corp.
and/or its designee(s) and may give notice to the Management Stockholder (or his
Permitted Transferees) (with a copy to Holdings Corp.) of such intention at any
time not later than 45 days after the date on which such notice is sent by the
selling Management Stockholder (or his Permitted Transferees) to such other
Stockholders. Each electing Stockholder shall indicate the number of
Involuntarily Transferred Securities it desires to purchase. If the other
Stockholders elect to purchase an aggregate number of Involuntarily Transferred
Securities in excess of the number of Involuntarily Transferred Securities which
Holdings Corp. and/or its designee(s) did not elect to purchase, the
Involuntarily Transferred Securities shall be allocated among the other
Stockholders who desire to purchase such Involuntarily Transferred Securities in
accordance with the allocation provisions which are set forth in Section
5.3(a)(i). Promptly upon determining the number of the Involuntarily Transferred
Securities which each purchasing Stockholder will purchase and the purchase
price thereof, Holdings Corp. shall send notices thereof to the Management
Stockholder and each of the purchasing Stockholders.
(b) Purchase Price. Any purchase pursuant to the foregoing option
contained in Section 5.7(a) shall be at the lower of (i) the price applicable to
such proposed sale or transfer or (ii) on or before the fifth anniversary of the
Acquisition Date, the Adjusted Cost Price multiplied by the number of
Involuntarily Transferred Securities and, following the fifth anniversary
<PAGE>
of the Acquisition Date, the Fair Market Value Price multiplied by the number of
Involuntarily Transferred Securities.
(c) Exercise and Nonexercise of Option. Exercise of the option
provided for in Section 5.7(a) shall be effected by the giving of written notice
to the Management Stockholder (and his Permitted Transferees) and the proposed
purchaser or transferee by Holdings Corp. (on its own behalf and/or on behalf of
its designee(s), as the case may be), signed by an officer of Holdings Corp.,
and, if applicable, by the purchasing Stockholders prior to the end of the
period during which the option is exercisable (and such notice shall be
effective when given). The closing of the purchase and sale of the Involuntarily
Transferred Securities pursuant to any such option exercise shall be held at
such place and such date to be established by Holdings Corp., which in no event
shall be less than 10 or more than 60 days from the date of such notice.
In the event Holdings Corp. and/or its designee(s) or the other
Stockholders fail to exercise the purchase option provided for in Section
5.7(a), then the Involuntarily Transferred Securities may be sold or transferred
by or on behalf of the Management Stockholder (and his Permitted Transferees) on
the terms contained in the Involuntary Transfer Notice, but the transferee or
purchaser shall be subject to all of the obligations contained in this Agreement
which were applicable to the Management Stockholder in respect of the
Involuntarily Transferred Securities and, without limiting the generality of the
foregoing, if the Management Stockholder incurs a Termination Date on or prior
to the fifth anniversary of the Acquisition Date, the Purchase Option contained
in Section 5.3 hereof shall apply to the Involuntarily Transferred Securities at
the applicable Option Purchase Price.
ARTICLE VI
REGISTRATION RIGHTS
The Stockholders shall have registration rights with respect to the
Common Stock as set forth in the Registration Rights Agreement attached hereto
as Exhibit B (the "Registration Rights Agreement"). Each of the Stockholders
agrees not to effect any public sale or distribution of any securities of
Holdings Corp. during the periods specified in the Registration Rights
Agreement, except as permitted thereby, and each such Stockholder agrees to be
bound by the rights of priority to participate in offerings as set forth
therein.
ARTICLE VII
MISCELLANEOUS
7.1 Amendment and Modification. This Agreement may be amended or
modified, or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) Holdings Corp.,
(ii) BRS (so long as the BRS Entities own in the aggregate at least 5% of the
outstanding Common Stock on a fully diluted basis), (iii) Canterbury (so long as
the Canterbury Entities own in the aggregate at least 5% of the outstanding
Common Stock on a fully diluted basis), (iv) the holders of a majority of the
Common Stock held by the Management Stockholders and (v) the holders of a
majority of the outstanding Common Stock on a fully diluted basis (including
Common Stock owned by the BRS Entities, but not including Common Stock held by
holders not a party hereto or hereafter made a party hereto). Notwithstanding
the foregoing, no amendment or waiver of Sections 2.3, 3.1, 3.2, 3.3, 3.5,
<PAGE>
Article IV, this Section 7.1 or the Registration Rights Agreement will be
effective against any Stockholder that would be adversely affected by such
amendment or waiver unless such Stockholder consents to such amendment or
waiver. No course of dealing between or among any persons having any interest in
this Agreement will be deemed effective to modify, amend or discharge any part
of this Agreement or any rights or obligations of any person under or by reason
of this Agreement.
7.2 Survival of Representations and Warranties. The representations and
warranties set forth in Section 2.1 of this Agreement will survive the execution
and delivery of this Agreement, regardless of any investigation made by a
Stockholder or on its behalf. No other representations, warranties or covenants
set forth herein shall so survive.
7.3 Successors and Assigns; Entire Agreement. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs; provided, however, that except as set forth
in this Agreement, no party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement. This Agreement (including the
Registration Rights Agreement) sets forth the entire agreement and understanding
among the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of any and every nature among
them.
7.4 Separability. In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
7.5 Notices. All notices provided for or permitted hereunder shall be
made in writing by hand-delivery, registered or certified first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery to the other
party at the following addresses (or at such other address as shall be given in
writing by any party to the others):
If to Holdings Corp., to:
B&G Foods Holdings Corp.
Four Gatehall Drive, Suite 110
Parsippany, NJ 07054
Attention: Robert C. Cantwell
with required copies to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
Attention: Glyndwr P. Lobo, Esq.
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street, 29th Floor
New York, New York 10022
Attention: Stephen C. Sherrill
<PAGE>
If to any BRS Entity, to:
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street, 29th Floor
New York, New York 10022
Attention: Stephen C. Sherrill
with a required copy to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
Attention: Glyndwr P. Lobo, Esq.
If to any Canterbury Entity, to:
Canterbury Mezzanine Capital II, L.P.
600 Fifth Avenue, 23rd Floor
New York, NY 10020
Attention: Patrick N.W. Turner
with a required copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Mayme Greer, Esq.
If to any CIT Entity, to:
The CIT Group/Equity Investments, Inc.
650 CIT Drive
Livingston, NJ 07039
Attention: Colby W. Collier
with a required copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Ele Klein, Esq.
<PAGE>
If to the Management Stockholders or any of them, to their
addresses as listed in the books of Holdings Corp. or the relevant Company.
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
7.6 Governing Law. The validity, performance, construction and effect
of this Agreement shall be governed by and construed in accordance with the
internal law of New York, without giving effect to principles of conflicts of
law, except to the extent that Delaware law shall be mandatorily applicable.
7.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect. Unless otherwise specified, section
references herein refer to sections of this Agreement and schedules and exhibits
refer to schedules and exhibits attached hereto.
7.8 Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
7.9 Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
7.10 Remedies. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
7.11 Party No Longer Owning Securities. If a party hereto ceases to own
any Securities, such party will no longer be deemed to be a Stockholder or
Management Stockholder for purposes of this Agreement.
7.12 No Effect on Employment. Nothing herein contained shall confer on
any Management Stockholder the right to remain in the employ of Holdings Corp.
or any of the Companies or any of its subsidiaries or Affiliates.
7.13 Pronouns. Whenever the context may require, any pronouns used
herein shall be deemed also to include the corresponding neuter, masculine or
feminine forms.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
B&G FOODS HOLDINGS CORP.
By:
------------------------------------------
Name: Robert Cantwell
Title: Executive Vice President Finance
BRUCKMANN, ROSSER, SHERRILL & CO., L.P.
By: BRS Partners, Limited Partnership,
the general partner,
By: BRSE Associates, Inc., its general
partner
By:
----------------------------------
Name: Stephen C. Sherrill
Title: Executive Vice President
CANTERBURY MEZZANINE CAPITAL II, L.P.
By: Canterbury Capital II, LLC,
its general partner
By:
----------------------------------
Name:
Title:
THE CIT GROUP/EQUITY INVESTMENTS, INC.
By:
------------------------------------------
Name:
Title:
<PAGE>
BRS STOCKHOLDERS
*
-----------------------------------
Bruce C. Bruckmann
SS#: ###-##-####
Residence Address:
125 East 84th Street, Apt. 5A
New York, NY 10028
*
-----------------------------------
Harold O. Rosser II
SS#: ###-##-####
Residence Address:
499 Silvermine Road
New Canaan, CT 06840
-----------------------------------
Stephen C. Sherrill
SS#: ###-##-####
Residence Address:
765 Park Avenue, Apt. 4B
New York, NY 10021
*
-----------------------------------
Donald Bruckmann
SS#: ###-##-####
Residence Address:
66 East 79th Street
New York, NY 10021
*
-----------------------------------
H. Virgil Sherrill
SS#: ###-##-####
Residence Address:
One Sutton Place South
New York, NY 10022
<PAGE>
*
-----------------------------------
Nancy Zweng
SS#: ###-##-####
Residence Address:
125 East 84th Street, Apt. 5A
New York, NY 10028
*
-----------------------------------
Paul D. Kaminski
SS#: ###-##-####
Residence Address:
54 W. 9th Street
New York, NY 10011
*
-----------------------------------
Polly Bruckmann
SS#:
Residence Address:
BCB PARTNERSHIP
By: Bruce C. Bruckmann,
General Partner
By: *
-------------------------------
Name: Bruce C. Bruckmann
Title: General Partner
NAZ PARTNERSHIP
By: Nancy Zweng, General Partner
By: *
--------------------------------
Name:
Title:
<PAGE>
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED, CUSTODIAN FBO
PAUL D. KAMINSKI IRA
By: Paul D. Kaminski
By: *
--------------------------------
Name:
Title:
* By:
-----------------------
Stephen C. Sherrill
Attorney-in-Fact
MANAGEMENT STOCKHOLDERS
--------------------------------
Name: Leonard S. Polaner
SS#:
Residence Address:
--------------------------------
Name: David L. Wenner
SS#:
Residence Address:
--------------------------------
Name: David Burke
SS#:
Residence Address:
--------------------------------
Name: Robert C. Cantwell
SS#:
Residence Address:
<PAGE>
--------------------------------
Name: James Brown
SS#:
Residence Address:
--------------------------------
Name: Thomas J. Baldwin
SS#:
Residence Address:
--------------------------------
Name: Alfred Poe
SS#:
Residence Address:
--------------------------------
Name: William F. Callahan, III
SS#:
Residence Address:
--------------------------------
Name: Sumner Kaufman
SS#:
Residence Address:
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Series A Series B Series C
Common Preferred Preferred Preferred Series B Series C
Stock Stock Stock Stock Warrants Warrants
----- --------- --------- --------- -------- --------
BRUCKMANN, ROSSER
SHERRILL & CO., L.P.
("BRS") 79,690.92 17,602.30 11,540.72 4,687.34 11,001.74 3,080.48
CANTERBURY MEZZANINE CAPITAL II, L.P. ----- ----- ----- 15,000.00 ----- 9,857.92
THE CIT GROUP/EQUITY INVESTMENTS, INC.
BRS STOCKHOLDERS ----- ----- ----- 5,000.00 ----- 3,285.97
Bruce C. Bruckmann 1,613.69 356.51 241.32 98.01 230.05 64.41
Harold O. Rosser II 324.20 71.61 47.01 19.09 44.81 12.55
Stephen C. Sherrill 1,664.23 367.59 241.32 98.01 230.05 64.41
Donald Bruckmann 216.10 47.74 ----- ----- ----- -----
H. Virgil Sherrill 1,080.51 238.66 156.70 63.65 149.38 41.83
Nancy Zweng 64.86 14.33 9.40 3.82 8.96 2.51
BCB Partnership 92.96 20.54 13.48 5.47 12.85 3.60
NAZ Partnership 44.86 9.91 6.50 2.64 6.20 1.74
Paul D. Kaminski 78.56 17.36 22.75 9.24 21.69 6.07
Merrill Lynch Pierce
Fenner and Smith,
custodian FBO Paul
D. Kaminski IRA 78.56 17.36 ----- ----- ----- -----
Elizabeth McShane 25.27 5.54 ----- ----- ----- -----
Beverly Place 25.27 5.54 ----- ----- ----- -----
Polly Bruckmann ----- ----- 31.34 12.73 29.88 8.37
<PAGE>
Series A Series B Series C
Common Preferred Preferred Preferred Series B Series C
Stock Stock Stock Stock Warrants Warrants
----- --------- --------- --------- -------- --------
MANAGEMENT STOCKHOLDERS
Leonard S. Polaner 3,000.00 145.00 ----- ----- ----- -----
David L. Wenner 3,000.00 20.00 ----- ----- ----- -----
David Burke 3,000.00 20.00 ----- ----- ----- -----
Robert C. Cantwell 3,000.00 20.00 ----- ----- ----- -----
James Brown 3,000.00 20.00 ----- ----- ----- -----
Thomas J. Baldwin 500.00 110.44 ----- ----- ----- -----
Alfred Poe 500.00 110.44 ----- ----- ----- -----
William F. Callahan, III 1,450.00 1,050.94 ----- ----- ----- -----
Sumner Kaufman 50.00 49.50 ----- ----- ----- -----
- ---------------------------------------- ------------- ------------- -------------- ------------- ------------- --------------
TOTAL 102,499.99 20,321.31 12,310.54 25,000.00 11,735.61 16,429.86
===== ========== ========= ========= ========= ========= =========
</TABLE>
In addition, there are a total of 6,250 options to acquire Common Stock
outstanding to employees, officers or directors of subsidiaries of Holdings
Corp. under Holdings Corp.'s 1997 Incentive Stock Option Plan.
B&G FOODS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended Year Ended Year Ended
January 1, 2000 January 2, 1999 January 3, 1998
--------------- --------------- ---------------
Income before income tax expense and
extraordinary item...................
$ 4,682 $ 2,281 $ 1,265
Add:
Interest expense..................... 29,874 13,319 8,948
Amortization of deferred financing
costs............................. 1,477 589 630
Portion of rents representative of
the interest factor...............
758 719 514
-------- ------- ------
Income as adjusted....................... $ 36,791 $ 16,908 $ 11,357
Fixed charges:
Interest expense..................... $ 29,874 $ 13,319 $ 8,948
Amortization of deferred financing
costs............................. 1,477 589 630
Portion of rents representative of
the interest factor............... 758 719 514
-------- ------- ------
Fixed charges............................ $ 32,109 $ 14,627 $ 10,092
-------- ------- ------
-------- ------- ------
Ratio of earnings to fixed charges.......
1.15 1.16 1.13
-------- ------- ------
-------- ------- ------
</TABLE>
Subsidiaries of the Company*
BGH Holdings, Inc., a Delaware corporation
Burns & Ricker, Inc., a Delaware corporation
Bloch & Guggenheimer, Inc., a Delaware corporation
Polaner, Inc., a Delaware corporation
RWBV Acquisition Corp., a Delaware corporation
Trappey's Fine Foods, Inc., a Delaware corporation
Maple Grove Farms of Vermont, Inc., a Vermont corporation
Les Products Alimentaires Jacques et Fils, a Quebec company
Heritage Acquisition Corp., a Delaware corporation
William Underwood Company, a Massachusetts business trust
- ---------------
* As of March 2, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-02-1999
<PERIOD-END> JAN-01-2000
<CASH> 7,745
<SECURITIES> 0
<RECEIVABLES> 25,852
<ALLOWANCES> (517)
<INVENTORY> 71,913
<CURRENT-ASSETS> 112,870
<PP&E> 41,615
<DEPRECIATION> (12,890)
<TOTAL-ASSETS> 477,057
<CURRENT-LIABILITIES> 53,457
<BONDS> 329,340
0
0
<COMMON> 0
<OTHER-SE> 58,073
<TOTAL-LIABILITY-AND-EQUITY> 477,057
<SALES> 336,112
<TOTAL-REVENUES> 336,112
<CGS> 180,062
<TOTAL-COSTS> 121,494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,874
<INCOME-PRETAX> 4,682
<INCOME-TAX> 2,429
<INCOME-CONTINUING> 2,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,253
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
