<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _____
Commission file numbers 333-50305 and 333-50305-01
_____________
Eagle Family Foods Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3983598
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
Eagle Family Foods, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3982757
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
220 White Plains Road 10591
Tarrytown, NY (Zip Code)
(Address of principal executive offices)
Registrants' telephone number, including area code: (914) 631-3100
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
As of October 27, 1999, there were 1,074,085 shares of Common Stock, par value
$.01 per share, of Eagle Family Foods Holdings, Inc. and 10,000 shares of Common
Stock, par value $.01 per share, of Eagle Family Foods, Inc. outstanding,
respectively.
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I - Financial Information
Item 1. Financial Statements Page
----
Eagle Family Foods, Inc.
<S> <C>
Eagle Family Foods, Inc. Statements of Operations and Comprehensive Loss for the thirteen week periods ended
October 2, 1999 and September 26, 1998............................................................................. 3
Eagle Family Foods, Inc. Balance Sheets as of October 2, 1999 and July 3, 1999..................................... 4
Eagle Family Foods, Inc. Statements of Cash Flows for the thirteen week periods ended October 2, 1999 and
September 26, 1998................................................................................................. 5
Eagle Family Foods, Inc. Statement of Changes in Stockholder's Equity for the thirteen week period
ended October 2, 1999.............................................................................................. 6
Eagle Family Foods Holdings, Inc.
Eagle Family Foods Holdings, Inc. Consolidated Statements of Operations and Comprehensive Loss for the
thirteen week periods ended October 2, 1999 and September 26, 1998................................................. 7
Eagle Family Foods Holdings, Inc. Consolidated Balance Sheets as of October 2, 1999 and July 3, 1999............... 8
Eagle Family Foods Holdings, Inc. Consolidated Statements of Cash Flows for the thirteen week periods ended
October 2, 1999 and September 26, 1998............................................................................. 9
Eagle Family Foods Holdings, Inc. Statement of Changes in Stockholders' Deficit for the thirteen week period
ended October 2, 1999.............................................................................................. 10
Notes to the Financial Statements.................................................................................. 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................................ 20
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds................................................................. 21
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 21
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EAGLE FAMILY FOODS, INC.
Statements of Operations and Comprehensive Loss
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Week
Period Ended
October 2, September 26,
1999 1998
--------------- ---------------
<S> <C> <C>
Net sales........................................................... $ 55,157 $ 50,957
Cost of goods sold.................................................. 29,436 22,558
--------------- ---------------
Gross margin..................................................... 25,721 28,399
Distribution expense................................................ 3,594 2,978
Marketing expense................................................... 17,432 12,587
General and administrative expense.................................. 3,328 2,596
Amortization of intangibles......................................... 2,790 7,113
--------------- ---------------
Operating income (loss).......................................... (1,423) 3,125
Interest expense, net............................................... 7,976 6,976
--------------- ---------------
Loss before income taxes......................................... (9,399) (3,851)
Income tax benefit.................................................. (3,281) (1,350)
--------------- ---------------
Net loss......................................................... $ (6,118) $ (2,501)
=============== ===============
Other comprehensive loss:
Foreign translation adjustment................................... (98) (263)
--------------- ---------------
Comprehensive loss............................................... $ (6,216) $ (2,764)
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
EAGLE FAMILY FOODS, INC.
Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
--------------- --------------
Assets (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents............................................................... $ 1,389 $ 972
Accounts receivable, net................................................................ 25,676 21,825
Inventories, net........................................................................ 34,642 41,757
Other current assets.................................................................... 3,958 5,269
--------------- --------------
Total current assets................................................................... 65,665 69,823
Property and equipment, net.............................................................. 32,941 33,798
Notes receivable from related parties.................................................... 744 728
Intangibles, net......................................................................... 280,094 282,880
Deferred income taxes.................................................................... 25,300 22,006
Other noncurrent assets.................................................................. 8,474 8,051
--------------- --------------
Total assets............................................................................. $ 413,218 $ 417,286
=============== ==============
Liabilities and Stockholder's Equity
Current liabilities
Current portion of long-term debt....................................................... $ 1,000 $ 1,000
Accounts payable........................................................................ 10,766 16,070
Other accrued liabilities............................................................... 10,521 12,793
Accrued interest........................................................................ 6,102 8,128
--------------- --------------
Total current liabilities.............................................................. 28,389 37,991
Long-term debt........................................................................... 339,250 337,500
Commitments and contingencies
Stockholder's equity
Common stock, $0.01 par value, 250,000 shares authorized, 10,000 shares
issued and outstanding................................................................. 1 1
Additional paid-in capital.............................................................. 92,500 82,500
Accumulated deficit..................................................................... (47,047) (40,929)
Accumulated other comprehensive income.................................................. 125 223
--------------- --------------
Total stockholder's equity............................................................. 45,579 41,795
--------------- --------------
Total liabilities and stockholder's equity............................................... $ 413,218 $ 417,286
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
EAGLE FAMILY FOODS, INC.
Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Week
Period Ended
October 2, September 26,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net loss.............................................................................. $ (6,118) $ (2,501)
Adjustments to reconcile net loss to net cash from (used in) operating activities:
Depreciation and amortization........................................................ 4,423 7,826
Amortization of deferred financing costs............................................. 432 221
Loss on retirement of fixed assets................................................... 2 --
Deferred taxes....................................................................... (3,294) (1,380)
Net change in assets and liabilities
Accounts receivable, net............................................................. (3,851) (3,678)
Inventories, net..................................................................... 7,115 (2,683)
Accounts payable..................................................................... (5,304) (657)
Other assets......................................................................... 1,295 (2,769)
Other liabilities.................................................................... (4,396) 1,078
-------------- --------------
Cash used in operating activities...................................................... (9,696) (4,543)
Cash used in investing activities:
Capital expenditures.................................................................. (778) (3,261)
-------------- --------------
Cash used in investing activities..................................................... (778) (3,261)
Cash from (used in) financing activities:
Payment under term loan facility...................................................... (250) (250)
Borrowings under revolving credit facility............................................ 15,000 8,500
Debt amendment costs.................................................................. (859) --
Payments under revolving credit facility.............................................. (13,000) --
Capital contribution.................................................................. 10,000 --
-------------- --------------
Cash from financing activities........................................................ 10,891 8,250
Increase in cash and cash equivalents.................................................. 417 446
Cash and cash equivalents at beginning of period....................................... 972 1,812
-------------- --------------
Cash and cash equivalents at end of period............................................. $ 1,389 $ 2,258
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
EAGLE FAMILY FOODS, INC.
Statement of Changes in Stockholder's Equity
For the Thirteen Week Period Ended October 2, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid Accumulated Comprehensive
Stock in Capital Deficit Income (Loss) Total
----------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, July 3, 1999............... $ 1 $ 82,500 $ (40,929) $ 223 $ 41,795
Net loss............................ -- -- (6,118) -- (6,118)
Capital contribution................ -- 10,000 -- -- 10,000
Other comprehensive loss:
Foreign translation adjustment.... -- -- -- (98) (98)
----------- ------------ ------------- -------------- -------------
Balance, October 2, 1999............ $ 1 $ 92,500 $ (47,047) $ 125 $ 45,579
=========== ============ ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Week
Period Ended
October 2, September 26,
1999 1998
-------------- --------------
<S> <C> <C>
Net sales................................................................ $ 55,157 $ 50,957
Cost of goods sold....................................................... 29,436 22,558
-------------- --------------
Gross margin.......................................................... 25,721 28,399
Distribution expense..................................................... 3,594 2,978
Marketing expense........................................................ 17,432 12,587
General and administrative expense....................................... 3,335 2,603
Amortization of intangibles.............................................. 2,790 7,113
-------------- --------------
Operating income (loss)............................................... (1,430) 3,118
Interest expense, net.................................................... 7,976 6,976
-------------- --------------
Loss before income taxes.............................................. (9,406) (3,858)
Income tax benefit....................................................... (3,281) (1,350)
-------------- --------------
Net loss.............................................................. $ (6,125) $ (2,508)
============== ==============
Other comprehensive loss:
Foreign translation adjustment........................................ (98) (263)
-------------- --------------
Comprehensive loss.................................................... $ (6,223) $ (2,771)
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
-------------- --------------
Assets (unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents............................................................... $ 1,389 $ 972
Accounts receivable, net................................................................ 25,676 21,825
Inventories, net........................................................................ 34,642 41,757
Other current assets.................................................................... 3,958 5,269
-------------- --------------
Total current assets................................................................... 65,665 69,823
Property and equipment, net.............................................................. 32,941 33,798
Intangibles, net......................................................................... 280,094 282,880
Deferred income taxes.................................................................... 25,300 22,006
Other noncurrent assets.................................................................. 8,474 8,051
-------------- --------------
Total assets............................................................................. $ 412,474 $ 416,558
============== ==============
Liabilities and Stockholders' Deficit
Current liabilities
Current portion of long-term debt....................................................... $ 1,000 $ 1,000
Accounts payable........................................................................ 10,766 16,070
Other accrued liabilities............................................................... 10,521 12,793
Accrued interest........................................................................ 6,102 8,128
-------------- --------------
Total current liabilities.............................................................. 28,389 37,991
Long-term debt........................................................................... 339,250 337,500
Commitments and contingencies
Redeemable preferred stock, 1,000,000 shares authorized:
Series A preferred stock, $100 stated value, 816,750 shares issued and
outstanding, at redemption value....................................................... 96,364 94,023
Subscription receivable................................................................. (735) (721)
-------------- --------------
95,629 93,302
Series B preferred stock, $100,000 stated value, 99 shares issued and
outstanding, at redemption value....................................................... 9,914 --
-------------- --------------
Total redeemable preferred stock....................................................... 105,543 93,302
Stockholders' deficit
Common stock $0.01 par value, 1,200,000 shares authorized, 1,074,085 and
975,980 shares issued and outstanding, respectively.................................... 11 10
Additional paid-in capital.............................................................. 1,063 966
Unearned compensation................................................................... (100) (109)
Accumulated deficit..................................................................... (61,798) (53,318)
Subscription receivable................................................................. (9) (7)
Accumulated other comprehensive income.................................................. 125 223
-------------- --------------
Total stockholders' deficit............................................................ (60,708) (52,235)
-------------- --------------
Total liabilities and stockholders' deficit.............................................. $ 412,474 $ 416,558
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Week
Period Ended
October 2, September 26,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net loss................................................................................. $ (6,125) $ (2,508)
Adjustments to reconcile net loss to net cash from (used in) operating activities:
Depreciation and amortization........................................................... 4,430 7,833
Amortization of deferred financing costs................................................ 432 221
Loss on retirement of fixed assets...................................................... 2 --
Deferred taxes.......................................................................... (3,294) (1,380)
Net change in assets and liabilities
Accounts receivable, net................................................................ (3,851) (3,678)
Inventories, net........................................................................ 7,115 (2,683)
Accounts payable........................................................................ (5,304) (657)
Other assets............................................................................ 1,295 (2,769)
Other liabilities....................................................................... (4,396) 1,078
-------------- --------------
Cash used in operating activities........................................................ (9,696) (4,543)
Cash used in investing activities:
Capital expenditures..................................................................... (778) (3,261)
-------------- --------------
Cash used in investing activities........................................................ (778) (3,261)
Cash from (used in) financing activities:
Payment under term loan facility......................................................... (250) (250)
Borrowings under revolving credit facility............................................... 15,000 8,500
Payments under revolving credit facility................................................. (13,000) --
Debt amendment costs..................................................................... (859) --
Issuance of Series B Preferred Stock and Common Stock.................................... 10,000 --
-------------- --------------
Cash from (used in) financing activities................................................. 10,891 8,250
Increase in cash and cash equivalents..................................................... 417 446
Cash and cash equivalents at beginning of period.......................................... 972 1,812
-------------- --------------
Cash and cash equivalents at end of period................................................ $ 1,389 $ 2,258
============== ==============
Supplemental disclosure:
Non-cash financing activities included dividends accrued on redeemable
preferred stock......................................................................... $ 2,355 $ 2,036
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Statement of Changes in Stockholders' Deficit
For the Thirteen Week Period Ended October 2, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additional
Common Paid Unearned Accumulated Subscription
Stock In Capital Compensation Deficit Receivable
----------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, July 3, 1999.............. $ 10 $ 966 $ (109) $ (53,318) $ (7)
Net loss........................... -- -- -- (6,125) --
Preferred stock dividend........... -- -- -- (2,355) --
Subscription receivable:
Interest income................... -- -- -- -- (2)
Infusion of capital................ 1 99 -- -- --
Termination of restricted
common stock...................... -- (2) 2 -- --
Amortization of unearned
compensation...................... -- -- 7 -- --
Other comprehensive loss:
Foreign translation adjustment.... -- -- -- -- --
----------- ------------ -------------- ------------- --------------
Balance, October 2, 1999........... $ 11 $ 1,063 $ (100) $ (61,798) $ (9)
=========== ============ ============== ============= ==============
<CAPTION>
Accumulated
Other
Comprehensive
Income (Loss) Total
----------------- ------------
<S> <C> <C>
Balance, July 3, 1999.............. $ 223 $ (52,235)
Net loss........................... -- (6,125)
Preferred stock dividend........... -- (2,355)
Subscription receivable:
Interest income................... -- (2)
Infusion of capital................ -- 100
Termination of restricted
common stock...................... -- --
Amortization of unearned
compensation...................... -- 7
Other comprehensive loss:
Foreign translation adjustment.... (98) (98)
----------------- ------------
Balance, October 2, 1999........... $ 125 $ (60,708)
================= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements
(Unaudited)
1. Basis of Presentation:
The accompanying financial statements present the financial position, results
of operations and cash flows of Eagle Family Foods, Inc. ("Eagle") and the
consolidated financial position, results of operations and cash flows of Eagle
Family Foods Holdings, Inc. ("Holdings") and its wholly-owned subsidiary, Eagle.
Eagle and Holdings are collectively referred to as the "Company," unless the
context indicates otherwise. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain prior year amounts
have been reclassified to conform with the current year's presentation.
The financial statements as of October 2, 1999 and September 26, 1998 and for
the thirteen week periods ended October 2, 1999 and September 26, 1998 are
unaudited and are presented pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, these financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Annual Report on Form 10-K of Holdings and Eagle for the year
ended July 3, 1999. In the opinion of management, the accompanying financial
statements reflect all adjustments (which are of a normal recurring nature)
necessary to present fairly the financial position and results of operations and
cash flows for the interim periods, but are not necessarily indicative of the
results of operations for a full fiscal year.
2. Inventories:
Inventories are stated at the lower of cost or market at October 2, 1999 and
July 3, 1999 and consisted of the following (in thousands):
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
----------- -----------
<S> <C> <C>
Finished goods........................................................................... $ 30,228 $ 36,886
Raw materials............................................................................ 4,414 4,871
----------- -----------
Total inventories.................................................................... $ 34,642 $ 41,757
=========== ===========
</TABLE>
Included in the amount at October 2, 1999 is a reserve of $4.7 million
representing the write down of the ReaLemonade inventories.
3. Property and Equipment:
Property and equipment is recorded at cost at October 2, 1999 and July 3, 1999
and consisted of the following (in thousands):
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
----------- -----------
<S> <C> <C>
Land..................................................................................... $ 470 $ 470
Buildings and improvements............................................................... 5,577 5,611
Machinery and equipment.................................................................. 21,843 20,949
Computers................................................................................ 10,593 10,531
Construction in progress................................................................. 1,754 1,913
----------- -----------
Total property and equipment......................................................... 40,237 39,474
Accumulated depreciation................................................................. (7,296) (5,676)
----------- -----------
Property and equipment, net.......................................................... $ 32,941 $ 33,798
=========== ===========
</TABLE>
11
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements
(Unaudited)
4. Intangible Assets:
Intangible assets are amortized on a straight-line basis over their estimated
useful lives and consisted of the following (in thousands):
<TABLE>
<CAPTION>
October 2, July 3, Estimated
1999 1999 Useful Lives
-------------- -------------- -------------
<S> <C> <C> <C>
Tradenames...................................................... $ 141,000 $ 141,000 40 years
Goodwill........................................................ 136,664 136,664 40 years
Covenant not to compete......................................... 21,000 21,000 5 years
Master customer services agreement.............................. -- 17,300 1 year
-------------- --------------
Total intangible assets..................................... 298,664 315,964
Accumulated amortization........................................ (18,570) (33,084)
-------------- --------------
Intangible assets, net...................................... $ 280,094 $ 282,880
============== ==============
</TABLE>
5. Debt Obligations:
Debt obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
-------------- --------------
<S> <C> <C>
Term loan facility due December 31, 2005........................ $ 173,250 $ 173,500
Senior subordinated notes due January 15, 2008.................. 115,000 115,000
Revolving credit facility due December 31, 2004................. 52,000 50,000
-------------- --------------
Total debt obligations...................................... 340,250 338,500
Less current portion of long-term debt.......................... (1,000) (1,000)
-------------- --------------
Long-term debt obligations.................................. $ 339,250 $ 337,500
============== ==============
</TABLE>
Senior Credit Facilities
Eagle received senior bank financing from a group of lenders in an aggregate
principal amount of up to $245.0 million (the "Senior Credit Facilities") on
January 23, 1998. The Senior Credit Facilities consist of (i) a $70.0 million
seven-year revolving credit facility including a $10.0 million swingline loan
(the "Revolving Credit Facility") and (ii) a $175.0 million eight-year term loan
(the "Term Loan Facility"). The Senior Credit Facilities are guaranteed by
Holdings and all future domestic subsidiaries of the Company.
The obligations of Eagle under the Senior Credit Facilities are collateralized
by (i) 100% of the capital stock of Eagle and each of its subsidiaries and (ii)
a first priority collateral interest in substantially all assets and properties
of Eagle and its future domestic subsidiaries. The fair market value of the
Senior Credit Facilities at October 2, 1999 approximated the carrying value.
On April 22, 1998, the Company entered into interest rate swap agreements in
order to fix the interest rate on a portion of the Term Loan Facility. The Term
Loan Facility bears interest at LIBOR plus 3.50%. These swap agreements
commenced on July 23, 1998 and fixed the LIBOR rate at 5.905% on $25.0 million
and 5.955% on $75.0 million of the $175.0 million Term Loan Facility. These swap
agreements expire on December 29, 2000 and December 31, 2002, respectively. The
estimated benefit to cancel the interest rate swap agreements at October 2, 1999
was approximately $0.7 million based on current interest rates for similar
instruments.
12
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements
(Unaudited)
In first quarter 2000, the Company paid an amendment fee of one quarter of one
percent on the total amount outstanding as of July 13, 1999 on the Term Loan
Facility and the Revolving Credit Facility.
Senior Subordinated Notes
Eagle issued $115.0 million of senior subordinated notes (the "Notes") and
received cash proceeds of approximately $112.0 million net of underwriting
discount on January 23, 1998. The Notes are due January 15, 2008 and bear
interest of 8.75% per annum payable on January 15 and July 15. The fair market
value of the senior subordinated notes was approximately $86.2 million at
October 2, 1999.
Future principal payments for the remainder of fiscal year 2000 and the next
four fiscal years and thereafter consist of the following (in thousands):
<TABLE>
<S> <C>
2000.................................................................... $ 750
2001.................................................................... 1,000
2002.................................................................... 750
2003.................................................................... 3,250
2004.................................................................... 27,500
Thereafter.............................................................. 307,000
---------
$ 340,250
=========
</TABLE>
6. Redeemable Preferred Stock
On September 24, 1999, the issuance of 99 shares of newly designated Series B
Non-Voting Preferred Stock (the "Series B Preferred Stock") was authorized by
Holdings at a stated value of $100,000 per share (the "Series B Stated
Value"). The Series B Preferred Stock ranks as to dividends and on liquidation
on parity with the already outstanding Series A Non-Voting Preferred Stock (the
"Series A Preferred Stock", and together with the Series B Preferred Stock, the
"Preferred Stock") of Holdings at a stated value of $100 per share (the "Series
A Stated Value" and together with the Series B Stated Value, the "Stated
Value"). The Preferred Stock provides for preferential cumulative dividends at
the rate of 10% per share per annum of the Stated Value for each series of
Preferred Stock. Dividends are payable as declared by the Holdings Board of
Directors and shall be paid before any dividends shall be set apart for or paid
upon the Common Stock of Holdings, par value $0.01 per share (the "Common
Stock"). In the event of liquidation, dissolution or winding up, the holders of
shares of Preferred Stock are entitled to be paid out of the assets of Holdings
available for distribution to its stockholders before any payment is made to the
holders of stock junior to the Preferred Stock. Holders of Preferred Stock are
not entitled to vote on any matters presented to the stockholders of Holdings.
However, the affirmative vote or written consent of the holders of at least two-
thirds of the then outstanding shares of Preferred Stock is required to amend,
alter or repeal the preferences, special rights or other powers of the Preferred
Stock. The Preferred Stock is subject to mandatory redemption at a price per
share equal to the Stated Value for each series of Preferred Stock plus all
dividends accrued and unpaid thereon upon (1) the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, (2) the sale of all or substantially all of the assets of Holdings or the
merger or consolidation of Holdings with or into any other corporation or other
entity in which the holders of Holdings' outstanding shares before the merger or
consolidation do not retain a majority of the voting power of the surviving
corporation or other entity or (3) the acquisition by any person of shares of
Common Stock representing a majority of the issued and outstanding shares of
Common Stock then outstanding.
7. Stockholders and Registration Rights Agreements
The Stockholders Agreement, dated as of January 23, 1998, by and among
Holdings and the stockholders named therein (the "Stockholders Agreement") and
the Registration Rights Agreement, dated as of January 23, 1998, by and among
Holdings and the investors named therein (the "Registration Rights Agreement")
were each amended as of September 27, 1999, to reflect a Subscription Agreement
with GE Investment Private Placement Partners II, ("GEI") and Warburg, Pincus
Ventures,
13
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements
(Unaudited)
L.P. ("Warburg") (as described in Footnote 8) for the offer and sale of a total
of 99 shares of Series B Preferred Stock and a total of 100,000 shares of newly
issued Common Stock with accompanying warrants to purchase a total of 22,013
shares of Common Stock (the "Warrants") (collectively, the "Offered
Securities"). As a result of such amendments, all covenants and agreements set
forth in the initial Stockholders Agreement and Registration Rights Agreement
will apply to the newly issued Series B Preferred Stock, Common Stock and Common
Stock issuable upon exercise of the Warrants.
8. Subscription Agreement
On September 27, 1999, GEI and Warburg subscribed to purchase a total of 99
shares of newly issued Series B Preferred Stock at $100,000 per share and a
total of 100,000 shares of Common Stock at $1 per share with accompanying
Warrants to purchase up to 22,013 additional shares of Common Stock. The
Warrants may be exercised for a purchase price of $1 per share of Common Stock
(subject to certain adjustments) and only upon failure of the Company to achieve
certain financial targets for the fiscal year ending July 1, 2000. The Warrants
automatically terminate if the Company achieves certain financial targets for
fiscal year ended July 1, 2000. Otherwise, the Warrants expire on September 27,
2004. Holdings received $10.0 million in exchange for the Offered Securities.
In connection with the issuance of the Offered Securities, Holdings made a $10.0
million capital contribution to Eagle.
14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Set forth below is a discussion of the financial condition and results of
operations for the thirteen week periods ended October 2, 1999 and September 26,
1998. The following discussion should be read in conjunction with the financial
statements of the Company and the notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. Certain statements under this caption constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which involve known and unknown risks and
uncertainties. The Company's actual results, performance or achievements in the
future could differ significantly from the results, performance or achievements
discussed or implied in such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, the
effect on financial performance of increased competition in the dry-grocery food
industry, potential future competition, competitive pricing for products,
general economic and business conditions, industry trends, raw material costs,
dependence on the Company's labor force, the success of new product innovations
and changes in, or the failure or inability to comply with, government rules and
regulations, including, without limitation, Food and Drug Administration and
environmental rules and regulations.
The following table sets forth the results of operations as a percentage of
net sales for the thirteen week periods ended October 2, 1999 and September 26,
1998:
<TABLE>
<CAPTION>
Thirteen Week Period Ended
October 2, September 26,
1999 1998
----------- --------------
<S> <C> <C>
Net sales...................................................... 100.0 % 100.0 %
Cost of goods sold............................................. 53.4 44.3
----------- --------------
Gross margin................................................... 46.6 55.7
Distribution expense........................................... 6.5 5.8
Marketing expense.............................................. 31.6 24.7
General and administrative expense............................. 6.0 5.1
Amortization of intangibles.................................... 5.1 14.0
----------- --------------
Operating income (loss)........................................ (2.6)% 6.1 %
=========== ==============
</TABLE>
Results of Operations
Thirteen Week Periods ended October 2, 1999 ("first quarter 2000") and September
26, 1998 ("first quarter 1999") (Unaudited)
Net Sales. The Company's net sales for first quarter 2000 were $55.2 million
as compared to $51.0 million for first quarter 1999, an increase of $4.2
million, or 8.2%. The increase reflected $3.8 million in net sales from the
April 1999 launch of ReaLemonade, $0.7 million in net sales within the lemon and
lime juice product line, and $0.5 million in net sales of Borden eggnog and None
Such pie filling. Sweetened condensed milk net sales were reduced by $0.7
million for products returned to reclamation centers. These unsaleable returns
were primarily for Eagle Brand chocolate flavored sweetened condensed milk, a
product which the Company has discontinued manufacturing.
The increases described above were also offset by $0.8 million in lower non-
dairy creamer net sales. Production of non-dairy creamer was temporarily
disrupted due to a June 2, 1999 fire at the Company's Chester, South Carolina
manufacturing plant. While all retail product sales and some industrial product
sales were unaffected by the fire due to the Company's ability to have products
manufactured by a third party, certain industrial products could not be
outsourced during the production downtime. The Company estimates sales were
reduced by approximately $0.6 million of industrial sales during first quarter
2000 as a result of the downtime. The Company has replaced the damaged
equipment and resumed production in mid-October 1999.
15
<PAGE>
The table below sets forth the Company's net sales data for each of the
Company's product lines for first quarter 2000 and first quarter 1999 (dollars
in millions):
<TABLE>
<CAPTION>
Net Sales Net Sales
First Percentage First Percentage
Quarter of Quarter of
Product Line Company's Principal Brands 2000 Net Sales 1999 Net Sales
- ------------------------ ------------------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sweetened condensed milk Eagle Brand, Meadow Gold,
Magnolia, Star and other....... $ 24.4 44.2% $ 24.4 47.8%
Lemon and lime juice, ReaLemon and ReaLime........... 16.3 29.5 15.6 30.6
Liquid concentrate ReaLemonade.................... 3.8 6.9 -- --
Non-dairy creamer Cremora, Cremora Royale and
other.......................... 7.7 14.0 8.5 16.7%
Shelf-stable eggnog Borden......................... 1.1 2.0 0.7 1.3
Mincemeat pie filling None Such...................... 1.0 1.8 0.9 1.8
Acid neutralized coffee Kava........................... 0.9 1.6 0.9 1.8
----------- ----------- ---------- ----------
Total........................................... $ 55.2 100.0% $ 51.0 100.0%
=========== =========== ========== ==========
</TABLE>
The table below sets forth the Company's net sales data by sales channel for
first quarter 2000 and first quarter 1999
(dollars in millions):
<TABLE>
<CAPTION>
Net Sales Percentage Net Sales Percentage
First Quarter of First Quarter of
2000 Net Sales 1999 Net Sales
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
U.S. Retail
Sweetened condensed milk................................. $ 19.4 35.1% $ 18.0 35.3%
Lemon and lime juice..................................... 11.8 21.4 10.7 21.0
Liquid concentrate lemonade.............................. 3.6 6.5 -- --
Branded non-dairy creamer................................ 5.5 10.0 5.9 11.6
Other products........................................... 3.0 5.4 2.4 4.7
Private label non-dairy creamer.......................... 1.1 2.0 0.9 1.7
U.S. Foodservice/Industrial............................... 6.3 11.4 6.3 12.4
International............................................. 4.5 8.2 6.8 13.3
------------- ------------ ------------- ------------
Total.................................................... $ 55.2 100.0% $ 51.0 100.0%
============= ============ ============= ============
</TABLE>
Cost of Goods Sold. Cost of goods sold was $29.4 million for first quarter
2000 as compared to $22.6 million for first quarter 1999, an increase of $6.8
million, or 30.1%. The increase reflected the higher level of sales, which
increased 8.2%, and the recording of a $4.7 million charge to reserve for
obsolescence of ReaLemonade inventories related to inventory expiration. The
reserve was recorded because, based on the Company's forecasted sales volume,
the inventories will expire before its anticipated sale dates. Expressed as a
percentage of net sales, excluding the $4.7 million reserve mentioned above,
cost of goods sold for first quarter 2000 increased to 44.7% from 44.3% for
first quarter 1999.
Distribution Expense. Distribution expense was $3.6 million for first quarter
2000 as compared to $3.0 million for first quarter 1999, an increase of $0.6
million, or 20.0%. Expressed as a percentage of net sales, distribution expense
for first quarter 2000 increased to 6.5% from 5.8% for first quarter 1999. The
increase was driven by $0.2 million related to the higher volume of sales, $0.2
million for higher warehousing costs primarily associated with the inventory
manufactured to support the launch of ReaLemonade, and $0.2 million for costs
shifted from marketing expense to distribution costs as a result of the change
in the distribution network for certain U.S. foodservice sales.
Marketing Expense. Marketing expense was $17.4 million for first quarter 2000
as compared to $12.6 million for first quarter 1999, an increase of $4.8
million. The increase was driven by $5.5 million in advertising, trade and
consumer support
16
<PAGE>
related to the launch of ReaLemonade. This increase in expense was partially
offset by a decrease of $1.0 million in trade support and slotting costs related
to the 1999 launch of Cremora Royale.
General and Administrative ("G&A") Expense. Total G&A expense was $3.3 million
for first quarter 2000, as compared to $2.6 million for first quarter 1999, an
increase of $0.7 million, or 26.9%. Expressed as a percentage of net sales, G&A
expense for first quarter 2000 increased to 6.0% from 5.1% for first quarter
1999. The increase primarily reflected $0.5 million of higher depreciation
expense associated with the start up of the Company's new computer systems.
Amortization of Intangibles. Amortization of intangibles was $2.8 million for
first quarter 2000, as compared to $7.1 million for first quarter 1999, a
decrease of $4.3 million. The decrease was due to the expiration of the one year
master customer services agreement entered into between the Company and Borden
Foods Corporation ("BFC") in connection with the Company's January 23, 1998
acquisition of assets from BFC, pursuant to which BFC provided certain
processing services for a period up to 18 months after the acquisition closing
based on predetermined below market rates.
Operating Income. Operating loss was $1.4 million for first quarter 2000 as
compared to operating income of $3.1 million for first quarter 1999, a decrease
of $4.5 million. Excluding the impact of $2.8 million and $7.1 million of
amortization expense for intangibles for first quarter 2000 and first quarter
1999, respectively, and a $4.7 million charge to reserve for ReaLemonade
inventories for first quarter 2000, operating income was $6.1 million for first
quarter 2000 as compared to $10.2 million for first quarter 1999, a decrease of
$4.1 million, or 40.2%. Together with other factors discussed above, the
Company's operating income was significantly reduced by the marketing investment
in ReaLemonade.
Interest Expense. Interest expense net of interest income was $8.0 million for
first quarter 2000 as compared to interest expense net of interest income of
$7.0 million for first quarter 1999. The increase was due to $0.5 million of
higher interest expense because the average outstanding balance on the Revolving
Credit Facility was $52.0 million at October 2, 1999 compared to $37.0 million
at September 26, 1998, $0.3 million from higher interest rates during first
quarter 2000 compared to first quarter 1999, and $0.2 million for debt issuance
costs associated with a June 30, 1999 amendment to the Company's credit
agreement with its Lenders for the Senior Credit Facilities.
Income Taxes. The Company recorded an income tax benefit of $3.3 million for
first quarter 2000 as compared to a $1.4 million income tax benefit for first
quarter 1999.
Liquidity and Capital Resources
Borrowings under the Senior Credit Facilities at October 2, 1999 and July 3,
1999 consisted of $173.2 million and $173.5 million, respectively, for the Term
Loan Facility maturing in 2005. The Term Loan Facility matures $0.8 million in
the remainder of fiscal year 2000 and fiscal year 2002, and $1.0 million, $3.3
million, $27.5 million, $80.0 million and $60.0 million in the fiscal years
2001, 2003, 2004, 2005 and 2006, respectively. In addition, the Senior Credit
Facilities include the $70.0 million Revolving Credit Facility maturing in 2004,
of which $52.0 million and $37.0 million were outstanding at October 2, 1999 and
September 26, 1998, respectively. The increase in the amount outstanding under
the Revolving Credit Facility was principally due to the marketing and
manufacturing investment made in supporting ReaLemonade and other inventories to
support the higher sales occurring in the last month of first quarter 2000.
On September 27, 1999, GEI and Warburg (collectively, "Equity Sponsors")
contributed $10.0 million of additional equity for the Offered Securities. The
capital contribution made by the Equity Sponsors was made in connection with the
significant marketing investment made by the Company in launching Cremora Royale
and ReaLemonade during the fiscal year ended July 3, 1999.
Interest payments on the Notes and interest and principal payments under the
Senior Credit Facilities represent significant cash requirements for the
Company. Borrowings under the Senior Credit Facilities bear interest at floating
rates and require interest payments on varying dates. However, on April 22,
1998, the Company entered into interest rate swap agreements in order to fix the
interest rate on $100 million of the Term Note Facility. These swap agreements
commenced on July 23, 1998.
The Company's remaining liquidity needs are for capital expenditures and
increases in working capital. The Company spent $0.8 million on capital projects
in first quarter 2000 to fund expenditures in existing facilities, management
information systems initiatives, and discretionary capital projects associated
with new products. The Company expects to spend approximately $5.0 to $7.0
million on capital projects in fiscal year 2000 to fund expenditures in existing
facilities,
17
<PAGE>
information system initiatives and discretionary capital projects associated
with new products. The Company's primary sources of liquidity are cash flows
from operations and available borrowings under the Revolving Credit Facility.
Net cash used in operating activities for first quarter 2000 was $9.7 million
and for first quarter 1999 was $4.5 million.
Cash provided by financing activities in first quarter 2000 and first quarter
1999 was $10.9 million and $8.3 million, respectively. Net proceeds of $2.0
million and $8.5 million represented borrowings under the Revolving Credit
Facility for first quarter 2000 and first quarter 1999, respectively.
Additionally, the Company received $10.0 million associated with the issuance of
the Offered Securities to the Equity Sponsors.
Management believes that cash generated from operations and borrowings under
the Senior Credit Facilities will be sufficient to satisfy working capital
requirements and required capital expenditures. Further expansion of the
business through acquisitions may require the Company to incur additional
indebtedness or to issue additional equity securities.
Other Information
Plant Fire. On June 2, 1999, a fire destroyed several critical pieces of
equipment at the Chester, South Carolina powdered non-dairy creamer
manufacturing plant. The plant operated at modified levels until production
commenced in mid-October 1999. The Company had temporarily engaged another
manufacturer to produce powdered non-dairy creamer in bulk. The Chester, South
Carolina plant then packaged and shipped the finished product to its customers.
The Company estimates that total lost sales associated with the fire will be
less than $1.0 million.
The Company is in the process of completing its insurance claim for property
damage, other expenses related to the fire and business interruption. The claim
is expected to be approximately $3.5 to $4.0 million. The Company does not
believe that this event will have a material impact on its results of operations
or financial position.
Seasonality
The Company's net sales, net income and cash flows are affected by a seasonal
bias toward the fourth quarter of the calendar year due to increased sales
during the holiday season. Three of the Company's six major product lines (Eagle
Brand and the Company's other sweetened condensed milk products, Borden eggnog
and None Such mincemeat pie filling) are consumed primarily during the November
and December holiday season. In recent years, approximately 45% of the Company's
net sales have occurred in the last quarter of the calendar year. As a result of
this seasonality, the Company's working capital needs have historically
increased throughout the year, normally peaking in the September/October period,
requiring the Company to draw additional amounts on its Revolving Credit
Facility during this period.
Recently Issued Accounting Statements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments and
hedging activities and requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Company expects to adopt this standard in the
first quarter of 2001. The Company is evaluating this pronouncement and has not
yet determined the ultimate impact of this pronouncement on future financial
statements.
18
<PAGE>
Impact of the Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the particular year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company's efforts to address the 2000 issues are divided into three areas
including: (1) the completed installation of the PeopleSoft enterprise-wide
system for business and accounting systems; (2) the renovation of, if required,
systems not replaced by the enterprise-wide system, including non-information
technology systems such as plant process controls; and (3) assessment of the
Year 2000 readiness of external suppliers and customers. A discussion of each
area of activity follows.
Enterprise-wide system. On January 25, 1999, the Company, in conjunction with
outside consultants, implemented a comprehensive new PeopleSoft enterprise-wide
system. The Company's version of the PeopleSoft enterprise-wide system software
release was developed and warranted by the vendor to be Year 2000 ready. All
other applications installed are new and also warranted by the vendor to be Year
2000 ready. Certain testing was performed against the application on hardware
where the dates were rolled forward to 2000, and no processing issues were
identified.
Systems not replaced by the enterprise-wide system. For the systems not
replaced by the PeopleSoft enterprise-wide system, including plant process
controls, other non-information technology systems, brokerage reporting systems
and telephone and communications systems, the Company has determined the areas
that possess vulnerability to the Year 2000 issue, and have identified
solutions, whether it be upgrades or workarounds. Implementation of any
recommendations and contingency plan(s) and final system testing will be
substantially completed by October 31, 1999. The Company's review did not
identify any serious Year 2000 issues. A budget of $150,000 has been established
for remediation costs in this area.
Suppliers and Customers. The Company has assessed and addressed the risks
related to third party suppliers and customers. The Company surveyed its
customers and suppliers regarding their own assessment of Year 2000
vulnerability. The Company has developed contingency plans, such as reverting to
a paper based order and invoice system, with its customers and suppliers where
appropriate, and has communicated the contingency plans to the appropriate
people. However, the Company can give no assurances that failure of third
parties to address the Year 2000 system issues will not have an adverse impact
on the Company's business operations and results. The current estimate for this
assessment and the development of contingency plans is less than $30,000.
Risk. Due to the general uncertainty inherent in the Year 2000 problem,
including the uncertainty associated with suppliers and customer's Year 2000
readiness, which is beyond the Company's control, the potential effect on the
financial results and the condition of the Company can not be measured. The
Company intends to complete its Year 2000 program on a timely basis so as to
significantly minimize the level of uncertainty that Year 2000 will have on the
Company's operations and financial results.
19
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rates
The following table presents descriptions of the financial instruments and
derivative instruments that are held by the Company at October 2, 1999 and which
are sensitive to changes in interest rates, including interest rate swaps and
debt obligations. In the ordinary course of business, the Company enters into
derivative financial instrument transactions in order to manage or reduce market
risk. Under interest rate swaps, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and floating
rate interest amounts calculated by reference to an agreed notional principal
amount. The Company does not enter into derivative financial instrument
transactions for speculative purposes.
For the liabilities, the table represents principal fiscal year cash flows
that exist by maturity date and the related average interest rate. For the
interest rate derivatives, the table presents the notional amounts and expected
interest rates that exist by contractual dates; the notional amount is used to
calculate the contractual payments to be exchanged under the contract. The
variable rates are estimated based upon the six month forward LIBOR rate.
All amounts are reflected in U.S. Dollars (in thousands).
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Liabilities
Fixed rate..........................
Average interest rate...............
Variable rate....................... $ 750 $ 1,000 $ 750 $ 3,250 $ 27,500
Average interest rate............... 9.461% 9.461% 9.461% 9.461% 9.461%
Interest-Rate Derivatives
Variable to fixed:
Notional amount at the
beginning of fiscal year........... $ 100,000 $ 100,000 $ 75,000 $ 75,000
Maturities.......................... 25,000 75,000
Average pay rate.................... 5.943% 5.943% 5.955% 5.955%
Average receive rate................ 5.509% 5.509% 5.509% 5.509%
<CAPTION>
Balance at
October 2, Fair
Thereafter 1999 Value
------------ ------------ ----------
<S> <C> <C> <C>
Liabilities
Fixed rate.......................... $ 115,000 $ 115,000 $ 86,247
Average interest rate............... 8.750% 8.750%
Variable rate....................... $ 192,000 $ 225,250 $ 225,250
Average interest rate............... 9.216% 9.274%
Interest-Rate Derivatives
Variable to fixed:
Notional amount at the
beginning of fiscal year...........
Maturities.......................... $ 100,000 $ 685
Average pay rate.................... 5.948%
Average receive rate................ 5.509%
</TABLE>
On April 22, 1998, the Company entered into interest rate swap agreements in
order to fix the interest rate on a portion of the Term Loan Facility. The Term
Loan Facility bears interest at LIBOR plus 3.50% . These swap agreements
commenced on July 23, 1998 and fixed the LIBOR rate at 5.905% on $25.0 million
and 5.955% on $75.0 million and of the $175.0 million Term Loan Facility. These
swap agreements expire on December 29, 2000 and December 31, 2002, respectively
and have been reflected in the table above.
Milk Hedging
The Company uses milk as a major ingredient in its sweetened condensed milk
product line and is subject to the risk of rising milk prices that increase
manufacturing costs and erode profit margins. By purchasing futures contracts,
however, the Company establishes a known price for future milk purchases in
order to protect against dramatic milk price increases. As of October 20, 1999,
the Company had outstanding 263 milk futures contracts for various months
through January 2000. The aggregate market value of these contracts was $6.2
million with an average cost of $6.3 million. The unrealized loss on these
contracts was $0.1 million.
The Company realized gains of $0.4 million for futures milk contracts that
expired in the first quarter 2000. These gains were recorded as an offset to
manufacturing costs and reduced the cost of milk purchases during this period.
20
<PAGE>
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) On September 27, 1999, each of Warburg and GEI purchased (i) 50,000
shares of Common Stock and Warrants to purchase 11,006.5 shares of
Common Stock for a cash purchase price of $50,000 and (ii) 49.5 shares
of Series B Preferred Stock for a cash purchase price of $4,950,000.
The Warrants may be exercised (x) for a purchase price of $1 per share
of Common Stock (subject to certain adjustments) and (y) only upon the
failures of the Company to achieve certain financial targets for the
fiscal year ending July 1, 2000. The Offered Securities were issued
pursuant to the exemption of Section 4(2) of the Securities Act of
1933, as amended.
(d) Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Designation, Number, Voting Powers, Preferences and
Rights of Series B Non-Voting Preferred Stock of Eagle Family Foods
Holdings, Inc. dated September 24, 1999.
4.1 First Amendment to Registration Rights Agreement, dated September 27,
1999, by and among Holdings and certain investors named therein.
4.2 First Amendment to Stockholders Agreement, dated September 27, 1999,
by and among Holdings and certain stockholders of Holdings named
therein.
4.3 Subscription Agreement, dated September 27, 1999, by and among
Holdings, GE Investment Private Placement Partners, II, a Limited
Partnership and Warburg, Pincus Ventures, L.P.
27.1 Financial Data Schedule of Eagle Family Foods Holdings, Inc.
27.2 Financial Data Schedule of Eagle Family Foods, Inc.
(b) Reports on Form 8-K
None.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
EAGLE FAMILY FOODS HOLDINGS, INC.
EAGLE FAMILY FOODS, INC.
By: /s/ John O'C Nugent
-------------------------------------
John O'C Nugent
President and Chief Executive Officer
By: /s/ Craig A. Steinke
-------------------------------------
Craig A. Steinke
Vice President and Chief Financial
Officer
Date: October 27, 1999
22
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Designation, Number, Voting Powers,
Preferences and Rights of Series B Non-Voting Preferred
Stock of Eagle Family Foods Holdings, Inc. dated
September 24, 1999.
4.1 First Amendment to Registration Rights Agreement, dated
September 27, 1999, by and among Holdings and certain
investors named therein.
4.2 First Amendment to Stockholders Agreement, dated
September 27, 1999, by and among Holdings and certain
stockholders of Holdings named therein.
4.3 Subscription Agreement, dated September 27, 1999, by and
among Holdings, GE Investment Private Placement Partners,
II, a Limited Partnership and Warburg, Pincus Ventures,
L.P.
27.1 Financial Data Schedule of Eagle Family Foods Holdings,
Inc.
27.2 Financial Data Schedule of Eagle Family Foods, Inc.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, NUMBER, VOTING POWERS,
PREFERENCES AND RIGHTS OF SERIES B NON-VOTING
PREFERRED STOCK
OF
EAGLE FAMILY FOODS HOLDINGS, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted by the Board of Directors of Eagle Family Foods Holdings, Inc., a
Delaware corporation (hereinafter called the "Corporation"), with the
preferences and rights set forth therein relating to dividends, conversion,
redemption, dissolution and distribution of assets of the Corporation having
been fixed by the Board of Directors pursuant to authority granted to it under
Article FOURTH of the Amended and Restated Certificate of Incorporation of the
Company ("Certificate of Incorporation") and in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware:
RESOLVED: That, pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of Directors hereby
authorizes the issuance of 99 shares of Series B Preferred Stock, par value $.01
per share, of the Corporation, and hereby fixes the designations, powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, of such shares, in
addition to those set forth in the Certificate of Incorporation of the
Corporation, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
----------------------
designated "Series B Non-Voting Preferred Stock" (the "Series B Preferred
Stock") and the number of shares constituting such series shall be 99.
2. DIVIDENDS.
---------
(a) The holders of the Series B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of any funds legally
available therefor, preferential cumulative dividends in cash at the rate of ten
percent (10%) per share per annum of the Stated Value thereof (as
<PAGE>
hereinafter defined) and not more, payable as the Board of Directors of the
Corporation may determine, before any dividends shall be set apart for or paid
upon the Common Stock or any other stock ranking as to dividends and on
liquidation junior to the Series B Preferred Stock (such stock being referred to
hereinafter collectively as "Junior Stock") in any year. The Series A Non-Voting
Preferred Stock of the Company ("Series A Preferred Stock") shall rank as to
dividends and on liquidation on parity with the Series B Preferred Stock.
Subject to the foregoing and to Section 2(b) of this Certificate of Designation,
the Corporation shall not be obligated to pay dividends until the redemption of
such shares of Series B Preferred Stock in accordance with the terms of Section
5 of this Certificate of Designation. All dividends declared upon Series B
Preferred Stock shall be declared pro rata per share. As used in this Section 2
of this Certificate of Designation, the term "Stated Value" with respect to each
share of Series B Preferred Stock shall mean the amount of One Hundred Thousand
Dollars ($100,000.00) (subject to adjustment in the event of any stock dividend,
stock split, stock distribution or combination with respect to such shares).
(b) Dividends on the Series B Preferred Stock shall be cumulative and
shall accrue on a daily basis from the date of issuance, whether or not declared
and whether or not in any fiscal year there shall be net profits or surplus
available for the payment of dividends in such fiscal year, so that if in any
fiscal year or years, dividends in whole or in part are not paid upon the Series
B Preferred Stock, unpaid dividends shall accumulate as against the holders of
the Junior Stock. In addition, all accrued but unpaid dividends on the Series B
Preferred Stock shall compound on a semi-annual basis on each December 31 and
June 30.
(c) For so long as the Series B Preferred Stock remains outstanding,
the Corporation shall not pay any dividend upon the Junior Stock, whether in
cash or other property (other than shares of Junior Stock), or purchase, redeem
or otherwise acquire any such Junior Stock. Notwithstanding the provisions of
this Section 2(c) of this Certificate of Designation, without declaring or
paying dividends on the Series B Preferred Stock, the Corporation may, subject
to applicable law, repurchase or redeem shares of capital stock of the
Corporation from current or former officers or employees of the Corporation
pursuant to the terms of repurchase or similar agreements in effect from time to
-2-
<PAGE>
time, provided that such agreements have been approved by the Board of
Directors.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
--------------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock and the Series B Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of any other Preferred
Stock of the Corporation ranking on liquidation prior and in preference to the
Series A Preferred Stock and the Series B Preferred Stock (such Preferred Stock
being referred to hereinafter as "Senior Preferred Stock") upon such
liquidation, dissolution or winding up, but before any payment shall be made to
the holders of Junior Stock, an amount equal to the Series B Redemption Price
(as hereinafter defined). If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation available for the
distribution to its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Preferred Stock shall be insufficient
to pay the holders of shares of Series A Preferred Stock and Series B Preferred
Stock, and the holders of any class of stock ranking on liquidation on a parity
with the Series A Preferred Stock and Series B Preferred Stock, the full amount
to which they shall be entitled, the holders of shares of Series A Preferred
Stock and Series B Preferred Stock, and any class of stock ranking on
liquidation on a parity with the Series B Preferred Stock, shall, before any
payment shall be made to the holders of Junior Stock, share ratably, in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect to the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full.
(b) After the payment of all referential amounts required to be paid
to the holders of Senior Preferred Stock, Series A Preferred Stock and Series B
Preferred Stock and any other series of Preferred Stock upon the dissolution,
liquidation or winding up of the Corporation, the holders of shares of Junior
Stock then outstanding shall be entitled to receive the remaining
-3-
<PAGE>
assets and funds of the Corporation available for distribution to its
stockholders.
(c) The merger or consolidation of the Corporation into or with
another corporation, the merger or consolidation of any other corporation into
or with the Corporation, or the sale, conveyance, mortgage, pledge or lease of
all or substantially all the assets of the Corporation shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation for purposes of this
Section 3 of this Certificate of Designation.
4. VOTING.
------
(a) Except as expressly provided in Section 4(b) of this Certificate
of Designation or as required by law, holders of Series B Preferred Stock shall
not be entitled to vote on any matters presented to the stockholders of the
Corporation.
(b) The Corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of at least two-thirds of the then
outstanding of shares of Series B Preferred Stock, amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock. For this purpose, the
authorization or issuance of any series of Preferred Stock with preference or
priority over, or being on a parity with the Series B Preferred Stock as to the
right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall be deemed so to affect
adversely the Series B Preferred Stock.
5. REDEMPTION.
----------
(a) The Series B Preferred Stock shall be subject mandatory redemption
(to the extent that such redemption shall not violate any applicable provisions
of the laws of the State of Delaware) at a price per share equal to One Hundred
Thousand Dollars ($100,000.00) (subject to adjustment in the event of any stock
dividend, stock split, stock distribution or combination with respect to such
shares), plus an amount equal to any and all dividends accrued and unpaid
thereon as of the date of such redemption (the "Series B Redemption Price") (i)
upon the closing of a public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of equity securities for the account of the
-4-
<PAGE>
Corporation (an "Initial Public Offering"), or (ii) upon the sale of all or
substantially all of the assets of the Corporation or the merger or
consolidation of the Corporation with or into any other corporation or other
entity in which the holders of the Corporation's outstanding shares before the
merger or consolidation do not retain a majority of the voting power of the
surviving corporation or other entity or (iii) upon the acquisition by any
person of shares of Common Stock representing a majority of the issued and
outstanding shares of Common Stock then outstanding. If the Corporation is
unable to redeem any shares of Series B Preferred Stock because such
redemption would violate the applicable laws of the State of Delaware, then
the Corporation shall not be obligated to redeem such shares at such time but
shall redeem such shares as soon thereafter as the restrictions precluding
such redemption or imposing such liability shall no longer be applicable.
(b) In the event of any redemption of only a part of the then
outstanding Series B Preferred Stock, the Corporation shall effect such
redemption pro rata among the holders thereof (based on the number of shares of
Series B Preferred Stock held on the date of notice of redemption).
(c) In the case of an Initial Public Offering resulting in net
proceeds to the Corporation of not less than $25,000,000, any holder of Series B
Preferred Stock may elect, by giving notice to the Corporation at least ten (10)
days prior to the date or estimated date fixed as the date of redemption of
Series B Preferred Stock, to receive the Series B Redemption Price then payable
in fully paid and nonassessable shares of the Corporation's Common Stock, par
value $0.01 per share (the "Common Stock"), in which case the Corporation shall
take such action as shall be necessary to issue to such electing holder in such
exchange the applicable number of shares of Common Stock. The number of shares
of Common Stock to be issued in exchange for each share of Series B Preferred
Stock being redeemed shall be determined by dividing (i) the Series B Redemption
Price by (ii) the price per share at which the Common Stock is sold to the
public in the Initial Public Offering less underwriting discounts and
commissions per share of such Common Stock (the "Net Initial Public Offering
Price"). To the extent that all or any part of the Series B Redemption Price
payable in shares of Common Stock would result in the issuance of a fractional
share of Common Stock (which shall be determined with respect to the aggregate
number of shares of Common Stock held of record by each holder),
-5-
<PAGE>
then the product of such fraction multiplied by the Net Initial Public Offering
Price shall be paid in cash (unless there are not legally available funds with
which to make such cash payment, in which event such cash payment shall be made
as soon as possible thereafter).
(d) At least thirty (30) days, but not more than 90 days, prior to the
date or estimated date fixed as the date of the redemption thereof, written
notice shall be mailed, postage prepaid, to each holder of record of Series B
Preferred Stock to be redeemed, at his or its post office address last shown on
the records of the Corporation, notifying such holder of the number of shares so
to be redeemed, specifying the date or estimated date for such redemption and
calling upon such holder to surrender to the Corporation, in the manner and at
the place designated, his or its certificate or certificates representing the
shares to be redeemed (such notice is hereinafter referred to as the "Series B
Redemption Notice"). On or prior to the date or estimated date fixed as the
date of the redemption thereof, each holder of Series B Preferred Stock to be
redeemed shall surrender to the Corporation or to any transfer agent of the
Corporation, his or its certificate or certificates representing such shares,
duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer, and otherwise in the manner and at the place designated
in the Series B Redemption Notice, and on the date actually fixed for the
redemption of such shares, the Series B Redemption
-6-
<PAGE>
Price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and, to the
extent the Series B Redemption Price is being paid in shares of Common Stock,
the holder of such shares of Series B Preferred Stock shall be entitled to
receive stock certificates evidencing the number of shares of Common Stock for
which such shares of Series B Preferred Stock have been exchanged, and in each
case, each surrendered certificate of Series B Preferred Stock shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after the date fixed as the date of the redemption
thereof, unless there shall have been a default in payment of the Series B
Redemption Price (in which event such rights shall be exercisable until such
default is cured), all rights of the holders of the Series B Preferred Stock
designated for redemption in the Series B Redemption Notice as holders of Series
B Preferred Stock of the Corporation (except the right to receive the Series B
Redemption Price and the payment in respect of any fractional share without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. Any shares of Series B Preferred Stock so redeemed shall be
permanently retired, shall no longer be deemed outstanding and shall not under
any circumstances be reissued, and the Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce the authorized
Series B Preferred Stock accordingly.
(e) Except as provided in Section 5(a) of this Certificate of
Designation, the Corporation shall have no right to redeem the shares of Series
B Preferred Stock. Nothing herein contained shall prevent or restrict the
purchase by the Corporation, from time to time either at public or private sale,
of the whole or any part of the Series B Preferred Stock at such price or prices
as the Corporation may determine, subject to the provisions of applicable law.
-7-
<PAGE>
IN WITNESS WHEREOF, Eagle Family Foods Holdings, Inc. has caused this
Certificate of Designations, Number, Voting Powers, Preferences and Rights of
Series B Non-Voting Preferred Stock to be duly executed by John O'C. Nugent, its
Chief Executive Officer and President this 24th day of September, 1999.
EAGLE FAMILY FOODS HOLDINGS INC.
By: /s/ John O'C. Nugent
--------------------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer and President
-8-
<PAGE>
Exhibit 4.1
EAGLE FAMILY FOODS HOLDINGS, INC.
FIRST AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
First Amendment to Registration Rights Agreement, dated as of
September 27, 1999, by and among the Investors whose names appear on Schedule I
hereto, and Eagle Family Foods Holdings, Inc., a Delaware corporation (the
"Company"). Capitalized terms used herein but not defined, are used as defined
in the Registration Rights Agreement (as defined below).
R E C I T A L S
- - - - - - - -
WHEREAS, the parties hereto have entered into that certain
Registration Rights Agreement, dated as of January 23, 1998 (the "Registration
Rights Agreement");
WHEREAS, the Company is concurrently herewith entering into
Subscription Agreements with Warburg and GEI, dated as of the date hereof,
relating to the offer and sale to Warburg and GEI of 99 shares of newly-issued
Series B Non-Voting Preferred Stock, par value $0.01 per share, of the Company
(the "Series B Preferred Stock"), and (ii) 100,000 shares of newly-issued Common
Stock with accompanying warrants (collectively, the "Offered Securities");
WHEREAS, in connection with the purchase and sale of the Offered
Securities, the parties hereto desire to amend provisions of the Registration
Rights Agreement, as provided for herein, and provisions of the Stockholders
Agreement as provided for in the First Amendment to Stockholders Agreement,
dated as of even date herewith.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------
(a) The first paragraph of the Recitals of the Registration Rights
Agreement is hereby deleted and replaced in its entirety with the following:
"WHEREAS, the Investors have (a) pursuant to the terms of certain
subscription agreements among the Company and the Investors (collectively, the
"Subscription Agreements"), agreed to purchase shares of Common Stock, par value
$.01 per share, of the Company ("Common Stock"), shares of Series A Non-Voting
Preferred Stock, par value $.01 per share, of the Company (the "Series A
Preferred Stock") and shares of Series B Non-Voting Preferred Stock, par value
$.01 per share, of the Company (the
<PAGE>
"Series B Preferred Stock" and, together with the Series A Preferred Stock, the
"Preferred Stock") and/or (b) pursuant to the terms of the restricted stock
agreement under the Company's 1998 Stock Incentive Plan (the "Plan"), received
grants of restricted Common Stock, subject to certain vesting requirements and
forfeiture provisions; and"
2. EFFECTIVENESS OF THIS FIRST AMENDMENT TO REGISTRATION RIGHTS
------------------------------------------------------------
AGREEMENT
- ---------
This First Amendment to Registration Rights Agreement is effective as
of the date first written above. Except as amended herein, the Registration
Rights Agreement shall continue in full force and effect and shall be
enforceable in accordance with its terms.
3. GOVERNING LAW
-------------
This First Amendment to Registration Rights Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State.
4. COUNTERPARTS
------------
This First Amendment to Registration Rights Agreement may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Registration Rights Agreement as of the date first written above.
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
----------------------
Name: John O'C. Nugent
Title: President and Chief
Executive Officer
INSTITUTIONAL INVESTORS:
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A
LIMITED PARTNERSHIP
By: GE Investment Management Incorporated, its
General Partner
By: /s/ Donald W. Torey
---------------------
Name: Donald W. Torey
Title: Executive Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co., its General Partner
By: /s/ Kewsong Lee
-----------------
Name: Kewsong Lee
Title: Managing Director
ADDITIONAL INVESTORS:
/s/ Tamar Bernbaum /s/ Virginia Cappello
- ------------------------------------- --------------------------------------
Tamar Bernbaum Virginia Cappello
/s/ Paul Keida /s/ Richard Lumpp
- ------------------------------------- --------------------------------------
Paul Keida Richard Lumpp
/s/ A.L. Stanley /s/ Marcus L. Currey
- ------------------------------------- --------------------------------------
A.L. Stanley Marcus L. Currey
-3-
<PAGE>
ADDITIONAL INVESTORS (continued):
/s/ William A. Lynch /s/ John O'C. Nugent
- ------------------------------------- --------------------------------------
William A. Lynch John O'C. Nugent
/s/ Jonathan F. Rich /s/ Craig A. Steinke
- ------------------------------------- --------------------------------------
Jonathan F. Rich Craig A. Steinke
/s/ James A. Byrne /s/ William J. Awad
- ------------------------------------- --------------------------------------
James A. Byrne William J. Awad
-4-
<PAGE>
Exhibit 4.2
EAGLE FAMILY FOODS HOLDINGS, INC.
FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT
First Amendment to Stockholders Agreement, dated as of September 27,
1999, by and among GE Investment Private Placement Partners II, a Limited
Partnership ("GEI"), Warburg, Pincus Ventures, L.P., a Delaware limited
partnership ("Warburg" and, together with GEI, the "Institutional Investors");
the individuals whose names appear on Schedule I hereto, and Eagle Family Foods
Holdings, Inc., a Delaware corporation (the "Company"). Capitalized terms used
herein but not defined, are used as defined in the Stockholders Agreement (as
defined below).
R E C I T A L S
- - - - - - - -
WHEREAS, the parties hereto have entered into that certain
Stockholders Agreement, dated as of January 23, 1998 (the "Stockholders
Agreement");
WHEREAS, the Company is concurrently herewith entering into
Subscription Agreements with the Institutional Investors, dated as of the date
hereof, relating to the offer and sale to such Institutional Investors of 99
shares of newly-issued Series B Non-Voting Preferred Stock, par value $0.01 per
share, of the Company (the "Series B Preferred Stock"), and (ii) 100,000 shares
of newly-issued Common Stock with accompanying warrants to purchase 22,013
shares of Common Stock (collectively, the "Offered Securities");
WHEREAS, in connection with the purchase and sale of the Offered
Securities, the parties hereto desire to amend provisions of the Stockholders
Agreement, as provided for herein, and provisions of the Registration Rights
Agreement as provided for in the First Amendment to Registration Rights
Agreement, dated as of even date herewith.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. AMENDMENTS TO STOCKHOLDERS AGREEMENT
------------------------------------
(a) The first paragraph of the Recitals of the Stockholders Agreement
is hereby deleted and replaced in its entirety with the following:
"WHEREAS, certain of the Investors, pursuant to the terms of certain
subscription agreements with the Company
<PAGE>
(collectively, the "Subscription Agreements"), have agreed to purchase shares of
the Common Stock, par value $.01 per share, of the Company (the "Common Stock"),
the Series A Non-Voting Preferred Stock, par value $.01 per share, of the
Company (the "Series A Preferred Stock") and the Series B Non-Voting Preferred
Stock, par value $.01 per share, of the Company (the "Series B Preferred Stock"
and, together with the Series A Preferred Stock, the "Preferred Stock"), and
warrants of the Company ("Warrants"); and"
(b) The third paragraph of the Recitals of the Stockholders Agreement
is hereby deleted and replaced in its entirety with the following:
"WHEREAS, the Investors and the Company desire to promote their mutual
interests by agreeing to certain matters relating to the operations of the
Company and the dispositions and/or voting of the shares of Common Stock and
Preferred Stock and the Warrants purchased by the Investors pursuant to the
Subscription Agreements, together with any other shares of Common Stock or
Preferred Stock or Warrants acquired by them (other than shares of Common Stock
issued under the Company's 1998 Stock Incentive Plan (as it may be amended from
time to time, the "Stock Plan")) (collectively, the "Shares")."
2. EFFECTIVENESS OF THIS FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT
---------------------------------------------------------------
This First Amendment to Stockholders Agreement is effective as of the
date first written above. Except as amended herein, the Stockholders Agreement
shall continue in full force and effect and shall be enforceable in accordance
with its terms.
3. GOVERNING LAW
-------------
This First Amendment to Stockholders Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
4. COUNTERPARTS
------------
This First Amendment to Stockholders Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Stockholders Agreement as of the date first written above.
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
----------------------
Name: John O'C. Nugent
Title: President and Chief
Executive Officer
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A
LIMITED PARTNERSHIP
By: GE Investment Management Incorporated, its
General Partner
By: /s/ Donald W. Torey
----------------------
Name: Donald W. Torey
Title: Executive Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co., its General Partner
By: /s/ Kewsong Lee
-----------------
Name: Kewsong Lee
Title: Managing Director
MANAGEMENT INVESTORS:
/s/ James Byrne /s/ Richard Lumpp
- ----------------------------------- -------------------------------------------
James Byrne Richard Lumpp
/s/ William A. Lynch /s/ John O'C. Nugent
- ----------------------------------- -------------------------------------------
William A. Lynch John O'C. Nugent
/s/ Jonathan F. Rich /s/ Craig Steinke
- ----------------------------------- -------------------------------------------
Jonathan F. Rich Craig Steinke
-3-
<PAGE>
SCHEDULE I
Management Investors
--------------------
James A. Byrne
Richard Lumpp
William A. Lynch
John O'C. Nugent
Jonathan F. Rich
Craig Steinke
<PAGE>
Exhibit 4.3
EAGLE FAMILY FOODS HOLDINGS, INC.
SUBSCRIPTION AGREEMENT
September 27, 1999
GE Private Placement Partners II,
a Limited Partnership
3003 Summer Street
Stamford, CT 06905
Attention: Andreas Hildebrand
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
17th Floor
New York, NY 10017
Attention: Kewsong Lee
Gentlemen:
This letter is being written for the purpose of setting forth the
basic terms of the understandings between Eagle Family Foods Holdings, Inc., a
Delaware corporation (the "Company"), and you in connection with the purchase by
you and sale by the Company of shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock"), warrants to purchase shares of
Common Stock (the "Warrants") and shares of Series B Non-Voting Preferred Stock,
par value $0.01 per share ("Series B Preferred Stock") as set forth below.
If you are in agreement with the terms and conditions set forth
herein, please sign the last page of one copy of this letter and return it to
us, whereupon this letter shall represent a legally binding agreement between us
and shall supersede any prior agreement between you and the Company or any third
party as regards the sale and purchase of stock of the Company. Please keep the
other copy of this letter for your files.
1. AUTHORIZATION OF CAPITAL STOCK. The Company has authorized the creation of
------------------------------
(i) 1,200,000 shares of Common Stock and (ii) 1,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). The terms,
limitations and relative rights and preferences of the Common Stock are set
forth
<PAGE>
in the Amended and Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"). The terms, limitations and relative rights and
preferences of the Series B Preferred Stock are set forth in the Certificate of
Designations, Number, Voting Powers, Preferences and Rights of Series B Non-
Voting Preferred Stock of the Company (the "Certificate of Designation").
2. PURCHASE AND SALE OF SECURITIES.
-------------------------------
(a) Subject to the terms and conditions hereof, on the Closing Date, as defined
herein, the Company shall issue to you and you shall purchase from the
Company, the number of shares of Common Stock, Warrants to purchase the
number of shares of Common Stock and shares of Series B Preferred Stock
(collectively, the "Securities") set forth opposite your name on Schedule I
hereto for the amount per share in cash set forth on Schedule I hereto (the
"Purchase Price").
(b) Such issuance and purchase shall be effected by the Company executing and
delivering to you duly executed certificates evidencing the shares of
Common Stock and shares of Series B Preferred Stock (collectively, the
"Shares") and duly executed warrants evidencing the Warrants to be
subscribed by you, duly registered in your name against delivery by you to
the Company of the amounts set forth opposite your name on Schedule I.
Such payment shall be made by wire transfer.
(c) The closing of the sale shall take place on September 27, 1999 (the
"Closing Date").
(d) On the Closing Date, the Company shall deliver to you such officers'
certificates, good standing certificates and opinions as you shall
reasonably request relating to the transactions contemplated hereby.
3. RESTRICTIONS ON SECURITIES. None of the Securities (including any
--------------------------
securities received as a result of dividends, splits or any other forms of
recapitalization in respect of such Securities) shall be Transferred (as
hereinafter defined), either voluntarily or involuntarily, directly or
indirectly, (i) except pursuant to an effective registration under the
Securities Act (as hereinafter defined), or in a transaction which, in the
opinion of counsel reasonably satisfactory to the Company, qualifies as an
exempt transaction under the Securities Act and the rules and regulations
promulgated thereunder and (ii) in
-2-
<PAGE>
accordance with the terms of the Stockholders Agreement, dated as of January 23,
1998, as amended by Amendment No. 1 to the Stockholders Agreement, dated as of
the date hereof, by and among the Company, each of you and the Management
Investors (as defined therein) (as the same may be amended from time to time,
the "Amended Stockholders Agreement").
4. WARRANTIES AND REPRESENTATIONS OF THE COMPANY. The Company represents and
---------------------------------------------
warrants that:
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Annexed hereto as
Exhibits A and B, respectively, are true and complete copies of the
Certificate of Incorporation (including the Certificate of Designation) and
the Amended Bylaws as in effect on the date hereof.
(b) The Board of Directors of the Company (the "Board") has authorized the
execution, delivery, and performance of this Agreement, and each of the
transactions contemplated hereby. No other corporate action is necessary
to authorize such execution, delivery and performance, and upon such
execution and delivery, this Agreement shall constitute a valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms. The Board has authorized the issuance and delivery of the
Securities in accordance with this Agreement.
(c) The Shares and Warrants to be issued and sold by the Company pursuant to
this Agreement, when issued in accordance with the provisions hereof, will
be validly issued by the Company, fully paid and nonassessable shares and
fully paid and duly executed warrants, respectively, of the Company. Upon
issuance in accordance with the terms of the Warrants, the shares of Common
Stock issuable upon the exercise of the Warrants will be duly authorized,
validly issued by the Company, fully paid and nonassessable shares of the
Company.
(d) Except as has been obtained, the creation, authorization, issuance, offer
and sale of the Securities do not require any consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company or the vote, consent or
approval in any manner of the holders of any security (as defined in
Section 2(1) of the Securities Act) of the Company as a condition to the
execution and delivery of this Agreement or the creation,
-3-
<PAGE>
authorization, issuance, offer and sale of the Securities. The execution
and delivery by the Company of this Agreement and the performance by the
Company of its obligations hereunder will not violate (i) the terms and
conditions of the Certificate of Incorporation or the Amended Bylaws of the
Company, or any agreement or instrument to which the Company is a party or
by which it is bound or (ii) subject to the accuracy of your
representations and warranties contained in Section 5 hereof, any federal
or state law.
5. INVESTOR REPRESENTATIONS.
------------------------
You represent and warrant that:
(a) Offering Exemption. You understand that the Securities have not been
------------------
registered under the Securities Act, nor qualified under any state
securities laws, and that they are being offered and sold pursuant to an
exemption from such registration and qualification based in part upon your
representations contained herein.
(b) Knowledge of Offer. You are familiar with the business and operations of
------------------
the Company and have been given the opportunity to obtain from the Company
all information that you have requested regarding its business plans and
prospects.
(c) Knowledge and Experience; Ability to Bear Economic Risks. You have such
--------------------------------------------------------
knowledge and experience in financial and business matters that you are
capable of evaluating the merits and risks of the investment contemplated
by this Agreement; and you are able to bear the economic risk of this
investment in the Company (including a complete loss of this investment).
(d) Limitations on Disposition. You recognize that no public market exists for
--------------------------
the Securities, and none will exist in the future (other than as set forth
in the Amended Registration Rights Agreement). You understand that you
must bear the economic risk of this investment indefinitely unless your
Securities are registered pursuant to the Securities Act or an exemption
from such registration is available, and unless the disposition of such
Securities is qualified under applicable state securities laws or an
exemption from such qualification is available, and that the Company has no
obligation or present intention of so registering the Securities (other
than as set forth in the Amended Registration Rights Agreement). You
further understand that there is no assurance that any exemption from the
-4-
<PAGE>
Securities Act will be available, or, if available, that such exemption
will allow you to Transfer any or all the Securities, in the amounts, or at
the times you might propose. You understand at the present time Rule 144
promulgated under the Securities Act by the Securities and Exchange
Commission ("Rule 144") is not applicable to sales of the Securities
because they are not registered under Section 12 of the Exchange Act (as
hereinafter defined) and there is not publicly available the information
concerning the Company specified in Rule 144. You further acknowledge that
the Company is not presently under any obligation to register under Section
12 of the Exchange Act or to make publicly available the information
specified in Rule 144 and that it may never be required to do so. You
further acknowledge the restrictions on disposition and other terms set
forth in the Amended Stockholders Agreement.
(e) Investment Purpose. You are acquiring the Securities solely for your own
------------------
account for investment and not with a view toward the resale, Transfer, or
distribution thereof, nor with any present intention of distributing the
Securities. No other Person (as hereinafter defined) has any right with
respect to or interest in the Securities to be purchased by you, nor have
you agreed to give any Person any such interest or right in the future.
(f) Capacity. You have full power and legal right to execute and deliver this
--------
Agreement and to perform your obligations hereunder.
6. COVENANTS.
---------
(a) Conduct of Business and Maintenance of Existence. The Company will
------------------------------------------------
continue to engage in business of the same general type as will be
conducted by it on the Closing Date, and preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in
the normal conduct of its business.
(b) Compliance with Laws. The Company will comply in all material respects
--------------------
with all applicable laws, rules, regulations and orders except where the
failure to comply would not have a material adverse effect on the business,
properties, operations, prospects or financial condition of the Company.
-5-
<PAGE>
(c) Insurance. The Company will maintain insurance with responsible and
---------
reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies of similar size and credit
standing engaged in similar business and owning similar properties,
provided that such insurance is and remains available to the Company at
commercially reasonable rates.
(d) Keeping of Books. The Company will keep proper books of record and
----------------
account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Company in accordance with
generally accepted accounting principles.
(e) Lost, etc. Certificates Evidencing Shares or Warrants; Exchange. Upon
---------------------------------------------------------------
receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of any certificate evidencing any
Shares or any Warrant owned by you, and (in the case of loss, theft or
destruction) of an unsecured indemnity satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of such certificate or Warrant, if
mutilated, the Company will make and deliver in lieu of such certificate or
Warrant a new certificate or Warrant of like tenor. Your agreement of
indemnity shall constitute an indemnity satisfactory to the Company for
purposes of this Section 6. Upon surrender of any certificate representing
any Shares or Warrants for exchange at the office of the Company, the
Company at its expense will cause to be issued in exchange therefor new
certificates or Warrants in such denomination or denominations as may be
requested for the same aggregate number of Shares or Warrants represented
by the Security so surrendered and registered as such holder may request.
The Company will also pay the cost of all deliveries of certificates for
such Shares or Warrants to you (including the cost of insurance against
loss or theft in an amount satisfactory to the holders) upon any exchange
provided for in this Section 6.
(f) Termination. The provisions of this Section 6 (other than Section 6(e),
-----------
which shall survive) shall remain in effect until the closing of an Initial
Public Offering (as defined in the Amended Stockholders Agreement).
7. SECURITIES ACT RESTRICTIONS. In addition to the legends required by Section
---------------------------
1(a) of the Amended Stockholders
-6-
<PAGE>
Agreement, the certificates evidencing the Securities will bear the following
legend reflecting the restrictions on the transfer of such securities contained
in this Agreement:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred
except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder."
8. OTHER AGREEMENTS. On the Closing Date, the Company and each of you shall
----------------
execute and mutually deliver a counterpart of the Amended Stockholders Agreement
and the Amended Registration Rights Agreement.
9. INTERPRETATION OF THIS AGREEMENT.
--------------------------------
(a) Terms Defined. As used in this Agreement, the following terms have the
-------------
respective meaning set forth below:
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Person: an individual, partnership, joint-stock company, corporation,
------
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
Amended Registration Rights Agreement: that certain Registration
-------------------------------------
Rights Agreement, dated as of January 23, 1998, as amended by Amendment No. 1 to
the Registration Rights Agreement, dated as of the date hereof, and as amended
from time to time, by and among the Company, each of you, the Management
Investors and the other Investors identified therein.
Securities Act: the Securities Act of 1933, as amended.
--------------
Transfer: any sale, assignment, pledge, hypothecation, or other
--------
disposition or encumbrance.
(b) Directly or Indirectly. Where any provision in this Agreement refers to
----------------------
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall
-7-
<PAGE>
be applicable whether such action is taken directly or indirectly by such
Person.
(c) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(d) Section Headings. The headings of the sections and subsections of this
----------------
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
10. MISCELLANEOUS.
-------------
(a) Notices. All Communications under this Agreement shall be in writing and
-------
shall be delivered by hand or facsimile or mailed by overnight courier or
by registered mail or certified mail, postage prepaid:
(i) if to GE Private Placement Partners II, a Limited Partnership
("GEI"), at 3003 Summer Street, Stamford, CT 06905, Attention:
Andreas T. Hildebrand (Fax No.: (203) 326-2495, or at such other
address or facsimile number as GEI may have furnished the other
parties hereto in writing;
(ii) if to Warburg, Pincus Ventures, L.P. ("Warburg") at 466 Lexington
Avenue, New York, New York 10017, Attention: Kewsong Lee (Fax No.:
(212) 878-6162, or at such other address or facsimile number as
Warburg may have furnished the other parties hereto in writing;
(iii) if to the Company, to Eagle Family Foods Holdings, Inc., 220 White
Plains Road, Tarrytown, New York 10591, Attention: Jonathan F. Rich,
Esq. (Fax No.: (914) 631-3220), or at such other address or
facsimile number as the Company may have furnished the other parties
hereto in writing.
(b) Any notice so addressed shall be deemed to be given: if delivered by hand
or facsimile, on the date of such delivery, if a business day, otherwise
the first business day thereafter; if mailed by courier, on the first
business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of
such mailing.
-8-
<PAGE>
(c) Advances; Expenses and Taxes. (i) The Company agrees to pay the reasonable
----------------------------
fees and disbursements of Willkie Farr & Gallagher and such other counsel
as shall have been engaged by you, incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement, the
Amended Stockholders Agreement, the Amended Registration Rights Agreement
and the other instruments and agreements entered into pursuant to this
Agreement or such other agreements, and any amendments to the same.
(ii) The Company will pay, and save and hold each of you harmless
from any and all liabilities (including interest and penalties)
with respect to, or resulting from any delay or failure in
paying, stamp and other taxes (other than income taxes), if any,
which may be payable or determined to be payable on the
execution and delivery or acquisition of the Securities.
(d) Reproduction of Documents. This Agreement and all documents relating
-------------------------
thereto, including, without limitation, (i) consents, waivers and
modifications relating hereto which may hereafter be executed, (ii)
documents received by you on the Closing Date (except for certificates
evidencing the Shares themselves and the Warrants themselves), and (iii)
financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and you may destroy any original document so reproduced. All
parties hereto agree and stipulate that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by you in the regular course of
business) and that any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence.
(e) Survival. All warranties, representations, and covenants made by you and
--------
the Company herein or in any certificate or other instrument delivered by
one of you or the Company under this Agreement shall be considered to have
been relied upon by the Company or you, as the case may be, and shall
survive all deliveries to you of the Securities, or payment to the Company
for such Securities, regardless of any investigation made by the Company or
one of you, as the case may be, or on the Company's or your behalf. All
statements in any such certificate
-9-
<PAGE>
or other instrument shall constitute warranties and representations by the
Company hereunder.
(f) Successors and Assigns; No Third Party Beneficiaries. This Agreement shall
----------------------------------------------------
inure to the benefit of and be binding upon the successors and assigns of
each of the parties. Nothing in this Agreement shall confer upon any
Person not a party to this Agreement any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement.
(g) Entire Agreement; Amendment and Waiver. This Agreement, the Amended
--------------------------------------
Registration Rights Agreement, the Amended Stockholders Agreement and the
Certificate of Incorporation constitute the entire understandings of the
parties hereto and supersede all prior agreements or understandings with
respect to the subject matter hereof among such parties. This Agreement
may be amended, and the observance of any term of this Agreement may be
waived, with (and only with) the written consent of the Company and each of
you.
(h) Severability. In the event that any part or parts of this Agreement shall
------------
be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
(i) Obligations Several. Notwithstanding anything to the contrary contained in
-------------------
this Agreement, each of your representations and warranties, covenants and
other agreements under this Agreement shall be several, but not joint.
(j) Limitation on Enforcement of Remedies. The Company hereby agrees that it
-------------------------------------
will not assert against the limited partners of either of you any claim it
may have under this Agreement by reason of any failure or alleged failure
by either of you to meet its obligations hereunder.
(k) Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed an original and all of which together shall
be considered one and the same agreement.
Please indicate your acceptance and approval of the foregoing in the
space provided below.
-10-
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
--------------------
Name: John O'C. Nugent
Title: President and Chief
Executive Officer
-11-
<PAGE>
ACCEPTED AND APPROVED
AS OF THE 27th DAY OF
SEPTEMBER, 1999
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: GE Investment Management
Incorporated, its General
Partner
By: /s/ Donald W. Torey
--------------------
Name: Donald W. Torey
Title: Executive Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ Kewsong Lee
-----------------
Name: Kewsong Lee
Title: Managing Director
-12-
<PAGE>
SCHEDULE I
PURCHASES OF SECURITIES
<TABLE>
<CAPTION>
Price Per
Number of Share of Price Per
Shares of Series B Number of Share of
Series B Preferred Shares of Common Stock
Name of Subscriber Preferred Stock Stock Common Stock Warrants and Warrants
- ------------------ --------------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
GE INVESTMENT PRIVATE 49.5 $100,000.00 50,000 11,006.5 $1.00
PLACEMENT PARTNERS II, A
LIMITED PARTNERSHIP
WARBURG, PINCUS VENTURES, L.P. 49.5 $100,000.00 50,000 11,006.5 $1.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EAGLE FAMILY FOODS HOLDINGS, INC. FOR THE THIRTEEN WEEK
PERIOD ENDED OCTOBER 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001054040
<NAME> EAGLE FAMILY FOODS HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 1,389
<SECURITIES> 0
<RECEIVABLES> 25,886
<ALLOWANCES> 210
<INVENTORY> 34,642
<CURRENT-ASSETS> 65,665
<PP&E> 40,237
<DEPRECIATION> 7,296
<TOTAL-ASSETS> 412,474
<CURRENT-LIABILITIES> 28,389
<BONDS> 339,250
105,543
0
<COMMON> 11
<OTHER-SE> (60,719)
<TOTAL-LIABILITY-AND-EQUITY> 412,474
<SALES> 55,157
<TOTAL-REVENUES> 55,157
<CGS> 29,436
<TOTAL-COSTS> 29,436
<OTHER-EXPENSES> 27,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,976
<INCOME-PRETAX> (9,406)
<INCOME-TAX> (3,281)
<INCOME-CONTINUING> (6,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,125)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EAGLE FAMILY FOODS, INC. FOR THE THIRTEEN WEEK PERIOD
ENDED OCTOBER 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001059761
<NAME> EAGLE FAMILY FOODS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 1,389
<SECURITIES> 0
<RECEIVABLES> 25,886
<ALLOWANCES> 210
<INVENTORY> 34,642
<CURRENT-ASSETS> 65,665
<PP&E> 40,237
<DEPRECIATION> 7,296
<TOTAL-ASSETS> 413,218
<CURRENT-LIABILITIES> 28,389
<BONDS> 339,250
0
0
<COMMON> 1
<OTHER-SE> 45,578
<TOTAL-LIABILITY-AND-EQUITY> 413,218
<SALES> 55,157
<TOTAL-REVENUES> 55,157
<CGS> 29,436
<TOTAL-COSTS> 29,436
<OTHER-EXPENSES> 27,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,976
<INCOME-PRETAX> (9,399)
<INCOME-TAX> (3,281)
<INCOME-CONTINUING> (6,118)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,118)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
