<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter ended June 30, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 1-13747
ATLANTIC PREMIUM BRANDS, LTD.
- --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 36-3761400
- ---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 480-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ---
As of August 6, 1999, there were outstanding 6,811,869 shares of Common Stock,
par value $.01 per share, of the Registrant.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1.
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
<TABLE>
<CAPTION>
(Audited) (Unaudited)
December 31, June 30,
1998 1999
---- ----
<S> <C> <C>
ASSETS
-------
Current assets:
Cash $ 1,774 $ 1,240
Accounts receivable, net of allowance for doubtful accounts
of $247 and $240, respectively 10,437 8,262
Inventory 4,457 5,872
Prepaid expenses and other current assets 235 218
Deferred income taxes 544 544
Net assets of discontinued operations 1,240 550
------- -------
Total current assets 18,687 16,686
Property, plant and equipment, net 12,288 12,603
Goodwill, net 13,517 13,335
Other assets, net 605 450
Deferred income taxes 568 568
------- -------
Total assets $45,665 $43,642
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Bank overdraft $ 4,073 $ 2,335
Notes payable under line of credit 1,579 3,939
Current maturities of long-term debt 1,378 1,613
Accounts payable 5,609 6,994
Income taxes payable 79 100
Accrued expenses 4,602 1,622
------- -------
Total current liabilities 17,320 16,603
Long-term debt, net of current maturities 17,079 16,320
Put warrants 1,435 1,435
------- -------
Total liabilities 35,834 34,358
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $.01 par value; 30,000,000 shares authorized;
7,412,583 shares and 6,838,773 shares issued and outstanding
at December 31, 1998 and June 30, 1999, respectively 74 68
Additional paid-in capital 12,260 10,889
Accumulated deficit (2,503) (1,673)
------- -------
Total stockholders' equity 9,831 9,284
------- -------
Total liabilities and stockholders' equity $45,665 $43,642
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 3
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
Net sales $ 45,810 $ 47,393
Cost of goods sold 39,531 41,396
--------- ---------
Gross profit 6,279 5,997
--------- ---------
Selling, general and administrative expenses:
Salaries and benefits 2,255 2,177
Other operating expenses 2,461 2,378
Depreciation and amortization 395 513
--------- ---------
Total selling, general and administrative expenses 5,111 5,068
--------- ---------
Income from operations 1,168 929
Interest expense 731 634
Other income, net 98 95
--------- ---------
Income from continuing operations before income taxes 535 390
Income tax expense 197 94
--------- ---------
Income from continuing operations 338 296
Loss from discontinued operations 62 --
--------- ---------
Net income $ 276 $ 296
========= =========
Income per common share:
Basic:
Income from continuing operations $ 0.05 $ 0.04
Loss from discontinued operations (0.01) --
--------- ---------
Net income $ 0.04 $ 0.04
========= =========
Diluted:
Income from continuing operations $ 0.04 $ 0.04
Loss from discontinued operations -- --
--------- ---------
Net income $ 0.04 $ 0.04
========= =========
Weighted average common shares:
Basic 7,402,603 7,100,175
========= =========
Diluted 7,620,369 7,259,650
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 4
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
Net sales $82,671 $93,300
Cost of goods sold 72,352 80,727
--------- ---------
Gross profit 10,319 12,573
--------- ---------
Selling, general and administrative expenses:
Salaries and benefits 3,566 4,400
Other operating expenses 4,115 4,831
Depreciation and amortization 697 1,001
--------- ---------
Total selling, general and administrative expenses 8,378 10,232
--------- ---------
Income from operations 1,941 2,341
Interest expense 1,072 1,218
Other income, net 221 172
--------- ---------
Income from continuing operations before income taxes 1,090 1,295
Income tax benefit (expense) 57 (465)
--------- ---------
Income from continuing operations 1,147 830
Loss from discontinued operations 127 --
------- -- ---------
Income before extraordinary loss 1,020 830
Extraordinary loss on early extinguishment of debt 195 --
--------- ---------
Net income $ 825 $ 830
========= ==========
Income per common share:
Basic:
Income from continuing operations $ 0.16 $ 0.11
Loss from discontinued operations (0.02) --
Extraordinary loss (0.03) --
--------- ---------
Net income $ 0.11 $ 0.11
========= =========
Diluted:
Income from continuing operations $ 0.15 $ 0.11
Loss from discontinued operations (0.02) --
Extraordinary loss (0.02) --
--------- ---------
Net income $ 0.11 $ 0.11
--------- ---------
Weighted average common shares:
Basic 7,402,603 7,256,379
--------- ---------
Diluted 7,620,369 7,435,513
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 5
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1998 1999
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 825 $ 830
Adjustments to reconcile net income to net cash provided
By (used in) operating activities, net of assets
and liabilities of acquired businesses:
Loss from discontinued operations 186 --
Extraordinary loss 195 --
Depreciation and amortization 862 1,113
Accretion of put warrants 35 --
Non-cash compensation expense 47 --
Deferred income taxes (116) --
Decrease in accounts receivable, net 1,450 2,174
Decrease (increase) in inventory 11 (1,416)
(Increase) decrease in prepaid expenses
and other assets (125) 1,412
(Decrease) increase in accounts payable (1,878) 1,385
Increase (decrease) in accrued expenses and other
current liabilities 817 (3,510)
------- -------
Net cash provided by operating activities 2,309 1,988
------- -------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (323) (1,021)
Cash paid for businesses acquired including deferred
acquisition fees, net of cash acquired (11,673) --
Repurchase of common stock -- (1,376)
Other 122 --
------- -------
Net cash used in investing activities (11,874) (2,397)
------- -------
Cash Flows from Financing Activities:
Increase (decrease) in bank overdraft 954 (1,738)
Borrowings (payments) under line of credit (1,010) 2,360
Payments of term debt and notes payable (5,336) (650)
Payments of financing costs (505) --
Borrowings under senior subordinated note 5,065 --
Issuance of put warrants 1,435 --
Issuance of common stock 13 --
Borrowings under term loan 11,000 --
------- -------
Net cash flows provided by (used in)
financing activities 11,616 (28)
Net cash used in discontinued operations (631) (97)
------- -------
Net increase (decrease) in cash 1,420 (534)
Cash, beginning of period 1,184 1,774
------- -------
Cash, end of period $ 2,604 $ 1,240
======= =======
</TABLE>
These accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> 6
ATLANTIC PREMIUM BRANDS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
The accompanying consolidated financial statements present the accounts of
Atlantic Premium Brands, Ltd. and subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated in consolidation. The Company's
financial statements have been restated to classify the results of operations
and net assets of the beverage division as discontinued operations.
Accordingly, all amounts included in the Notes to Consolidated Financial
Statements pertain to continuing operations except where otherwise noted. See
further discussion in Note 3 -- "Discontinued Operations".
The Company is engaged in the manufacturing, marketing and distribution of
packaged meat and other food products in Texas, Louisiana, Kentucky, Oklahoma
and surrounding states. The operating results of the Company are impacted by
changes in food commodity markets.
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. In management's opinion, the interim financial data
presented includes all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation. Certain information and
footnote disclosures normally included in the consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to understand the information
presented. The results of operations for interim periods are not necessarily
indicative of the operating results expected for an entire year. It is suggested
that these consolidated financial statements be read in conjunction with the
Company's December 31, 1998, consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K dated March 26, 1999.
Revenue Recognition
- -------------------
The Company records sales when product is delivered to the customers. Discounts
provided, principally based on volume, are accrued at the time of the sale.
Cash
- ----
Cash consists of cash held in various deposit accounts with financial
institutions. As of June 30, 1999, $235,000 was restricted to meet minimum
balance funding requirements.
<PAGE> 7
Inventory
- ---------
Inventory is stated at the lower of cost or market and is comprised of raw
materials, finished goods and packaging supplies. Cost is determined using the
first-in, first-out method (FIFO). Inventory consisted of the following as of:
<TABLE>
<CAPTION>
December 31, June 30,
(in thousands) 1998 1999
------------ --------
<S> <C> <C>
Raw materials $ 140 $ 404
Finished goods 2,998 4,239
Packaging supplies 1,319 1,229
------ ------
Total inventory $4,457 $5,872
====== ======
</TABLE>
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost, net of applicable
depreciation. Depreciation is computed using the straight-line method at annual
rates of 3% to 20% for buildings and building improvements, and 10% to 20% for
equipment, furniture and vehicles. Leasehold improvements are amortized over
the lesser of the lease term or asset life. Additions and improvements that
substantially extend the useful life of a particular asset are capitalized.
Repair and maintenance costs are charged to expense. Upon sale, the cost and
related accumulated depreciation are removed from the accounts.
Other Assets
- ------------
Other assets consist of deferred acquisition costs, cash surrender value of life
insurance, and deferred financing costs. Deferred financing costs are being
amortized over 5 to 7 years, representing the term of the related debt, using
the effective interest method.
Goodwill
- --------
Goodwill recorded in connection with business combinations is being amortized
using the straight-line method over 5 to 40 years.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE> 8
Income Per Common Share
- -----------------------
The weighted average shares used to calculate basic and diluted income per
common share for the three and six month periods ended June 30, 1998 and 1999,
are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1999 1998 1999
----- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding
for basic income per common share 7,402,603 7,100,175 7,388,169 7,256,379
Dilutive effect of common stock options 217,766 159,475 233,768 179,134
--------- --------- --------- ---------
Weighted average shares outstanding
for dilutive income per common share 7,620,369 7,259,650 7,621,937 7,435,513
========= ========= ========= =========
</TABLE>
Options to purchase 229,050 and 1,316,763 shares of common stock at prices
ranging from $2.65 to $4.00 per share were outstanding during the second quarter
of 1998 and 1999, respectively, but were not included in the computation of
diluted income per common share because the options' exercise price was greater
than the average market price of the common shares during the quarter.
Warrants with a put option to purchase up to a maximum of 1,095,700 shares of
common stock, as of June 30, 1998 and 1999 at $3.38 per share were outstanding
during the second quarter of 1998 and 1999 but were not included in the
computation of diluted income per common share because the warrants' exercise
price was greater than the average market price of the common shares during the
quarter.
2. CONTINGENCIES:
--------------
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.
3. DISCONTINUED OPERATIONS:
------------------------
During the fourth quarter of 1998, the Company decided to sell substantially all
the assets of its beverage division. The beverage division has been accounted
for as a discontinued operation and prior period financial statements have been
restated. Interest expense has been allocated to the beverage division based on
its net assets as a percentage of total consolidated net assets.
The sale was recorded in three separate transactions. Effective December 1,
1998, certain assets were sold for cash of approximately $2.2 million. Effective
January 11, 1999, additional assets were sold for cash of approximately
$900,000. The Company completed its disposition of the beverage division on
February 2, 1999 when it sold the remaining assets for approximately $400,000 in
cash and notes. The estimated loss of $293,040, net of income taxes, related to
the asset disposals in January and February 1999, was accrued for in the fourth
quarter of 1998, and, therefore, is not reflected in the accompanying
consolidated statements of income.
<PAGE> 9
In connection with these transactions, the Company recorded expenses in the
fourth quarter of 1998 related to severance; legal, investment banking and
accounting fees; and lease obligations which have no future benefit. These
expenses totalled $1.3 million, of which $0.5 million remains in accrued
expenses in the accompanying consolidated balance sheet at June 30, 1999.
4. ACQUISITION:
------------
As of March 20, 1998, the Company acquired substantially all of the assets and
certain liabilities of J.C. Potter Sausage Company (Potter), a food processing
business in Durant, Oklahoma, specializing in a line of premium products
including breakfast sausage, link sausage and sausage and biscuits. In
connection with the Potter transaction, the Company paid approximately $10.5
million in cash plus related transaction costs. The business combination was
accounted for using the purchase method of accounting, whereby the purchase
price is allocated to the assets acquired and liabilities assumed based upon
fair value.
5. DEBT REFINANCING:
-----------------
On March 20, 1998, the Company refinanced its senior revolver and term debt. The
new debt consists of an $11 million term note, a $15 million line of credit and
$6.5 million senior subordinated note with detachable warrants with a put
option.
The new term debt bears interest at either the bank's prime rate plus 1% or
Adjusted LIBOR plus 2.5%, at the Company's option. This loan is due in varying
amounts monthly through March 2003 and is secured by all assets of the Company.
Under the terms of the new line of credit agreement, the Company is permitted to
borrow up to $15 million subject to advance formulas based on accounts
receivable, inventory and letter of credit obligations outstanding through March
2003. Amounts borrowed are due on demand and bear interest at an annual rate
equal to either the bank's prime rate plus 1% or adjusted LIBOR plus 2.5%.
Interest is payable monthly and amounts are secured by all assets of the
Company.
The $6.5 million senior subordinated note, maturing on March 31, 2005, bears
interest at 10% per annum. Principal is payable in quarterly installments
beginning June 30, 2003. The subordinated debt was issued with detachable
warrants with a put option to purchase 666,947 shares of nonvoting common stock
at $3.38 and a contingent warrant to purchase up to a maximum of 428,753 shares
of nonvoting common stock at $3.38 per share based upon the equity value of the
Company on certain dates. The warrants have been recorded at an estimated fair
value of $1,435,000, resulting in a discount on the senior subordinated note of
the same amount. This discount is being amortized over the seven year term of
the note as additional interest expense.
In connection with this debt refinancing, the Company recorded an extraordinary
loss of $194,993 related to the write off of deferred financing costs, net of an
income tax benefit of $122,000. Also, the Company incurred additional financing
costs which have been deferred and are being amortized over the terms of the
related debt.
6. SEGMENTS
--------
The Company's operations have been classified into two business segments: food
processing and food distribution. The food processing segment includes the
processing and sales of sausages and related food products to distributors and
retailers in Louisiana, Texas, Kentucky and other surrounding states. The food
distribution segment includes the purchasing, marketing, and distribution
<PAGE> 10
of packaged meat products to retailers and restaurants, located primarily in
Texas.
Summarized financial information, by business segment, for continuing operations
in the three months ended are as follows:
<TABLE>
<CAPTION>
(in thousands)
Three Months
June 30, 1998 June 30, 1999
------------- ------------
<S> <C> <C>
Net sales to external
customers:
Food Processing $12,084 $11,841
Food Distribution 33,726 35,552
------- -------
45,810 47,393
======= =======
Interest expense:
Food Processing 35 47
Food Distribution 45 33
Corporate 651 554
------- -------
731 634
======= =======
Depreciation and
amortization:
Food Processing 327 450
Food Distribution 68 63
------- -------
395 513
======= =======
Income from continuing
operations before income
taxes:
Food Processing 1,830 979
Food Distribution 287 462
Corporate (1,582) (1,051)
------- -------
$ 535 $ 390
======= =======
</TABLE>
<PAGE> 11
Summarized financial information, by business segment, for continuing
operations in the six months ended are as follows:
<TABLE>
<CAPTION>
(in thousands)
Six Months
June 30, June 30,
1998 1999
-------- --------
<S> <C> <C>
Net sales to external customers:
Food Processing $16,598 $23,288
Food Distribution 66,073 70,012
------- -------
82,671 93,300
======= =======
Interest expense:
Food Processing 70 82
Food Distribution 77 65
Corporate 925 1,071
------- -------
1,072 1,218
======= =======
Depreciation and amortization:
Food Processing 571 875
Food Distribution 126 126
------- -------
697 1,001
======= =======
Income from continuing operations
before income taxes:
Food Processing 2,174 2,123
Food Distribution 863 1,180
Corporate (1,947) (2,008)
------- -------
$ 1,090 $ 1,295
======= =======
</TABLE>
<PAGE> 12
7. PURCHASE OF COMMON STOCK
------------------------
On May 13, 1999, The Company completed the purchase of 573,810 shares of the
Company's Common Stock at a purchase price of $2.40 per share, for an aggregate
purchase price of $1,377,144. The Company purchased these shares from Bobby L.
and Betty Ruth Grogan, who received the shares in connection with the Company's
October 1996 acquisition of Grogan's Sausage, Inc. and Grogan's Farms, Inc.
<PAGE> 13
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
In 1996, the Company implemented a new corporate strategy that resulted in
the acquisition of five food businesses. Each of these businesses represents a
preeminent local or regional branded processed meat company. In addition to
significantly increasing the Company's size, the newly acquired businesses
created a broader platform for future growth.
In order to acquire and operate its food businesses, the Company formed
four new subsidiaries during 1996: Prefco Corp., Carlton Foods Corp., Richards
Cajun Foods Corp., and Grogan's Farm, Inc. In March of 1998, the Company formed
a fifth new subsidiary to acquire the business of J.C. Potter Sausage Company
and affiliates.
The Company completed the sale of substantially all the assets of its
beverage division, which operated as a distributor of non-alcoholic beverages in
the Baltimore and Washington D.C. metropolitan areas. The disposition occurred
in three stages on December 1, 1998, January 11, 1999 and February 2, 1999.
RESULTS OF OPERATIONS
All of the acquisitions were recorded utilizing the purchase method of
accounting. Therefore, results of the acquired businesses prior to the effective
dates of such acquisitions are not included in the Company's results of
operations. The results of operations of the beverage division have been
classified as a discontinued operation.
The Company's Carlton subsidiary and the Company's Grogan's subsidiary both
sell product to the Company's Prefco subsidiary. The Company's Potter subsidiary
sells product to both the Company's Carlton and Prefco subsidiaries and
purchases product from the Company's Grogan's subsidiary. The Company's
financial statements do not reflect this activity, as it is eliminated on a
consolidated basis.
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998
Net Sales. Net sales increased by approximately $1.6 million or 3.5% from
approximately $45.8 million for the quarter ended June 30, 1998 to approximately
<PAGE> 14
$47.4 million for the quarter ended June 30, 1999. Sales of the Company's Food
Processing segment decreased by approximately 2.0%, while sales of the Company's
Food Distribution segment increased by approximately 5.4% primarily as a result
of the strong growth being experienced by the segment's major customer.
Gross Profit. Gross profit decreased by approximately $0.3 million or 4.5%
from approximately $6.3 million for the quarter ended June 30, 1998 to
approximately $6.0 million for the quarter ended June 30, 1999. Gross profit as
a percentage of net sales decreased from 13.7% for the quarter ended June 30,
1998 to 12.7% for the quarter ended June 30, 1999. These decreases primarily
reflect the impact of the improvement in the sales of the Company's Food
Distribution segment, which earns a lower gross profit margin on net sales than
the Food Processing segment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were approximately $5.1 million for both the quarter
ended June 30, 1998 and the quarter ended June 30, 1999. As a percentage of net
sales, selling, general and administrative expenses remained unchanged at 24.8%
for the Food Processing segment and decreased from 6.3% to 6.0% for the Food
Distribution segment. The Food Distribution decrease was primarily attributable
to the ability of this segment to add revenue without a corresponding increase
in selling general and administrative expenses.
Income from Operations. Income from operations decreased by approximately
$0.2 million or 20.6% from approximately $1.2 million for the quarter ended June
30, 1998 to approximately $0.9 million for the quarter ended June 30, 1999. This
decrease was attributable to the factors discussed above in Gross Profit and
Selling, General and Administrative Expenses.
Interest Expense. Interest expense decreased approximately $0.1 million
from approximately $0.7 million for the quarter ended June 30, 1998 to
approximately $0.6 million for the quarter ended June 30, 1999. This decrease
was primarily attributable to a decrease in the average outstanding borrowings
under the Company's credit facility and the accretion of interest for the
warrants with the put option in the quarter ended June 30, 1998.
Warrants with a put option were issued by the Company in conjunction with
the debt incurred at the time of the Potter acquisition. The Company is required
to accrete the value of the warrants and mark-to-market the estimated fair value
of the put option. Any increases to such value are charged to earnings as
additional interest expense. To the extent of any charges to earnings, any
subsequent decreases to the value of the warrants are added to earnings as
additional interest income. Furthermore, any such additional interest expense
would not be deductible in the Company's federal or state income tax
<PAGE> 15
returns and, therefore, would increase the effective income tax rate of the
Company. For purposes of these calculations, the fair value of the warrants is
estimated using a Black-Scholes option-pricing model. During the quarter ended
June 30, 1998 the Company recorded $35,000 of additional interest expense and
during the quarter ended June 30, 1999, the Company recorded no additional
interest expense, as the value of the warrants did not increase beyond their
carrying value.
Income tax benefit (expense). The effective tax rate differs from the
statutory rate primarily because of adjustments in estimated tax accruals, state
income taxes and the non-deductibility of goodwill amortization.
Income from Continuing Operations. Income from continuing operations
decreased by approximately $0.1 million from approximately $0.4 million for the
quarter ended June 30, 1998 to approximately $0.3 million for the quarter ended
June 30, 1999. This decrease was attributable to the factors discussed above.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net Sales. Net sales increased by approximately $10.6 million or 12.9%
from approximately $82.7 million for the six months ended June 30, 1998 to
approximately $93.3 million for the six months ended June 30, 1999. Sales of the
Company's Food Processing segment increased by approximately 40.3%, primarily
resulting from the acquisition of the Potter subsidiary on March 20, 1998, while
sales of the Company's Food Distribution segment increased by approximately 6.0%
primarily as a result of the strong growth being experienced by the segment's
major customer.
Gross Profit. Gross profit increased by approximately $2.2 million or
21.8% from approximately $10.3 million for the six months ended June 30, 1998 to
approximately $12.6 million for the six months ended June 30, 1999. Gross profit
as a percentage of net sales increased from 12.5% for the six months ended June
30, 1998 to 13.5% for the six months ended June 30, 1999. These increases
primarily reflect the impact of the Potter acquisition and the availability of
certain of the Company's raw materials at prices below those paid in the first
six months of 1998 for both the Food Processing segment and the Food
Distribution segment. Hog prices have a significant impact on the Company's cost
of goods sold and lower hog prices in the first half of 1999 favorably impacted
gross profit as compared to 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $1.8 million or 22.5% from
approximately
<PAGE> 16
$8.4 million for the six months ended June 30, 1998 to approximately $10.2
million for the six months ended June 30, 1999. As a percentage of net sales,
selling, general and administrative expenses decreased from 26.2% to 25.8% for
the Food Processing segment and decreased from 6.1% to 6.0% for the Food
Distribution segment. The decrease in the Food Processing segment was primarily
attributable to an increased proportion of sales to private label customers
which require less marketing and advertising support per revenue dollar. The
decrease in the Food Distribution segment was primarily attributable to this
segment's ability to add additional revenue without a corresponding increase in
selling, general and administrative expenses.
Income from Operations. Income from operations increased by approximately
$0.4 million from approximately $1.9 million for the six months ended June 30,
1998 to approximately $2.3 million for the six months ended June 30, 1999. This
increase is attributable to the factors discussed above.
Interest Expense. Interest expense was approximately $1.2 million for the
six months ended June 30, 1998 and for the six months ended June 30, 1999.
Warrants with a put option were issued by the Company in conjunction with
the debt incurred at the time of the Potter acquisition. The Company is
required to accrete the value of the warrants and mark-to-market the estimated
fair value of the put option. Any increases to such value are charged to
earnings as additional interest expense. To the extent of any charges to
earnings, any subsequent decreases to the value of the warrants are added to
earnings as additional interest income. Furthermore, any such additional
interest expense would not be deductible in the Company's federal or state
income tax returns and, therefore, would increase the effective income tax rate
of the Company. For purposes of these calculations, the fair value of the
warrants is estimated using a Black-Scholes option-pricing model. During the
six months ended June 30, 1998 the Company recorded $35,000 of additional
interest expense and during the quarter ended June 30, 1999, the Company
recorded no additional interest expense, as the value of the warrants did not
increase beyond their carrying value.
Income tax benefit (expense). The effective tax rate differs from the
statutory rate primarily because of state income taxes, the non-deductibility
of goodwill amortization and the reversal of a valuation allowance of
approximately $0.5 million, which was recorded as a benefit from income taxes
during the six months ended June 30, 1998.
<PAGE> 17
Income from Continuing Operations. Income from continuing operations was
approximately $0.8 million for the six months ended June 30, 1998 and for the
six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the six months ended June 30,
1999 was approximately $2.0 million. Income from continuing operations,
depreciation, amortization, and non-cash interest, an increase in accounts
payable and decreases in prepaid expenses and accounts receivable were the
primary factors contributing to the cash generated by operating activities,
which were partially offset by an increase in inventory and a decrease in
accrued expenses. Cash provided by operating activities for the six months
ended June 30, 1998 was approximately $2.3 million. This amount was principally
affected by net income, depreciation, amortization and a decrease in accounts
receivable and an increase in accrued expenses, which were partially offset by
a decrease in accounts payable.
Cash used in investing activities for the six months ended June 30, 1999
was approximately $2.3 million and reflected the acquisition of equipment and
the repurchase of 573,810 shares of the Company's common stock at a purchase
price of $2.40 per share. Cash used in investing activities for the six months
ended June 30, 1998 was approximately $11.9 million and reflected the
acquisition of equipment and the payment of cash in connection with the
acquisition of Potter.
Cash used in financing activities for the six months ended June 30, 1999
was approximately $28,000 and was principally affected by a decrease in the
bank overdraft balance and payments of term debt and other notes payable, which
was partially offset by borrowings under the Company's line of credit. Cash
provided by financing activities for the six months ended June 30, 1998 was
approximately $11.6 million and was principally affected by the refinancing of
the existing senior debt with the new term and revolving loan agreements, the
borrowings under the senior subordinated note and the related common stock
warrants with the put option and payments on the Company's term debt and line
of credit.
As of June 30, 1999, the Company had outstanding approximately $10 million
in term debt, $6.5 million of Senior Subordinated Debt owed to a bank,
approximately
<PAGE> 18
$3.9 million in line-of-credit borrowings and approximately $2.7 million of
subordinated debt owed to former owners of Prefco, Richard's, Grogan's and
Partin's. Monthly interest payments, currently reflecting an average annual rate
of approximately 7.7%, are being made on the subordinated debt owed to former
owners and the principal on these notes is due in 2001. The term debt and line
of credit agreement bear interest at an annual rate equal to either the bank's
prime rate plus 1% or Adjusted LIBOR plus 2.5% at the Company's option. The
Senior Subordinated Debt bears interest at 10% per annum.
The Company has entered into a put option agreement with the holder of
certain warrants described above under "Results of Operations -- Interest
Expense." If the holder of the warrants exercises the put option, the Company's
ability to satisfy such obligation will depend on its ability to raise
additional capital. The Company's ability to secure additional capital at such
time will depend upon the Company's overall operating performance, which will be
subject to general business, financial, competitive and other factors affecting
the Company and the processed meat distribution industry, certain of which
factors are beyond the control of the Company. No assurance can be given that
the Company will be able to raise the necessary capital on terms acceptable to
the Company, if at all, to satisfy the put obligation in a timely manner. If the
Company is unable to satisfy such obligation, the Company's business, financial
condition and operations will be materially and adversely effected.
As of June 30, 1999, the Company believes that cash generated from
operations and bank borrowings will be sufficient to fund its debt service,
working capital requirements and capital expenditures as currently contemplated
for the balance of 1999 and fiscal 2000. However, the Company's ability to fund
its working capital requirements and capital expenditures will depend in large
part on the Company's ability to continue to comply with covenants in the bank
agreements. The Company's ability to continue to comply with the covenants in
the bank agreements will depend on a number of factors, certain of which are
beyond the Company's control, including but not limited to, successful
integration of acquired businesses and implementation of its business strategy,
prevailing economic conditions, uncertainty as to evolving consumer preferences,
sensitivity to such factors as weather and raw material costs, the impact of
competition and the effect of each of these factors on its future operating
performance. No assurance can be given that the Company will remain in
compliance with such covenants throughout the term of the bank agreements.
The Company, from time to time, reviews the possible acquisition of other
products or businesses. The Company's ability to expand successfully through
acquisition depends on many factors, including the successful identification and
acquisition of products or businesses and the Company's ability to integrate and
operate
<PAGE> 19
the acquired products or businesses successfully. There
can be no assurance that the Company will be successful in acquiring or
integrating any such products or businesses.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is subject to certain market risks. These risks relate to
commodity price fluctuations, interest rate changes and fluctuations in the
value of the warrants with the put option and credit risk.
The Company is a purchaser of pork and other meat products. The Company
buys pork and other meat products based upon market prices that are established
with the vendor as part of the purchase process. The operating results of the
Company are significantly impacted by pork prices. The Company does not use
commodity financial instruments to hedge pork and other meat product prices.
The Company's exposure to interest rate risk relates primarily to its debt
obligations and temporary cash investments. Interest rate risk is managed
through variable rate and fixed rate borrowings with varying maturities. The
Company does not use, and has not in the past fiscal year used, any derivative
financial instruments relating to the risk associated with changes in interest
rates.
The Company is required to accrete the value of the warrants and
mark-to-market the estimated fair value of the put option. Any increases to
such value are charged to earnings as additional interest expense. To the
extent of any charges to earnings, any subsequent decreases to the value of the
warrants are added to earnings as additional interest income. Furthermore, any
such additional interest expense is not deductible in the Company's federal or
state income tax returns and, therefore, increases the effective income tax
rate of the Company. For purposes of these calculations, the fair value of the
warrants is estimated using a Black-Scholes option-pricing model. During the
six months ended June 30, 1998, the Company recorded $35,000 in additional
interest expense resulting from changes in the estimated fair value of the
warrants. No additional interest expense was required to be recorded during the
six months ended June 30, 1999.
The Company is exposed to credit risk on certain assets, primarily
accounts receivable. The Company provides credit to customers in the ordinary
course of business and performs ongoing credit evaluations. The Company
currently believes its allowance for doubtful accounts is sufficient to cover
customer credit risks.
<PAGE> 20
YEAR 2000
The Year 2000 issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. These two-digit
computer systems will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, leading to disruptions
in operations. The Company has focused on three major areas in conducting an
assessment of its Year 2000 readiness: (1) information technology, (2)
embedded technology, and (3) third party relationships.
Information Technology. The Company began its assessment of its Year 2000
readiness by conducting a review of the computer hardware and software
applications which comprise the Company's information technology systems. This
review was completed in 1998. As a result of this review, the Company believes
that, with the exception of its Potter subsidiary, the information technology
being utilized by each of its six operating subsidiaries is Year 2000
compliant, and the Company has received written confirmation of Year 2000
compliance from its hardware and software vendors. The Company has determined
that its Potter subsidiary requires the installation of a new data processing
system, after which Potter will also be Year 2000 compliant. This installation
was completed early in the third quarter of 1999. Through June 30, 1999, the
costs paid to third parties in connection with the Company's review of its
information technology were approximately $150,000, and future estimated
expenses are $50,000, consisting primarily of the costs associated with the new
Potters' data processing system.
Embedded Technology. The next phase of the Company's assessment began in
the third quarter of 1998, and included an audit of the non-information
technology systems and embedded technology at its facilities. The Company
completed this audit in the first quarter of 1999 and the costs paid to third
parties in connection with its Year 2000 efforts in this area were not
material.
Third Party Relationships. The Company relies on third party suppliers
and vendors for raw materials and other key supplies and services. The Company
is also dependent upon its customers for sales and cash flow. Interruption of
supplier or vendor operations or customer sales due to a failure of those third
parties to be Year 2000 compliant could adversely affect the Company's
operations. The Company, however, is not dependent on any particular supplier,
vendor or customer (with the exception of Sam's Clubs Inc. which comprises a
significant portion of sales). The Company does not currently have any formal
information concerning the Year 2000 readiness of all its suppliers and
customers, but has confirmed the Year 2000 readiness with suppliers and
customers with whom the Company has an electronic data interface (EDI),
including its largest customer. While the Company believes that the impact of
isolated occurrences resulting from the failure of third parties to be Year
2000 compliant would not be material, a wide-spread Year 2000 interruption
throughout the food industry or a Year 2000 problem with respect to its largest
customer would have a material adverse effect on the Company's results of
operations and financial position.
<PAGE> 21
Contingency Plan. Although the Company does not currently have a
contingency plan for Year 2000 issues, it does intend to begin developing one
in the third quarter of 1999 to prepare the Company for Year 2000 interruptions
such as delays in its accounting systems or customer sales and the inability of
its lenders or other sources of capital and liquidity to make funds available
when required.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
During 1998, the Financial Accounting Standards Board issued statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement 133"). Implementation of Statement 133 is
required for periods beginning after June 15, 2000. Statement 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that derivatives be recognized in the balance sheet at
fair value and specifies the accounting for changes in fair value. The Company
is evaluating the effect of Statement 133 on its accounting policy related to
derivative financial instruments.
<PAGE> 22
FORWARD LOOKING STATEMENTS
The Company wants to provide stockholders and investors with more
meaningful and useful information. Therefore, this Form 10-Q contains forward
looking information and describes the Company's belief concerning future
business conditions and the outlook for the Company based on currently available
information. Whenever possible, the Company has identified these "forward
looking" statements by words such as "believes," "estimates," "anticipates,"
"continue to" and similar expressions. These forward looking statements are
subject to risks and uncertainties which would cause the Company's actual
results or performance to differ materially from those expressed in these
statements. These risks and uncertainties include the following: risks
associated with acquisitions, including integration of acquired businesses; new
product development and other aspects of the Company's business strategy;
uncertainty as to evolving consumer preferences; seasonality of demand for
certain products; customer and supplier concentration; the impact of
competition; the impact of change in the valuation of the warrants with a
put option on the Company's net income and effective tax rate; the Company's
ability to raise additional capital; sensitivity to such factors as weather and
raw material costs; and the factors discussed above under the captions
"Quantitative and Qualitative Disclosure about Market Risk" and "Year 2000."
Readers are encouraged to review the Company's Current Report on Form 8-K dated
June 4, 1997 filed with the Securities and Exchange Commission for a more
complete description of these factors. The Company assumes no obligation to
update the information contained in this Form 10-Q.
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of the Company held on May 19, 1999,
the following matters were submitted to a vote of the stockholders:
(1) Election of Directors. Rick Inatome, John A. Miller and Alan F. Sussna
were reelected as directors of the Company. The following directors'
terms of office continued after the Annual Meeting of Stockholders:
Eric D. Becker, Merrick M. Elfman, Brian T. Fleming, John T. Hanes, G.
Cook Jordan, Jr., Steven M. Taslitz.
(2) Approval of an amendment to the Company's Certificate of Incorporation
to authorize a new class of non-voting Common Stock.
(3) Approval of the Company's 1999 Amended and Restated Stock Option Plan.
TABULATION OF VOTES
<TABLE>
<CAPTION>
BROKER
MATTER FOR AGAINST WITHHELD NON-VOTES
- ------------------ -------- ------- --------- ---------
<S> <C> <C> <C> <C>
Director Election:
Rick Inatome 6,038,611 0 9,460 0
John A. Miller 6,038,611 0 9,460 0
Alan F. Sussna 6,038,011 0 10,060 0
Approval of Amendment
to Certificate of
Incorporation 5,088,916 3,900 13,100 942,155
Approval of 1999 Stock
Option Plan 5,051,945 25,164 28,807 942,155
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: The following are filed as Exhibits to this Quarterly
Report on Form 10-Q:
<TABLE>
Exhibit
Number Description
------- -----------
<S> <C>
3(i) Certificate of Incorporation of the Company, including all
amendments thereto*
3(ii) By-Laws of the Company (1)
10.1 The Company's 1999 Amended and Restated Stock Option Plan*
10.2 Stock Purchase Agreement dated April 23, 1999 among the Company
and Bobby L. Grogan and Betty Ruth Grogan (2)
27 Financial Data Schedule*
</TABLE>
__________________
* Filed herewith.
(1) Filed as an exhibit to the Company's Registration Statement
No. 33-69438 or the amendments thereto and incorporated herein by
reference.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K
dated May 21, 1999 filed with the SEC on May 24, 1999 and
incorporated herein by reference.
(b) Reports on Form 8-K:
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on May 24, 1999. The Form 8-K was filed in connection with the
Company's purchase of 573,810 shares of its Common Stock and reports Items 5
and 7.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC PREMIUM BRANDS, LTD.
Date: August 13, 1999 By: /s/ THOMAS M. DALTON
---------------------------------
Thomas M. Dalton, Chief Financial
Officer and Senior Vice President
(On behalf of Registrant and as
Chief Accounting Officer)
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
Exhibit
Number Description
------- -----------
<S> <C>
3(i) Certificate of Incorporation of the Company, including all
amendments thereto*
3(ii) By-Laws of the Company (1)
10.1 The Company's 1999 Amended and Restated Stock Option Plan*
10.2 Stock Purchase Agreement dated April 23, 1999 among the Company
and Bobby L. Grogan and Betty Ruth Grogan (2)
27 Financial Data Schedule*
</TABLE>
__________________
* Filed herewith.
(1) Filed as an exhibit to the Company's Registration Statement No.
33-69438 or the amendments thereto and incorporated herein by
reference.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K
dated May 21, 1999 filed with the SEC on May 24, 1999 and
incorporated herein by reference.
<PAGE> 1
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
ATLANTIC BEVERAGE COMPANY, INC.
1. NAME
The name of this corporation is Atlantic Beverage Company, Inc. (the
"Corporation").
2. REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at 1013
Centre Road, Wilmington, Delaware 19805 in the County of New Castle. The
registered agent of the Corporation at such address shall be Corporation Service
Company.
3. PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law"). The
Corporation shall have all power necessary or helpful to engage in such acts and
activities.
4. CAPITAL STOCK
4.1. AUTHORIZED SHARES
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 35,000,000, of which
5,000,000 shares shall be Preferred Stock, having a par value of $.01 per share
("Preferred Stock") and 30,000,000 shares shall be Common Stock having a par
value of $.01 per share ("Common Stock"). The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and the issuance thereof in
one or more classes or series without the approval of the stockholders of the
Corporation.
4.2. COMMON STOCK
4.2.1. RELATIVE RIGHTS
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificate of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative rights
as and be identical in all respects to all the other shares of Common Stock.
<PAGE> 2
4.2.2. DIVIDENDS
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Stock as to the payment of dividends, the full amount of dividends
and of sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then dividends may be
paid on the Common Stock and on any class or series of stock entitled to
participate therewith as to dividends, out of any assets legally available for
the payment of dividends thereon, but only when and as declared by the Board of
Directors of the Corporation.
4.2.3. DISSOLUTION, LIQUIDATION, WINDING UP
In the event of any dissolution, liquidation, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock
shall become entitled to participate in the distribution of any assets of the
Corporation remaining after the Corporation shall have paid, or set aside for
payment, to the holders of any class of stock having preference over the Common
Stock in the event of dissolution, liquidation or winding up the full
preferential amounts (if any) to which they are entitled.
4.2.4. VOTING RIGHTS
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
an act upon by the stockholders.
4.3. PREFERRED STOCK
4.3.1. ESTABLISHMENT OF SERIES
The Board of Directors is expressly authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide, by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law,
for the issuance of the shares of Preferred Stock in series, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon. The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
<PAGE> 3
(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii) whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(v) whether or not the shares of that series shall be redeemable,
and if so, the terms and conditions of such redemption, including the
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(viii) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that
series.
4.3.2. ADJUSTMENTS IN NUMBER OF SHARES AUTHORIZED
Except as provided to the contrary in the provisions establishing a
series of Preferred Stock, the number of shares of any such series may be
increased (but not above the total number of authorized shares of Preferred
Stock) or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the directors.
5. INCORPORATOR
The name and mailing address of the incorporator (the "Incorporator")
is Ann E. Flowers, Hogan & Hartson, 555 Thirteenth Street, NW, Washington,
DC 20004.
<PAGE> 4
6. BOARD OF DIRECTORS
6.1. NUMBER AND ELECTION
The number of directors of the corporation shall be such number as
from time to time shall be fixed by, or in the manner provided in, the Bylaws of
the corporation. The directors shall be divided into three classes, as nearly
equal in number as possible, to be designated as Class I, Class II and Class
III. The initial term of office of the Class I directors shall expire at the
annual meeting of stockholders to be held in 1994; the initial term of office of
the Class II directors shall expire at the annual meeting of stockholders to be
held in 1995; and the initial term of office of the Class III directors shall
expire at the annual meeting of stockholders to be held in 1996. At each annual
meeting of stockholders, the successors of the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
their election.
6.2. INITIAL DIRECTORS
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation, and the following persons, having the indicated
mailing address, shall serve as the directors of the Corporation until their
successor or successors are elected and qualify, as set forth in the
Section 6.1. above:
<TABLE>
Name Mailing Address
- ---- ---------------
<S> <C>
CLASS I DIRECTORS
Eric D. Becker One South Street, Suite 800
Baltimore, Maryland 21202
William E. O'Leary 1587 Sulphur Spring Road
Baltimore, Maryland 21227
CLASS II DIRECTORS
Merrick M. Elfman 111 North Canal Street, Suite 933
Chicago, Illinois 60606
Steven M. Taslitz 111 North Canal Street, Suite 933
Chicago, Illinois 60606
CLASS III DIRECTORS
Rudolph C. Hoehn-Saric 9135 Guilford Road
Columbia, Maryland 21046
</TABLE>
<PAGE> 5
6.3. REMOVAL
(a) Except as otherwise provided pursuant to the provisions of this
Certificate of Incorporation or a certificate of designations relating to the
rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, but only for
cause (as defined in Section 6.3(b) hereof) and only by the affirmative vote, at
a special meeting of the stockholders called for such a purpose, of not less
than a majority of the total number of votes of the then outstanding shares of
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, but only if notice of such
proposal was contained in the notice of such meeting. At least 30 days prior to
such special meeting of stockholders, written notice shall be sent to the
director or directors whose removal will be considered at such meeting. Any
vacancy in the Board of Directors resulting from any such removal or otherwise
shall be filled only by vote of a majority of the directors then in office,
although less than a quorum, and any director so chosen shall hold office until
the next election of the class for which such director shall have been chosen
and until such director's successor shall be elected and qualified or until any
such director's earlier death, resignation or removal.
(b) For the purposes of this Section 6.8, "cause" shall mean only (i)
conduct as a director of the Corporation or any subsidiary involving dishonest
of a material nature that relates to the performance of the director's duties as
a director of the Corporation or any subsidiary or (ii) criminal conduct (other
than minor infractions and traffic violations) that relates to the performance
of the director's duties as a director of the Corporation or any subsidiary.
6.4. CHANGE OF AUTHORIZED NUMBER
In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
6.5. DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or a certificate of designations
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Section 6 unless expressly provided by the certificate
of designations.
<PAGE> 6
6.6. LIMITATION OF LIABILITY
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provisions shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
the types of liability set forth in Section 174 of the Delaware General
Corporation Law; or (d) for any transaction from which the director received any
improper personal benefit.
7. INDEMNIFICATION
To the extent permitted by law, the Corporation shall fully indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees and all related costs
and expenses of such threatened, pending or completed action, suit or
proceeding), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
To the extent permitted by law, the Corporation shall fully indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was an employee or agent of the Corporation, or is or was serving
at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees and all related costs
and expenses of such threatened, pending or completed action, suit or
proceeding), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
The Corporation shall advance expenses (including attorneys' fees and
all related costs and expenses of such threatened, pending or completed action,
suit or proceeding) incurred by a director or officer in advance of the final
disposition of such action, suit or proceeding upon the receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to indemnification. The Corporation may advance expenses (including attorneys'
fees and all related costs and expenses of such threatened, pending or completed
action, suit or proceeding) incurred by an employee or agent in advance of the
final disposition of such action, suit or proceeding upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Notwithstanding anything in this Article to the contrary, the
Corporation will not have the obligation of indemnifying any person with respect
to proceedings, claims, suits or actions initiated or brought voluntarily by
such person and not by way of defense.
<PAGE> 7
8. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors is expressly authorized
and empowered to adopt, amend and repeal the Bylaws of the Corporation, subject
to the right of the stockholders entitled to vote with respect thereto to amend
or repeal Bylaws adopted by the Board of Directors as provided for in this
Certificate of Incorporation or in the Bylaws of the Corporation.
9. ACTION BY STOCKHOLDERS
Any action required or permitted to be taken by the stockholders of
the Corporation may be effected at a duly called annual or special meeting of
stockholders, and, except as provided below, may be effected without a meeting,
without prior notice and without a vote, by a consent in writing in accordance
with the Bylaws of the Corporation. At any time that a class of the equity
securities of the Corporation is registered pursuant to Section 12(g) or 15(d)
of the Securities Exchange Act of 1934, as amended, action shall be taken by the
stockholders only at a duly called annual or special meeting, and action without
a meeting shall be prohibited.
10. SPECIAL MEETINGS
Special meetings of the stockholders may be called at any time but
only by (a) the chairman of the board of the Corporation, (b) a majority of the
directors in office, although less than a quorum, or (c) the holders of not less
than 20% of the total number of votes of the then outstanding shares of stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class.
11. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Corporation elects not to be governed by the provisions of Section
203 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned, being the Incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
Delaware General Corporation Law, hereby certifies that the facts hereinabove
stated are truly set forth, and accordingly executes this Certificate of
Incorporation this 13th day of September, 1993.
/s/ ANN E. FLOWERS
----------------------------------
Ann E. Flowers
Incorporator
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Atlantic Beverage Company, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly
held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Atlantic Beverage
Company, Inc. be amended by changing Article I thereof so that, as amended,
said Article shall be and read as follows:
"The name of the corporation is Atlantic Premium Brands, Ltd."
SECOND: That the majority of the stockholders voted in favor of the
amendment at a meeting duly held.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective on June 1, 1997.
IN WITNESS WHEREOF, said Atlantic Beverage Company, Inc. has caused this
certificate to be signed by Merrick M. Elfman, its Chairman of the Board of
Directors, and attested by Tom D. Wippman, its Secretary this 29th day of May
1997.
ATLANTIC BEVERAGE COMPANY, INC.
By: /S/ MERRICK M. ELFMAN
---------------------------
Merrick M. Elfman, Chairman
ATTEST:
By: /s/ TOM D. WIPPMAN
-------------------------
Tom D. Wippman, Secretary
<PAGE> 9
CERTIFICATE OF ELIMINATION
OF
ATLANTIC PREMIUM BRANDS, LTD.
(DELAWARE FILE NO. 2350747)
ATLANTIC PREMIUM BRANDS, LTD., a corporation organized and existing under
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors by unanimous written consent of its
members, filed with the minutes of the Board, duly adopted resolutions setting
forth the proposed elimination of the Series A Non-Voting Convertible Preferred
Stock as set forth herein:
RESOLVED that no shares of the Series A Non-Voting Convertible Preferred
Stock are outstanding and none will be issued.
RESOLVED that a Certificate of Elimination be executed, which shall have
the effect when filed in Delaware of eliminating from the Certificate of
Incorporation all reference to the Series A Non-Voting Convertible
Preferred Stock.
SECOND: None of the authorized shares of the Series A Non-Voting
Convertible Preferred Stock are outstanding and none will be issued.
THIRD: In accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Certificate of Incorporation is
hereby amended to eliminate all reference to the Series A Non-Voting Convertible
Preferred Stock.
IN WITNESS WHEREOF, said ATLANTIC PREMIUM BRANDS, LTD. has caused this
Certificate of Elimination to be signed by Tom D. Wippman, its Secretary, this
Second day of April, 1998.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ TOM D. WIPPMAN
-------------------------------------
Tom D. Wippman, its Secretary
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Atlantic Premium Brands, Ltd. (the "Corporation), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation adopted a resolution
setting forth an amendment to the Corporation's Certificate of Incorporation
changing Article 4 so that, as amended, Article 4 shall read in its entirety as
set forth on Exhibit A, declaring its adoption advisable and directing that it
be considered at the next annual meeting of stockholders.
SECOND: That the holders of a majority of the outstanding stock entitled to
vote thereon, and the holders of a majority of the outstanding stock of each
class entitled to vote thereon as a class, voted in favor of the adoption of the
amendment set forth on Exhibit A at a meeting duly held.
THIRD: That the amendment set forth on Exhibit A was duly adopted and
approved in accordance with Section 242 of the General Corporation Law of the
State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective on May 31, 1999.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by Alan F. Sussna, its President and Chief Executive
Officer, as of May 20, 1999.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ ALAN F. SUSSNA
-------------------------------------
Alan F. Sussna
President and Chief
Executive Officer
<PAGE> 11
EXHIBIT A
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
ATLANTIC PREMIUM BRANDS, LTD.
Article 4 of the Certificate of Incorporation of Atlantic Premium Brands,
Ltd. is amended to read in its entirety as follows:
4. CAPITAL STOCK
4.1 AUTHORIZED SHARES
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 35,000,000, of which
5,000,000 shares shall be Preferred Stock, having a par value of $.01 per share
("Preferred Stock"); 28,900,000 shares shall be Common Stock, having a par value
of $.01 per share ("Common Stock"), and 1,100,000 shares shall be Non-Voting
Common Stock, having a par value of $.01 per share ("Non-Voting Common Stock").
The Common Stock and the Non-Voting Common Stock are hereafter collectively
referred to as the "Common Securities." The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and the issuance thereof in
one or more classes or series without the approval of the stockholders of
the Corporation.
4.2 COMMON STOCK
Except as otherwise provided herein, all shares of Common Stock and
Non-Voting Common Stock will be identical and will entitle the holders thereof
to the same rights and privileges.
4.2.1 RELATIVE RIGHTS
The Common Securities shall be subject to all of the rights,
privileges, preferences and priorities of the Preferred Stock as set forth in
the certificate of designations filed to establish the respective series of
Preferred Stock.
4.2.2 DIVIDENDS
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Securities as to the payment of dividends, the full amount of
dividends and of sinking fund or retirement payments, if any, to which such
holders are respectively entitled in preference to the Common Securities, then
dividends may be paid on the Common Securities and on any class or series
of stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends thereon, but only when and
as declared by the Board of Directors of the Corporation.
<PAGE> 12
When and as dividends are declared thereon, whether payable in cash, property or
securities of the Company, the holders of Common Stock and the holders of
Non-Voting Common Stock will be entitled to share equally, share for share, in
such dividends; provided that if dividends are declared which are payable in
shares of Common Stock or Non-Voting Common Stock, dividends will be declared
which are payable at the same rate on both classes of stock, and the dividends
payable in shares of Common Stock will be payable to holders of Common Stock and
the dividends payable in shares of Non-Voting Common Stock will be payable to
holders of Non-Voting Common Stock.
4.2.3 DISSOLUTION, LIQUIDATION, WINDING UP
In the event of any dissolution, liquidation, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common
Securities shall become entitled to participate in the distribution of any
assets of the Corporation remaining after the Corporation shall have paid, or
set aside for payment, to the holders of any class of stock having preference
over the Common Securities in the event of dissolution, liquidation or winding
up the full preferential amounts (if any) to which they are entitled.
4.2.4 VOTING RIGHTS
Except as otherwise required by law, the holders of Common Stock will
be entitled to one vote per share on all matters to be voted on by the Company's
stockholders, and the holders of Non-Voting Common Stock will have no right to
vote on any matters to be voted on by the Company's stockholders.
4.2.5 CONVERSION
(i) Conversion of Non-Voting Common Stock. Each record holder
of Non-Voting Common Stock is entitled to convert any or all of the
shares of such holder's Non-Voting Common Stock into the same number
of shares of Common Stock to the extent that the holder:
(A) sells such Common Stock pursuant to registration
statement under the Securities Act, provided that such offering
is underwritten on a firm commitment basis or otherwise provides
for a widely dispersed distribution of the shares;
(B) sells such Common Stock in a private placement pursuant
to Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended, provided that no purchaser or related group of
purchasers acquires more than 2% of the outstanding shares of
Common Stock.
(C) sells such Common Stock as part of a direct sale,
together with other shareholders of the Company, to a third party
that is not related to or affiliated with the holder, provided
that pursuant to such sale the
<PAGE> 13
purchaser acquires at least a majority of the outstanding
Common Stock without regard to any shares purchased from the
holder; or
(D) does not own or have the right to acquire more than 4.9%
of the Common Stock that would be outstanding after such
conversion.
(ii) Conversion Procedure.
(A) Each conversion of shares of Non-Voting Common Stock
into shares of Common Stock will be effected by the surrender of
the certificate or certificates, if any, representing the shares
to be converted at the principal office of the Company at any
time during normal business hours, together with a written notice
by the holder of such Non-Voting Common Stock stating that such
holder desires to convert the shares, or a stated number of the
shares, of Non-Voting Common Stock represented by such
certificate or certificates into Common Stock and that the
conversion complies with the provisions of Section 4.2.5(i) of
the Corporation's Certificate of Incorporation. Such conversion
will be deemed to have been effected as of the close of business
on the date on which such certificate or certificates, if any,
have been surrendered and such notice has been received, and at
such time the rights of the holder of the converted Non-Voting
Common Stock as such holder will cease and the person or persons
in whose name or names the certificate or certificates for shares
of Common Stock are to be issued upon such conversion will be
deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby.
(B) Promptly after such surrender and the receipt of such
written notice, the Company will issue and deliver in accordance
with the surrendering holder's instructions (a) the certificate
or certificates for the Common Stock issuable upon such
conversion and (b) a certificate representing any Non-Voting
Common Stock which was represented by the certificate or
certificates, if any, delivered to the Company in connection with
such conversion but which are not converted.
(C) If the Company in any manner subdivides or combines the
outstanding shares of one class of Common Securities, the
outstanding shares of the other class of Common Securities will
be proportionately subdivided or combined.
(D) The issuance of certificates for Common Stock upon
conversion of Non-Voting Common Stock will be made without charge
to the holders of such shares for any issuance tax in respect
thereof or other cost incurred by the Company in connection with
such conversion and the related issuance of Common Stock.
<PAGE> 14
(E) The Company will not close its books against the
transfer of Non-Voting Common Stock or of Common Stock issued or
issuable upon conversion of Non-Voting Common Stock in any manner
which would interfere with the timely conversion of Non-Voting
Common Stock.
4.3 PREFERRED STOCK
4.3.1 ESTABLISHMENT OF SERIES
The Board of Directors is expressly authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide, by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law,
for the issuance of the shares of Preferred Stock in series, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon. The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(iii) whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(v) whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption,
including the dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(viii) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that
series.
<PAGE> 15
4.3.2 ADJUSTMENTS IN NUMBER OF SHARES AUTHORIZED
Except as provided to the contrary in the provisions establishing a
series of Preferred Stock, the number of shares of any such series may be
increased (but not above the total number of authorized shares of Preferred
Stock) or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the directors.
<PAGE> 1
EXHIBIT 10.1
ATLANTIC PREMIUM BRANDS, LTD.
1999 AMENDED & RESTATED
STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I - ESTABLISHMENT ............................................... 1
1.1 Purpose .................................................. 1
ARTICLE II - DEFINITIONS ................................................ 1
2.1 "Affiliate" .............................................. 1
2.2 "Agreement" .............................................. 1
2.3 "Beneficiary" ............................................ 1
2.4 "Board" .................................................. 1
2.5 "Cause" .................................................. 2
2.6 "Change in Control" ...................................... 2
2.7 "Code" ................................................... 2
2.8 "Commission" ............................................. 2
2.9 "Committee" .............................................. 2
2.10 "Common Stock" ........................................... 2
2.11 "Company" ................................................ 2
2.12 "Disability" ............................................. 2
2.13 "Effective Date" ......................................... 3
2.14 "Exchange Act" ........................................... 3
2.15 "Fair Market Value" ...................................... 3
2.16 "Grant Date" ............................................. 3
2.17 "Incentive Stock Option" ................................. 3
2.18 "Nonqualified Stock Option" .............................. 3
2.19 "Option" ................................................. 3
2.20 "Option Period" .......................................... 3
2.21 "Option Price" ........................................... 3
2.22 "Participant" ............................................ 3
2.23 "Plan" ................................................... 4
2.24 "Representative" ......................................... 4
2.25 "Retirement" ............................................. 4
2.26 "Rule 16b-3" and "Rule 16a-1(c)(3)" ...................... 4
2.27 "Termination of Employment" .............................. 4
ARTICLE III - ADMINISTRATION ............................................ 5
3.1 Committee Structure and Authority ........................ 5
3.2 Independent Committee .................................... 7
ARTICLE IV - STOCK SUBJECT TO PLAN ...................................... 7
4.1 Number of Shares ......................................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
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<S> <C> <C>
4.2 Release of Shares............................................ 7
4.3 Restrictions on Shares....................................... 8
4.4 Stockholder Rights........................................... 8
4.5 Registration................................................. 8
4.6 Anti-Dilution................................................ 9
ARTICLE V - ELIGIBILITY..................................................... 9
5.1 Eligibility.................................................. 9
ARTICLE VI - STOCK OPTIONS.................................................. 10
6.1 General...................................................... 10
6.2 Grant and Exercise........................................... 10
6.3 Terms and Conditions......................................... 10
6.4 Termination by Reason of Death............................... 12
6.5 Termination by Reason of Disability.......................... 12
6.6 Other Termination............................................ 13
6.7 Cashing Out of Option........................................ 13
6.8 Formula Grants............................................... 13
ARTICLE VII - PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN....... 14
7.1 Limited Transfer During Offering............................. 14
7.2 No Company Obligation........................................ 14
ARTICLE VIII - CHANGE IN CONTROL PROVISIONS................................. 14
8.1.................................................................... 14
8.2 Definition of Change in Control.............................. 16
ARTICLE IX - MISCELLANEOUS.................................................. 17
9.1 Amendments and Termination................................... 17
9.2 Unfunded Status of Plan...................................... 18
9.3 Status of Options Under Section 162(m) of the Code........... 18
9.4 General Provisions........................................... 18
9.5 Mitigation of Excise Tax..................................... 20
9.6 Rights with Respect to Continuance of Employment............. 20
9.7 Options in Substitution for Options Granted by
Other Corporations......................................... 21
9.8 Procedure for Adoption....................................... 21
9.9 Procedure for Withdrawal..................................... 21
9.10 Delay........................................................ 21
9.11 Headings..................................................... 21
9.12 Severability................................................. 22
</TABLE>
ii
<PAGE> 4
<TABLE>
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<S> <C> <C>
9.13 Successors and Assigns...................................... 22
9.14 Entire Agreement............................................ 22
</TABLE>
iii
<PAGE> 5
ATLANTIC PREMIUM BRANDS, LTD.
1999 AMENDED & RESTATED STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT
1.1 Purpose. The Atlantic Premium Brands, Ltd. 1999 Amended & Restated
Stock Option Plan ("Plan") is hereby established by Atlantic Premium Brands,
Ltd. ("Company"). The purpose of this Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating those persons
selected to participate in this Plan to achieve long-term growth in stockholder
equity in the Company and by retaining the association of those individuals who
are instrumental in achieving this growth. The Plan and the grant of awards
hereunder are expressly conditioned upon the Plan's approval by the stockholders
of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.2 "Agreement" means any agreement entered into pursuant to this Plan
pursuant to which an Option is granted to a Participant.
2.3 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated beneficiary, then the
term means the person or persons, trust or trusts entitled by will or the laws
of descent and distribution to receive such benefits.
2.4 "Board" means the Board of Directors of the Company.
<PAGE> 6
2.5 "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate a written agreement or arrangement (employment
or otherwise) between the Participant and the Company or an Affiliate for Cause
as defined in such agreement or arrangement, or in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term "cause," then Cause shall mean (a) any act or failure to act deemed to
constitute cause under the Company's established practices, policies or
guidelines applicable to the Participant or (b) the Participant's act or
omission constituting gross misconduct with respect to the Company or an
Affiliate in any material respect.
2.6 "Change in Control" has the meaning set forth in Section 8.2.
2.7 "Code" means the Internal Revenue Code of 1986, as amended, final
Treasury Regulations thereunder and any subsequent Internal Revenue Code.
2.8 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.9 "Committee" means the person or persons appointed by the Board to
administer this Plan.
2.10 "Common Stock" means the shares of the Company's Common Stock, $.01
par value per share, whether presently or hereafter issued, and any other stock
or security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is so designated for the
purpose of this Plan.
2.11 "Company" means Atlantic Premium Brands, Ltd. and includes any
successor or assignee corporation or corporations into which the Company may be
merged, changed or consolidated; any corporation for whose securities all or
substantially all of the securities of the Company shall be exchanged; and any
assignee of or successor to substantially all of the assets of the Company.
2.12 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness, or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. Notwithstanding the
foregoing, if the Participant and the Company or an Affiliate have entered into
an employment agreement which defines the term "Disability" (or a similar term),
such definition shall govern for purposes of determining whether such
Participant suffers a Disability for purposes of this Plan. The
2
<PAGE> 7
determination of Disability shall be made by the Committee. The determination of
Disability for purposes of this Plan shall not be construed to be an admission
of disability for any other purpose.
2.13 "Effective Date" means May 19, 1999 or such later date on which
the 1999 Annual Meeting of Stockholders is held.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means the fair market value of Common Stock (or
other property) as determined by the Committee or under procedures established
by the Committee. Unless otherwise determined by the Committee, the Fair Market
Value per share of Common Stock as of any date shall be the closing sale price
per share reported on a consolidated basis for stock listed on the principal
stock exchange or market on which the Common Stock is traded on the date as of
which such value is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.
2.16 "Grant Date" means the date as of which an Option is granted pursuant
to this Plan.
2.17 "Incentive Stock Option" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.18 "Nonqualified Stock Option" means an Option to purchase Common Stock
granted under this Plan, the taxation of which is determined pursuant to Section
83 of the Code.
2.19 "Option" means a right to purchase Common Stock on specified
conditions granted under Article VI.
2.20 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article VI.
2.21 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).
2.22 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Option has been granted by the Committee under this
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which is by or for the benefit of the
Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts to minors act or similar statute for the benefit of the
Participant's descendants, to the extent permitted by the Committee and not
inconsistent with the Rule 16b-3 or the status of the Option as an Incentive
Stock Option to the extent intended. Notwithstanding the foregoing, the term
3
<PAGE> 8
"Termination of Employment" shall mean the Termination of Employment of the
employee to whom the Option was originally granted (and other terms intended to
refer solely to such employee shall be interpreted in a manner that is
consistent with such intent).
2.23 "Plan" means this Atlantic Premium Brands, Ltd. 1999 Amended and
Restated Stock Option Plan, as the same may be amended from time to time.
2.24 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or
(d) any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.25 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.26 "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.27 "Termination of Employment" means the occurrence of any act or event
whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, consultant, advisor, independent contractor, director or employee
of the Company or of any Affiliate, or to be an officer, consultant, advisor,
independent contractor, director or employee of any entity that provides
services to the Company or an Affiliate, including, without limitation, death,
Disability, dismissal, severance at the election of the Participant, Retirement,
or severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee of the
Company or an Affiliate, the Agreement may establish what act or event shall
constitute a Termination of Employment for purposes of this Plan. A transfer of
employment from the Company to an Affiliate, or from an Affiliate to the
Company, shall not be a Termination of Employment, unless expressly determined
by the Committee. A Termination of Employment shall occur with respect to an
employee who is employed by an Affiliate if the Affiliate shall cease to be an
Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate.
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In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. This Plan shall be administered by
the Committee which shall be comprised of two or more persons designated by the
Board. In the absence of a designation, the Board or the portion that qualifies
as the Committee shall be the Committee. A majority of the Committee shall
constitute a quorum at any meeting thereof (including telephone conference) and
the acts of a majority of the members present, or acts approved in writing by a
majority of the entire Committee without a meeting, shall be the acts of the
Committee for purposes of this Plan. The Committee may authorize any one or
more of its members or an officer of the Company to execute and deliver
documents on behalf of the Committee. At any time the Company is publicly held,
this Plan is intended to qualify for exemption from Section 16(b) of the
Exchange Act and to qualify as performance-based compensation under Section
162(m) of the Code and shall be interpreted in such a way as to result in such
qualification. A member of the Committee shall not exercise any discretion
respecting himself or herself under this Plan. The Board shall have the
authority to remove, replace or fill any vacancy of any member of the Committee
upon notice to the Committee and the affected member. Any member of the
Committee may resign upon notice to the Board. The Board may select different
Committees to administer Options for different classes of Participants. The
Committee may allocate among one or more of its members, or may delegate to one
or more of its agents, such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, (i) subject to
the terms of this Plan, and (ii) subject to the approval of the Board (to the
extent required to qualify an option granted hereunder for exemption under
Section 16(b) of the Exchange Act and as "performance-based compensation" under
Section 162(m) of the Code):
(a) to select those persons to whom Options may be granted from time
to time;
(b) to determine whether and to what extent Options are to be granted
hereunder;
(c) to determine the number of shares of Common Stock to be covered by
each Option granted hereunder;
(d) to determine the terms and conditions of any Option granted
hereunder (including, but not limited to, the Option Price, the Option Period,
any exercise restriction
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or limitation, any exercise acceleration or forfeiture waiver or any performance
criteria regarding any Option and the shares of Common Stock relating thereto);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Option, subject to the limitations of Section 9.1;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Option shall be deferred;
(g) to determine under what circumstances an Option may be settled in
cash or Common Stock;
(h) to provide for the forms of Agreement to be utilized in connection
with this Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
this Plan, Options, and the issuance of shares of Common Stock and to require of
a Participant that appropriate action be taken with respect to such
requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in this Plan or an Agreement, outstanding Options;
(l) to interpret and make a final determination with respect to the
remaining number of shares of Common Stock available under this Plan;
(m) to require as a condition of the exercise of an Option or the
issuance or transfer of a certificate of Common Stock, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a deduction
or as may be otherwise required by law;
(n) to determine whether and with what effect an individual has
incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the terms
and conditions on which such Common Stock is to be purchased;
(p) to determine the restrictions or limitations on the transfer of
Common Stock;
(q) to determine whether an Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under this Plan or the terms of an
Agreement;
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(r) to determine the permissible methods of Option exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of this
Plan and any Option issued under this Plan (and any Agreement) and to otherwise
supervise the administration of this Plan. The Committee's policies and
procedures may differ with respect to Options granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of this
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Option, may be made at the time of the grant of the Option or,
unless in contravention of any express term of this Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of this Plan shall be final and binding on all persons, including the Company
and Participants. No determination shall be subject to de novo review if
challenged in court.
3.2 Independent Committee. The Board may appoint a Committee that consists
of directors who are disinterested "Non-Employee Directors" the meaning of Rule
16b-3 and each of whom is an "outside" director under Section 162(m) of the Code
to administer the Plan with respect to individuals subject to (or potentially
subject to) such provisions.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock initially reserved and available for
distribution pursuant to Options under this Plan shall be 3,000,000 shares of
Common Stock, inclusive of all shares associated with options issued to
officers, directors, employees and other recipients prior to the adoption of
this Plan. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Option, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to
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be subject to an Option, any shares of Common Stock subject to any Option that
are forfeited, any Option that otherwise terminates without issuance of shares
of Common Stock being made to the Participant, or any shares (whether or not
restricted) of Common Stock that are received by the Company in connection with
the exercise of an Option including the satisfaction of any tax liability or the
satisfaction of a tax withholding obligation. If any shares could not again be
available for Options to a particular Participant under any applicable law, such
shares shall be available exclusively for Options to Participants who are not
subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Option Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares, with appropriate payment made with respect to such
fractional shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Option until, after proper exercise
of the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued and
transferred. Upon exercise of the Option or any portion thereof, the Company
will have a reasonable time in which to issue the shares, and the Participant
will not be treated as a stockholder for any purpose whatsoever prior to such
issuance. No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such shares are recorded as issued
and transferred in the Company's official stockholder records, except as
provided herein or in an Agreement.
4.5 Registration. During any period in which the Company's Common Stock is
registered under Section 12 of the Exchange Act, the Company will register under
the Securities Act the Common Stock delivered or deliverable pursuant to Options
on Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon after stockholder approval of the Plan
as the
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Committee, in its sole discretion, shall deem such registration appropriate.
The Company will use its reasonable best efforts to cause the registration
statement to become effective and will file such supplements and amendments to
the registration statement as may be necessary to keep the registration
statement in effect until the earliest of (a) one year following the expiration
of the last relevant period of the last Option outstanding, (b) the date the
Company is no longer a reporting company under the Exchange Act and (c) the date
all Participants have disposed of all shares of Common Stock delivered pursuant
to any Option. The Company may delay the foregoing obligation if the Committee
reasonably determines that any such registration would materially and adversely
affect the Company's interests or if there is no material benefit to
Participants.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company share
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee shall adjust or substitute, as the case may
be, the number of shares of Common Stock available for Options under this Plan,
the number of shares of Common Stock covered by outstanding Options, the
exercise price per share of outstanding Options, and any other characteristics
or terms of the Options as the Committee shall deem necessary or appropriate to
reflect equitably the effects of such changes to the Participants; provided,
however, that the Committee may limit any such adjustment so as to maintain the
deductibility of the Options under Section 162(m) of the Code, and that any
fractional shares resulting from such adjustment shall be eliminated by rounding
to the next lower whole number of shares with appropriate payment for such
fractional share as shall reasonably be determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in this Plan and be granted Options shall be those
persons who are officers, directors, employees, advisors, independent
contractors or consultants of the Company or any subsidiary, who shall be in a
position, in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Company and its subsidiaries. Of
those persons described in the preceding sentence, the Committee may, from time
to time, select persons to be granted Options and shall determine the terms and
conditions with respect thereto. In making any such selection and in
determining the form of the Option, the Committee may give consideration to the
functions and responsibilities of the person, the person's contributions to the
Company and
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its subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee.
ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant Options under
this Plan at any time or from time to time. Options may be either Incentive
Stock Options or Non-Qualified Stock Options. An Option shall entitle the
Participant to receive shares of Common Stock upon exercise of such Option,
subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with this Plan or an Agreement
(the terms and provisions of which may differ from other Agreements) including
without limitation, payment of the Option Price. During any calendar year,
Options to purchase no more than 500,000 shares of Common Stock shall be granted
to any Participant.
6.2 Grant and Exercise. The grant of an Option shall occur as of the date
the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to
the express terms and conditions set forth in this Plan. Such Agreement shall
become effective upon execution by the Participant. Only a person who is a
common-law employee of the Company, any parent corporation of the Company or a
subsidiary corporation of the Company (as such terms are defined in Section 424
of the Code) on the Grant date shall be eligible to be granted an Option which
is intended to be and is an Incentive Stock Option. To the extent that any
Option is not designated as an Incentive Stock Option or even if so designated
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option.
6.3 Terms and Conditions. Options shall vest in accordance with the terms
specified in the Agreement covering such Options, and shall be subject to such
terms and conditions as shall be determined by the Committee, including the
following:
(a) Option Period. The Option Period of each Option shall be fixed
by the Committee; provided that no Non-Qualified Stock Option shall be
exercisable more than ten (10) years after the date the Option is granted. In
the case of an Incentive Stock Option, the Option Period shall not exceed ten
(10) years from the date of grant or five (5) years in the case of an individual
who owns more than ten percent (10%) of the combined voting power of all classes
of stock of the Company, a corporation which is a parent corporation of the
Company or any subsidiary corporation of the Company (each as defined in Section
424 of the Code). No Option which is intended to be an Incentive Stock Option
shall be granted more than ten (10) years from the date this Plan is adopted by
the
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Company or the date this Plan is approved by the stockholders of the
Company, whichever is earlier.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be not less than the Fair Market Value per
share on the date the Option is granted. If such Option is intended to qualify
as an Incentive Stock Option, where such Option is granted to an individual who
owns or who is deemed to own stock possessing more than ten percent (10%) of the
combined voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary corporation of
the Company (each as defined in Section 424 of the Code), the Option Price per
share shall be not less than one hundred ten percent (110%) of such Fair Market
Value per share.
(c) Exercisability. Subject to Section 8.1, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. Unless provided in an Agreement or by the
Committee, no Option may be exercised to the extent it is not vested. If the
Committee provides that any Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in whole
or in part. In addition, the Committee may at any time accelerate the
exercisability of any Option. If the Committee intends that an Option be an
Incentive Stock Option, the Committee shall, in its discretion, provide that the
aggregate Fair Market Value (determined at the Grant Date) of the Incentive
Stock Option which is exercisable for the first time during the calendar year
shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
a Participant may exercise Options, in whole or in part, at any time during the
Option Period by giving written notice of exercise on a form provided by the
Committee to the Company specifying the number of shares of Common Stock subject
to the Option to be purchased. Such notice shall be accompanied by payment in
full of the purchase price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee (including approval at the time
of exercise), payment in full or in part may also be made (i) by delivering
Common Stock already owned by the Participant having a total Fair Market Value
on the date of such delivery equal to the Option Price; (ii) by the execution
and delivery of a note or other evidence of indebtedness (and any security
agreement thereunder) satisfactory to the Committee and permitted in accordance
with Section 6.3(e); (iii) by authorizing the Company to retain shares of
Common Stock which would otherwise be issuable upon exercise of the Option
having a total Fair Market Value on the date of delivery equal to the Option
Price; (iv) by the delivery of cash or the extension of credit by a
broker-dealer to whom the Participant has submitted a notice of exercise or
otherwise indicated an intent to exercise an Option (in accordance with
Part 220, Chapter II, Title 12 of the Code of Federal Regulations); (v) by
certifying ownership of shares of Common Stock owned by the Participant to the
satisfaction of the Committee for later delivery to the Company as specified by
the Company; or (vi) by any combination of the
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foregoing. In the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares of Common Stock of the same class
as the Common Stock subject to the Option may be authorized only at the time
the Option is granted. No shares of Common Stock shall be issued until full
payment therefor, as determined by the Committee, has been made.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(i) lend to the Participant, an amount equal to such portion of
the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a
third-party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate, whether the loan is with recourse against the Participant and any
security interest thereunder, shall be determined by the Committee, except that
no extension of credit or guarantee shall obligate the Company for an amount to
exceed the lesser of (i) the aggregate Fair Market Value per share of the Common
Stock on the date of exercise, less the par value of the shares of Common Stock
to be purchased upon the exercise of the Option, and (ii) the amount permitted
under applicable laws or the regulations and rules of the Federal Reserve Board
and any other governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in
an Agreement and then only consistent with the intent that the Option be an
Incentive Stock Option (as applicable), (i) no Option or interest therein may be
transferred, assigned, alienated or encumbered in any way by the Participant
other than by will or by the laws of descent and distribution or by a
designation of beneficiary effective upon the death of the Participant,
(ii) no Option shall be subject to the claims of a Participant's creditors, and
(iii) all Options shall be exercisable during the Participant's lifetime only
by the Participant.
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Option held by such
Participant shall, to the extent then vested and exercisable, thereafter be
fully exercisable for a period of ninety (90) days (or such other period or no
period as the Committee may specify) immediately following the date of such
death or until the expiration of the Option Period, whichever period is the
shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee (and subject to Section 6.8 with
respect to formula grants to non-
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employee Directors) if a Participant incurs a Termination of Employment due
to a Disability, any unexpired and unexercised Option held by such Participant
shall, to the extent then vested and exercisable, thereafter be fully
exercisable by the Participant for the period of one year (or such other period
or no period as the Committee may specify) immediately following the date of
such Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.
In the event of Termination of Employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Option will thereafter
be treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee (and subject to Section 6.8 with respect to formula
grants to non-employee Directors) if a Participant incurs a Termination of
Employment due to Retirement, or the Termination of Employment is involuntary on
the part of the Participant (but is not due to death, Disability or with Cause),
any Option held by such Participant shall thereupon terminate, except that such
Option, to the extent then vested and exercisable, may be exercised for the
lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. Unless
otherwise provided in an Agreement or determined by the Committee, if the
Participant incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not due to Retirement) or (b) with Cause,
the Option shall terminate immediately. Unless otherwise provided in an
Agreement or determined by the Committee, the death or Disability of a
Participant after a Termination of Employment otherwise provided herein
shall not extend the exercisability of the time permitted to exercise an
Option.
6.7 Cashing out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Option by
paying the Participant an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock that is subject to the Option over
the Option Price times the number of shares of Common Stock subject to the
Option on the effective date of such cash out.
6.8 Formula Grants. Beginning on January 1, 2000 and on each January 1,
thereafter, each person who is a non-employee Director on the Effective Date
shall become a Participant and shall be granted an Option to purchase ten
thousand (10,000) shares of Common Stock without further action by the Board or
the Committee, provided that such person continues to be a non- employee
Director on such January 1. Each non-employee who is not a Director on the
Effective Date and thereafter is elected or appointed as a Director shall become
a Participant and shall, and on each January 1, thereafter, without further
action by the Board or the Committee, be granted an Option to purchase ten
thousand (10,000) shares of Common Stock, on the first January 1 following such
Director's election or appointment, provided that such person continued to be a
non-employee Director on such January 1. In each case, a Director's options
granted pursuant to this provision shall vest quarterly in equal increments from
the effective grant date, vesting on the
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earlier of the date of the quarterly Board of Directors meeting or the last day
of the quarter. If the number of shares of Common Stock available to grant
under the Plan on a scheduled date of grant is insufficient to make all
automatic grants required to be made pursuant to the Plan on such date, then
each eligible Director shall receive an Option to purchase a pro rata number of
the remaining shares of Common Stock available under the Plan; provided further,
however, that if such proration results in fractional shares of Common Stock,
then such Option shall be rounded down to the nearest number of whole shares of
Common Stock. If there is no whole number of shares remaining to be granted,
then no grants shall be made under the Plan. Each Option granted under the Plan
shall be evidenced by an Agreement, in a form approved by the Committee, which
shall embody the terms and conditions of such Option and which shall be subject
to the express terms and conditions set forth in the Plan. Such Agreement shall
become effective upon execution by the Participant. Any Option granted pursuant
to this Section 6.8 shall terminate upon the first anniversary of the date the
Participant first ceased to hold the position of Director.
ARTICLE VII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN
7.1 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of
shares received directly or indirectly pursuant to an exercise of an Option.
7.2 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of Common Stock or an Option, and such holder shall
have no right to be advised of any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or
the exercise of an Option or the Company's purchase of Common Stock or an
Option from such holder in accordance with the terms hereof.
ARTICLE VIII
CHANGE IN CONTROL PROVISIONS
8.1 (a) Reorganization in which the Company is the Surviving Corporation.
Subject to subsection (b) hereof, if the Company shall be the surviving
corporation in any reorganization, merger, or consolidation of the Company
with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which
a holder of the number of shares of stock subject to such Option would
have been entitled immediately following such reorganization, merger,
or consolidation, with a corresponding proportionate adjustment of the
Option Price per share
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so that the aggregate Option Price (relating to all shares under such Option)
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization, merger
or consolidation.
(b) Reorganization in which the Company is not the Surviving
Corporation or Sale of Assets or Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation, reorganization or other business
combination of the Company with one or more other entities in which the Company
is not the surviving entity, or upon a sale of all or substantially all of the
assets of the Company to another entity, or upon any transaction (including,
without limitation, a merger or reorganization in which the Company is the
surviving corporation) approved by the Board which results in any person or
entity (or persons or entities acting as a group or otherwise in concert) owning
80 percent or more of the combined voting power of all classes of stock of the
Company, all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the writing in connection with such transaction
for the continuation of the Plan and/or the assumption of the Options
theretofore granted, or for the substitution for such Options of new options
covering the stock of a successor entity, or parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination, each individual holding an Option shall have the right (subject to
the general limitations on exercise set forth in Section 6.3 and except as
otherwise specifically provided in the Option Agreement relating to such
Option), immediately prior to the occurrence of such termination and during such
period occurring prior to such termination as the Board in its sole discretion
shall determine and designate, to exercise such Option in whole or in part,
whether or not such Option was otherwise exercisable at the time such
termination occurs. The Board shall send written notice of an event that will
result in such a termination to all individuals who hold Options not later than
the time at which the Company gives notice thereof to its shareholders.
(c) Discretionary Modifications. Notwithstanding provisions of any
other Article of this Plan to the contrary, in the event of a Change in Control
(as defined in Section 8.2), the Committee shall, in addition to other
provisions of this Article VIII, have full discretion, notwithstanding anything
herein or in an Agreement to the contrary (except as provided below), to do any
or all of the following with respect to an outstanding Option:
(i) to provide that the Options outstanding as of the date of
the Change in Control which are not then exercisable shall become
fully exercisable to the full extent of the original grant;
(ii) to provide that the restrictions and deferral limitations
applicable to the Options shall lapse, and such Options shall become
free of all restrictions and become fully vested and transferrable to
the full extent of the original grant;
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(iii) to cause any Option to be cancelled, provided notice of at
least 15 days thereof is provided before the date of cancellation;
(iv) to provide that the securities of another entity be
substituted hereunder for the Common Stock and to make equitable
adjustment with respect thereto; and
(v) to take any other action the Committee determines to take.
8.2 Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall mean the happening of any of the following events:
(a) Any corporation, person or other entity (other than the Company, a
majority-owned subsidiary of the Company or any of its subsidiaries, or an
employee benefit plan (or related trust) sponsored or maintained by the
Company), including a "group" as defined in Section 13(d)(3) of the Exchange
Act, becomes the beneficial owner of stock representing more than forty-nine
percent (49%) of the combined voting power of the Company's then outstanding
securities;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(c) Consummation of a reorganization, merger or consolidation of the
Company or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the then-outstanding
shares of common stock of the Company (the "Outstanding Company Common Stock")
and the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities") immediately prior to such Business
Combination beneficially own, directly or indirectly, more than sixty percent
(60%) of, respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such
16
<PAGE> 21
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, thirty percent (30%) or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination, or the combined voting
power of the then-outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company other than to a corporation which
would satisfy the requirements of clauses (i), (ii) or (iii) of Subsection (c)
of this Section 8.2, assuming for this purpose that such liquidation or
dissolution was a Business Combination.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Option theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or an Affiliate, (b) made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (c) made to permit
the Company or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Company's stockholders to
the extent such approval is required by law or agreement. The Committee may
amend, alter or discontinue the terms of any Option theretofore granted,
prospectively or retroactively, on the same conditions and limitations (and
exceptions to limitations) as the Board and further subject to any approval or
limitations the Board may impose.
Subject to the above provisions, the Board shall have the authority to
amend the Plan to take into account changes in law and tax and accounting rules,
as well as other developments, and to grant Options which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the
17
<PAGE> 22
right so that pooling of interest accounting shall be available, including the
substitution of Common Stock having a Fair Market Value equal to the cash
otherwise payable hereunder for the right which caused the transaction to be
ineligible for pooling of interest accounting.
9.2 Unfunded Status of Plan. It is intended that this Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under this Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of this
Plan.
9.3 Status of Options Under Section 162(m) of the Code. It is the intent
of the Company that Options granted to persons who are "covered employees"
within the meaning of Section 162(m) of the Code shall constitute "qualified
performance-based compensation" satisfying the requirements of Section 162(m) of
the Code. Accordingly, the provisions of the Plan shall be interpreted in a
manner consistent with Section 162(m) of the Code. If any provision of the Plan
or any agreement relating to such an Option does not comply or is inconsistent
with the requirements of Section 162(m) of the Code, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
9.4 General Provisions.
(a) Representation. The Committee may require each person purchasing
shares pursuant to an Option to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing contained in this Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal income tax
purposes with respect to any Option, the Participant shall pay to the Company
(or other entity identified by the Committee), or make arrangements satisfactory
to the Company or other entity identified by the Committee regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company or an
Affiliate to obtain a current deduction. To the extent permitted by the
Committee, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Option that gives rise to the withholding
requirement provided that any applicable requirements under Section 16 of the
Exchange Act are satisfied. The obligations of the Company under this Plan
shall be conditional on such payment or arrangements, and the Company and its
Affiliates shall, to the extent
18
<PAGE> 23
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. If the Participant disposes of shares of
Common Stock acquired pursuant to an Incentive Stock Option in any transaction
considered to be a disqualifying transaction under the Code, the Participant
must give written notice of such transfer and the Company shall have the right
to deduct any taxes required by law to be withheld from any amounts otherwise
payable to the Participant.
(d) Prior Grants. This Plan is expressly intended to comprehensively
amend and restate the Atlantic Beverage Company, Inc. Stock Option Plan, as
amended prior to the Effective Date, and the Atlantic Beverage Company, Inc.
Directors Stock Option Plan; and all options previously granted by the Board of
Directors or the Committee, pursuant to such plans or otherwise, shall be
treated as granted pursuant to this Plan; provided, however, that no recipient
shall have their rights associated with such previously issued options impaired
without their consent. Specifically, attached as Exhibit A is a list of options
previously granted to officers subject to Section 16 of the Exchange Act,
directors, independent contractors and consultants to which this Section 9.4(d)
shall apply. In addition to options listed on Exhibit A, this Section is also
intended to apply to options previously granted to employees which are not
officers subject to Section 16 of the Exchange Act.
(e) Reinvestment. The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall only be permissible
if sufficient shares of Common Stock are available for such reinvestment (taking
into account then outstanding Options and other Options).
(f) Representation. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to whom any
amounts payable in the event of the Participant's death are to be paid.
(g) Controlling Law. This Plan and all Options made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of Illinois (other than its law respecting choice of law). This Plan shall
be construed to comply with all applicable law, and to avoid liability to the
Company, an Affiliate or a Participant, including, without limitation, liability
under Section 16(b) of the Exchange Act.
(h) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value of
any shares of Common Stock, cash or other thing of value under this Plan or an
Agreement to be transferred to the Participant, and no shares of Common Stock,
cash or other thing of value under this Plan or an Agreement shall be
transferred unless and until all disputes between the Company and the
Participant have been fully and finally resolved and the Participant has waived
all claims to such against the Company or an Affiliate.
19
<PAGE> 24
(i) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated herein, such
provision (other than one relating to eligibility requirements or the price and
amount of Options) shall be deemed to be incorporated by reference into the Plan
with respect to Participants subject to Section 16.
(j) Right to Recapitalize. The grant of an Option shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
9.5 Mitigation of Excise Tax. Subject to any other agreement between the
Participant and the Company or an Affiliate, if any payment or right accruing to
a Participant under this Plan (without the application of this Section 9.5),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 280G of the Code and regulations
thereunder), such payment or right shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under this Plan being subject to an excise tax under Section 4999 of
the Code or being disallowed as a deduction under Section 280G of the Code. The
determination of whether any reduction in the rights or payments under this Plan
is to apply shall be made by the Committee in good faith after consultation with
the Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee
in making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 9.5 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of this
Plan and after reduction for only federal income taxes.
9.6 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or
an Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service
20
<PAGE> 25
hereby, and the Company or an Affiliate reserves the same rights to terminate
the Participant's employment or service as existed prior to the individual
becoming a Participant in this Plan.
9.7 Options in Substitution for Options Granted by Other Corporations.
Options may be granted under this Plan from time to time in substitution for
options in respect of other plans of other entities. The terms and conditions
of the Options so granted may vary from the terms and conditions set forth in
this Plan at the time of such grant as the majority of the members of the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.
9.8 Procedure for Adoption. Any Affiliate of the Company on the Effective
Date shall be deemed to have adopted this Plan on the Effective Date. Any other
Affiliate of the Company may by resolution of such Affiliate's board of
directors, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, adopt this Plan as of
the date specified in the board resolution.
9.9 Procedure for Withdrawal. Any Affiliate which has adopted this Plan
may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of this Plan.
9.10 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under this Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, whichever is shorter. The Company shall have the right to suspend or
delay any time period described in this Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of this Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
this Plan.
9.11 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
9.12 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
21
<PAGE> 26
9.13 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
9.14 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between this Plan and the Agreement, the terms
and conditions of the Agreement shall control.
22
<PAGE> 27
IN WITNESS WHEREOF, this instrument has been executed by the undersigned as
of April 12, 1999.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ ALAN F. SUSSNA
--------------------------------------------
Name: Alan F. Sussna
Title: President and Chief Executive Officer
23
<PAGE> 28
EXHIBIT A
<TABLE>
<CAPTION>
TOTAL NUMBER OF
OPTIONS GRANTED PRIOR TO THE
HOLDER EFFECTIVE DATE
- ------ ----------------------------
<S> <C>
Douglas L. Becker 30,000
Eric D. Becker 70,000
Anthony J. Brocato, Jr. 24,000
Thomas M. Dalton 75,000
Merrick M. Elfman 74,500
Steve Englander 45,000
Ericson Marketing Communications 8,000
Brian T. Fleming 20,000
John T. Hanes 20,000
Rudolph Christopher Hoehn-Saric 30,000
Rick Inatome 44,500
John Izzo 20,000
George Cook Jordan, Jr. 44,500
Alan Macksey 25,000
John A. Miller 44,500
Stoelting, Inc. 30,000
Alan F. Sussna 750,000
Steven M. Taslitz 74,500
Tom D. Wippman 18,000
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,240,000
<SECURITIES> 0
<RECEIVABLES> 8,502,000
<ALLOWANCES> 240,000
<INVENTORY> 5,872,000
<CURRENT-ASSETS> 16,686,000
<PP&E> 15,519,000
<DEPRECIATION> 2,916,000
<TOTAL-ASSETS> 43,642,000
<CURRENT-LIABILITIES> 16,603,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 10,889,000
<TOTAL-LIABILITY-AND-EQUITY> 43,642,000
<SALES> 47,393,000
<TOTAL-REVENUES> 47,393,000
<CGS> 41,396,000
<TOTAL-COSTS> 5,068,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 634,000
<INCOME-PRETAX> 390,000
<INCOME-TAX> 94,000
<INCOME-CONTINUING> 296,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296,000
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
