<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1997
REGISTRATION NO. 333-24715
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AURORA FOODS INC.
(formerly MBW Foods Inc.)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2099 13-3921934
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
</TABLE>
--------------------------
Community Corporate Center
445 Hutchinson Avenue
Columbus, Ohio 43235
(614) 436-8600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
MR. THOMAS J. FERRARO
PRESIDENT
AURORA FOODS INC.
COMMUNITY CORPORATE CENTER
445 HUTCHINSON AVENUE
COLUMBUS, OHIO 43235
(614) 436-8600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Mr. James B. Ardrey Frank L. Schiff, Esq.
Dartford Partnership White & Case
L.L.C. 1155 Avenue of the Americas
456 Montgomery Street, New York, New York 10036-2787
Suite 2200 (212) 819-8752
San Francisco, California
94104
(415) 982-3019
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the information of a holding company and there is compliance
with General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH OFFERING AGGREGATE
NOTE OF SECURITIES AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 7/8% Series B Senior Subordinated
Notes due 2007....................... $100,000,000 100% $100,000,000 $30,303.03
9 7/8% Series D Senior Subordinated
Notes due 2007....................... $100,000,000 100% $100,000,000 $30,303.03
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value, which was been computed as of July 11, 1997, of the
outstanding 9 7/8% Senior Subordinated Notes due 2007 and 9 7/8% Series C
Senior Subordinated Notes due 2007 of Aurora Foods Inc. to be cancelled in
the exchange transaction hereunder. $60,606.06 has been paid to the
Commission prior to the filing of this Amendment.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
AURORA FOODS INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF
ITEMS OF FORM S-4
<TABLE>
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover Page; Cross Reference
Outside Front Cover Page of Prospectus..... Sheet; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back Cover
of Prospectus.............................. Page
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Risk Factors; Pro Forma
Charges and Other Information.............. Financial Information; Selected
Historical Financial Data--The Company
and MBW Predecessor; Selected Historical
Financial Data--LC Business; Business
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer;
Certain United States Federal Income Tax
Considerations; Description of Notes
5. Pro Forma Financial Information............ Prospectus Summary; Pro Forma Financial
Information
6. Material Contacts with the Company Being Not Applicable
Acquired...................................
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties Deemed to
be Underwriters............................
8. Interests of Named Experts and Counsel..... Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities................................
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to S-3 Not Applicable
Registrants................................
11. Incorporation of Certain Information by Not Applicable
Reference..................................
12. Information with Respect to S-2 or S-3 Not Applicable
Registrants................................
13. Incorporation of Certain Information by Not Applicable
Reference..................................
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
14. Information with Respect to Registrant Prospectus Summary; Capitalization;
Other Than S-2 or S-3 Registrants.......... Selected Historical Financial Data--The
Company and MBW Predecessor; Selected
Historical Financial Data--LC Business;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; The Acquisitions; Business;
Management; Certain Related Transactions;
Description of Notes; Description of
Senior Credit Facilities; Financial
Statements
</TABLE>
<TABLE>
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Not Applicable
Companies..................................
16. Information with Respect to S-2 or S-3 Not Applicable
Companies..................................
17. Information with Respect to Companies Other Not Applicable
Than S-2 or S-3 Companies..................
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited.........
19. Information if Proxies, Consents or Management; Certain Related Transactions;
Authorizations are not to be Solicited or Security Ownership
in an Exchange Offer.......................
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 21, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
AURORA FOODS INC.
OFFER TO EXCHANGE
9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
-----------------------------------------------------------------
Aurora Foods Inc., a Delaware corporation (formerly MBW Foods Inc.) (the
"Company"), a wholly-owned subsidiary of Aurora Foods Holdings Inc. (formerly
MBW Holdings Inc.) ("Holdings"), which in turn is a wholly-owned subsidiary of
MBW Investors LLC ("MBW LLC") hereby offers, upon the terms and subject to
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal"; together with the
Prospectus, the "Exchange Offer"), to exchange up to an aggregate principal
amount of $100,000,000 of its 9 7/8% Series B Senior Subordinated Notes due 2007
(the "New Notes") for up to an aggregate principal amount of $100,000,000 of its
outstanding 9 7/8% Senior Subordinated Notes due 2007 (the "Series A Notes" or
the "Old Notes"). The proceeds from the issuance of the Series A Notes were used
to refinance certain bank indebtedness and to pay related fees and expenses
arising from the purchase of the MRS. BUTTERWORTH'S syrup and pancake mix
business on December 31, 1996. The terms of the New Notes are identical in all
material respects to those of the Old Notes, except for certain transfer
restrictions, registration rights and liquidated damages relating to the Old
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the Indenture governing the Old Notes. The New Notes and the Old Notes are
sometimes referred to collectively as the "Notes."
On July 1, 1997, the Company issued $100,000,000 of its 9 7/8% Series C Senior
Subordinated Notes due 2007 (the "Series C Notes"), the proceeds of which were
used by the Company to pay a portion of the purchase price for the LOG CABIN
syrup business and to pay related fees and expenses. Pursuant to a separate
prospectus dated the date of this Prospectus, the Company will be offering to
exchange, upon the terms and subject to the conditions set forth in such
separate prospectus and the accompanying letter of transmittal, its 9 7/8%
Series D Senior Subordinated Notes due 2007 (the "Series D Notes") for up to an
aggregate principal amount of $100,000,000 of its outstanding Series C Notes.
The terms of the Series D Notes will be identical in all material respects to
those of the Series C Notes, except for certain transfer restrictions,
registration rights and liquidated damages relating to the Series C Notes. The
Series D Notes will be issued pursuant to, and be entitled to the benefits of,
the indenture governing the Series C Notes. The Series D Notes and the Series C
Notes are sometimes referred to collectively as the "Other Notes".
Interest on the New Notes is payable semi-annually on February 15 and August 15
of each year, commencing on February 15, 1998. The New Notes will mature on
February 15, 2007. Except as described below, the Company may not redeem the New
Notes prior to February 15, 2002. On or after such date, the Company may redeem
the New Notes, in whole or in part, at any time at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time to time on or prior to
February 15, 2000, the Company may, subject to certain requirements, redeem up
to $35.0 million of the aggregate principal amount of Notes with the cash
proceeds received from one or more Equity Offerings at a redemption price equal
to 109.875% of the principal amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption, provided that at least $65.0
million of the aggregate principal amount of Notes remain outstanding
immediately after each such redemption. The New Notes will not be subject to any
sinking fund requirement. Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time on or prior to February 15, 2002, to
redeem the New Notes in whole but not in part at a redemption price equal to
100% of the principal amount thereof plus the Applicable Premium plus accrued
and unpaid interest to the date of redemption, and (ii) if the Company does not
so redeem the New Notes or if such Change of Control occurs after February 15,
2002, the Company will be required to make an offer to repurchase the New Notes
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of repurchase. See "Description of
Notes -- Optional Redemption."
The New Notes will be unsecured and will be subordinated to all existing and
future Senior Indebtedness of the Company and will be effectively subordinated
to all obligations of any subsidiaries of the Company as may exist from time to
time. On the date of issuance of the New Notes, the Company will not have any
subsidiaries; however the Indenture will not restrict the ability of the Company
to create, acquire or capitalize subsidiaries in the future. The New Notes will
rank PARI PASSU with the Other Notes and any future Senior Subordinated
Indebtedness of the Company and will rank senior to all other subordinated
indebtedness of the Company. As of June 28, 1997 on a pro forma basis giving
effect to the LC Acquisitions, the Company had $87.0 million of Senior
Indebtedness outstanding (excluding unused commitments of $13.0 million under
the Revolving Facility) and the Company had no Senior Subordinated Indebtedness
outstanding other than the Notes and the Other Notes. See "Description of Notes
- -- Ranking."
(CONTINUED ON NEXT PAGE)
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(CONTINUED FROM COVER)
The Old Notes were originally issued and sold on February 10, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144A and
Regulation D under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available.
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than , 1997. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated as of February 10, 1997 (the "Exchange and Registration Rights
Agreement") by and between the Company and Chase Securities Inc., as the initial
purchaser (the "Initial Purchaser"), with respect to the initial sale of the Old
Notes. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") rendered to third parties in similar transactions,
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by respective
holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the New Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement with any person to
participate in the distribution of such New Notes and is not engaged in and does
not intend to engage in a distribution of the New Notes. Only broker-dealers who
acquired the Old Notes as a result of market-making activities or other trading
activities may participate in the Exchange Offer. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of the New Notes received in exchange
for Old Notes if such New Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. To the extent
that an active market for the New Notes does develop, the market value of the
New Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition,
and other factors. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Absence of Public Market."
ii
<PAGE>
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
------------------------
Until , 1997 (90 days after commencement of this offering), all
dealers effecting transactions in the New Notes, whether or not participating in
this offering, may be required to deliver a Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
New Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Items of information omitted from this Prospectus but contained in
the Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following regional offices of
the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. Electronic filings filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR")
are publicly available through the Commission's home page on the Internet at
http://www.sec.gov.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed to file with the Commission and provide to the
Trustee and the holders of Notes annual reports and the information, documents
and other reports otherwise required pursuant to Sections 13 and 15(d) of the
Exchange Act. See "Description of Notes -- Certain Covenants -- SEC Reports."
CAPITALIZED TERMS
Capitalized Terms used herein shall have the respective meanings set forth
in the Glossary which begins at page 104.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE STATED IN THIS PROSPECTUS, REFERENCES TO (I) THE
"COMPANY" SHALL MEAN AURORA FOODS INC. (FORMERLY MBW FOODS INC.), A DELAWARE
CORPORATION; (II) "HOLDINGS" SHALL MEAN AURORA HOLDINGS INC. (FORMERLY MBW
HOLDINGS INC.), A DELAWARE CORPORATION; (III) "MBW LLC" SHALL MEAN MBW INVESTORS
LLC, A DELAWARE LIMITED LIABILITY COMPANY; AND (IV) THE "MBW PREDECESSOR" SHALL
MEAN THE MRS. BUTTERWORTH'S SYRUP AND PANCAKE MIX BUSINESS WHICH THE COMPANY
ACQUIRED FROM CONOPCO, INC. ("CONOPCO") A SUBSIDIARY OF UNILEVER UNITED STATES,
INC. ("UNILEVER") ON DECEMBER 31, 1996; AND (V) THE "LC BUSINESS" SHALL MEAN THE
LOG CABIN SYRUP BUSINESS WHICH THE COMPANY ACQUIRED FROM KRAFT FOODS, INC.
("KRAFT") ON JULY 1, 1997. EXCEPT AS OTHERWISE INDICATED, (I) ALL REFERENCES TO
MARKET, CATEGORY AND SEGMENT SALES AND TO MARKET SHARE PERCENTAGES AND MARKET
POSITIONS REFLECT THE 52-WEEK PERIOD ENDED MAY 17,1997 AS GATHERED BY A.C.
NIELSEN FOR U.S. RETAIL GROCERY SALES; (II) ALL REFERENCES TO THE COMPANY'S
SALES REFER TO NET SALES AS REPORTED IN THE HISTORICAL FINANCIAL STATEMENTS OF
THE COMPANY, THE MBW PREDECESSOR AND THE LC BUSINESS, AS APPLICABLE; (III) ALL
REFERENCES TO "REGULAR SYRUP" REFER TO FULL-CALORIE TABLE SYRUP; AND (IV) ALL
REFERENCES TO "SYRUP" REFER TO REGULAR SYRUP, LITE SYRUP AND PURE MAPLE/
SPECIALTY SYRUPS. Mrs. Butterworth's-Registered Trademark-, Log
Cabin-Registered Trademark-, Country Kitchen-Registered Trademark-, AND
Wigwam-Registered Trademark- ARE REGISTERED TRADEMARKS OF THE COMPANY. THIS
PROSPECTUS ALSO INCLUDES TRADEMARKS OF COMPANIES OTHER THAN THE COMPANY.
THE COMPANY
OVERVIEW
The Company, a wholly-owned subsidiary of Holdings, which in turn is a
wholly-owned subsidiary of MBW LLC, was organized in November 1996 by Dartford
Partnership L.L.C. ("Dartford"), majority owner McCown De Leeuw & Co. ("MDC")
and Fenway Partners Capital Fund, L.P. ("Fenway"). Dartford provides day-to-day
operational oversight to the Company. On December 31, 1996, the Company acquired
the MRS. BUTTERWORTH'S syrup and pancake mix business from Conopco for
approximately $114.1 million. On July 1, 1997, the Company acquired the LOG
CABIN syrup business from Kraft for approximately $222.0 million.
The Company markets and sells MRS. BUTTERWORTH'S, the number one brand of
regular syrup in the United States. Originally introduced in 1960, MRS.
BUTTERWORTH'S syrup is well known for its unique buttery flavor and distinctive
grandmother-shaped bottle and enjoys 100% aided brand awareness among syrup
consumers. In addition to its strong national presence, MRS. BUTTERWORTH'S is
the number one brand of syrup in the Central and Mid-Central United States, the
two regions of the country with the highest per capita syrup consumption. MRS.
BUTTERWORTH'S strong market position in syrup is complemented by its pancake mix
products, in which it is the fourth leading brand. MRS. BUTTERWORTH'S leading
market positions and strong brand recognition have enabled it to realize a long
history of high operating margins, stable sales and growth in operating profit.
On July 1, 1997, the Company acquired substantially all of the assets of the
LOG CABIN syrup business from Kraft. The LOG CABIN syrup business consists of
the retail syrup business marketed under the LOG CABIN and COUNTRY KITCHEN
brands and the foodservice syrup business marketed under the LOG CABIN and
WIGWAM brands. The LOG CABIN trademark dates back to 1888 and, the Company
believes it is one of the oldest and most widely recognized trademarks in the
United States. LOG CABIN syrup products have the number one market share overall
in the United States. LOG CABIN'S premium maple heritage, together with its
geographic strength on the east and west coasts, complements MRS. BUTTERWORTH'S
buttery flavor and strength in the central United States. Further extending the
Company's customer base is the addition of the COUNTRY KITCHEN and WIGWAM
trademarks. Introduced in 1954, COUNTRY KITCHEN is an economy-priced syrup
targeted towards the price conscious consumer and has the leading market share
in that segment. Collectively, LOG CABIN, MRS. BUTTERWORTH'S and AUNT
1
<PAGE>
JEMIMA account for approximately 53% of total syrup sales in the United States,
with the remaining 47% accounted for by other national, regional and private
label brands.
The Company plans to combine the manufacture and distribution of LOG CABIN
syrup products with its MRS. BUTTERWORTH'S products and as a result expects to
realize approximately $3.0 million in annual cost savings. LOG CABIN products
will be sold by the Company's independent food brokers and will be marketed and
administered by the Company, which will expand its corporate organization from
22 to 34 persons. For the twelve months ended June 28, 1997, the Company's
combined pro forma sales, EBITDA and income before income taxes were $194.1
million, $49.1 million and $10.3 million, respectively (which amounts do not
reflect the expected manufacturing and distribution annual cost savings of $3.0
million discussed above). MRS. BUTTERWORTH'S and LOG CABIN products represented
46% and 54%, respectively, of the Company's pro forma sales for the same period.
In order to effect the transition to an independent operating company, the
Company established a corporate infrastructure which is organized in three
operational groups--the product development group, the financial administrative
group and the sales group. In addition, in connection with the Red Wing Co-Pack
Agreement, the Company is in the process of transferring the production of MRS.
BUTTERWORTH'S syrup and the related equipment from Conopco's facilities to Red
Wing's facilities. The total cost of this transition is expected to be
approximately $5.8 million.
In connection with the LC Acquisition, the Company has expanded its
corporate organization from 22 to 34 persons. The Company is also negotiating
with Red Wing and other third-parties for the contract manufacture of its LOG
CABIN syrup products. The Company estimates that the transition costs related to
the LOG CABIN syrup business will be approximately $5.1 million.
The syrup and pancake mix categories in the United States are stable and are
characterized by broad household penetration and steady growth. Sales of syrup
products are driven by the consumption of host foods, including frozen waffles
and pancake mix, product innovation and consumers' desire for traditional "home
style" meals. From 1993 to 1996, the syrup and pancake mix categories grew at
compound annual rates of approximately 1.4% and 3.5%, respectively. The
Company's products are sold nationally through an independent broker network to
retail grocery stores, mass merchandisers, military exchanges and foodservice
distributors. The Company's syrups and pancake mixes are sold in nearly 100% and
63%, respectively, of all retail grocery stores in the United States. For the
twelve months ended June 28, 1997, the Company's syrup and pancake mix sales
represented approximately 95% and 5% of pro forma sales, respectively.
The Company believes that its brands provide an attractive platform upon
which to build a focused, branded dry grocery products company. Dartford, Fenway
and the other related parties are investors in certain other entities, however
these entities do not compete with the Company. The Company markets branded, dry
grocery products, including dry pancake mixes to which consumers add ingredients
as part of home preparation, while Van de Kamps, Inc. ("Van de Kamps"), in which
Dartford and Fenway are investors, focuses on frozen, prepared products which
include convenience frozen pancakes, waffles and french toast sold under the
AUNT JEMIMA-Registered Trademark- brand name. Dartford's other activities are in
other industries, such as pet food products. In addition, Dartford is required,
under the terms of the Dartford Management Services Agreement, to bring any
potential acquisitions of dry grocery products companies to the Company and is
restricted from establishing competing entities. See "Certain Related
Transactions--Dartford Management Services Agreement."
The Company believes that the performance of certain dry grocery categories
and brands has suffered in recent years as a result of declining levels of
marketing support and little or no new product innovation by the major food
companies. Consequently, the Company believes that many of these undermanaged
brands are likely candidates for divestiture from their corporate parents. While
these categories and brands tend to be mature, there are expanding segments
within the categories and growth opportunities that have not been realized. As a
result, the Company believes that an attractive opportunity exists for building
a branded dry grocery products company through strategic acquisitions
2
<PAGE>
of established, well-recognized national and regional brands that have been
undermanaged in recent years. The Company's objective is to renew the growth of
the brands it acquires by providing them the focus, strategic direction,
marketing resources and dedicated sales and marketing organizations that they
have lacked.
MRS. BUTTERWORTH'S GROWTH STRATEGY
The Company believes that MRS. BUTTERWORTH'S has significant growth
potential which has not been realized due to a lack of corporate support and
marketing resources from Unilever in recent years. The Company plans to improve
MRS. BUTTERWORTH'S performance by increasing management attention to the brand
and by devoting the marketing resources necessary to exploit opportunities in
the syrup and pancake mix categories. The Company intends to implement its
strategy through the following initiatives:
- POSITION BRAND AS BEST VALUE. The Company plans to position MRS.
BUTTERWORTH'S as the best value among the three leading national syrup brands by
continuing to provide its distinctive, premium quality product at prices which
are moderately below those of the other national brands. In May 1996, MRS.
BUTTERWORTH'S lowered the everyday prices of its syrup products. To offset the
cost of lowering everyday prices, MRS. BUTTERWORTH'S also reduced its costly and
relatively ineffective buy-one-get-one-free promotions. The Company believes
that full implementation of MRS. BUTTERWORTH'S value pricing strategy will
result in continued increases in sales and market share.
- REFORMULATE LITE PRODUCT. MRS. BUTTERWORTH'S LITE has not been
reformulated or improved since its introduction in 1985. Over the last five
years, competitors have focused their research and development efforts on the
lite syrup segment, taking advantage of newly developed ingredients and
formulations. While MRS. BUTTERWORTH'S is the leading brand in the regular syrup
segment, MRS. BUTTERWORTH'S share of the lite syrup segment is 15.0% and is
significantly below AUNT JEMIMA'S leading 32.6% share of the segment. The
Company plans to reformulate and improve the taste of MRS. BUTTERWORTH'S LITE.
Management believes that this reformulation, coupled with MRS. BUTTERWORTH'S
leading position in the regular syrup segment and increased marketing support,
can expand the Company's share of the lite segment and further strengthen the
Company's overall syrup market share.
- ROLL OUT PRODUCT LINE EXTENSIONS. Management believes MRS. BUTTERWORTH'S
strong brand equity and leading market shares in the syrup category present
considerable opportunities for product line extensions. For example, an
opportunity exists to develop a product which is directed at children and
packaged in plastic, as compared to the current glass packaging. Opportunities
also exist for MRS. BUTTERWORTH'S in the flavored syrup segment, as none of the
major national brands currently offer these specialty products. In addition,
management believes that opportunities exist for growth in the Company's pancake
mix business with increased marketing and sales support for its recently
redesigned and updated packaging.
- ADOPT CONSUMER BASED MARKETING STRATEGY. Over the next two years, the
Company plans to reduce its reliance on costly and relatively inefficient trade
spending and periodic price discounting and increase its advertising and
consumer promotional events. The Company plans to reduce or eliminate
buy-one-get-one-free promotions and its heavy reliance on coupons in free
standing inserts. The Company will reallocate those marketing dollars to
advertising and more focused consumer promotions such as cross-promotions with
host foods. In addition, the Company will direct its advertising expenditures to
support the introduction of new or improved products and reinforce MRS.
BUTTERWORTH'S unique brand equity and positioning as the best value among the
national brands.
LOG CABIN GROWTH STRATEGY
LOG CABIN'S overall share of the retail syrup category has decreased from
35% in 1972 to 19%. The Company attributes the decrease to declining levels of
corporate support and marketing resources over this period of time. The Company
plans to undertake the following initiatives to revitalize the LOG CABIN brand
and profitably grow the business:
3
<PAGE>
- RESTORE LOG CABIN'S PREMIUM IMAGE. The Company believes that
historically, the LOG CABIN brand has been perceived by the consumer as a
premium, real maple syrup. In recent years, LOG CABIN'S premium image has
eroded due to a lack of marketing support. For example, packaging of LOG
CABIN syrup products has been downgraded from glass to clear plastic to
opaque plastic. Advertising support for the brand was eliminated in 1994.
The Company plans to restore LOG CABIN'S premium image by upgrading LOG
CABIN'S packaging and renewing advertising support for the brand that
promotes its premium, real maple heritage and warm, homespun image.
- RETURN TO CONSUMER BASED MARKETING STRATEGY. Over the last four years,
LOG CABIN'S marketing program has consisted almost entirely of trade
spending and price discounting. Little or no money was spent promoting LOG
CABIN products to the consumer through coupons or advertising. In order to
bring consumers back to the LOG CABIN brand, the Company plans to increase
advertising support for the brand and implement focused consumer
promotional activities such as point-of-sale coupons and cross-promotions
with host foods. The Company expects to fund these programs in part
through the elimination of certain inefficient trade programs.
- BENEFIT FROM GROWTH IN HOST FOODS. Sales of syrup products are related to
sales of host foods, which include pancakes, waffles and french toast.
Over the last five months, following little or no growth over the last
three years, sales of frozen breakfast products have grown at
approximately a 10% annual rate as a result of increased marketing
activity by host food manufacturers. The Company believes that sales of
syrup products will benefit from renewed growth in host foods.
- EXPAND DISTRIBUTION CHANNELS. The Company plans to expand distribution of
the economy-priced COUNTRY KITCHEN brand into the mass merchandise and
drugstore channels of trade. The Company also plans to leverage its WIGWAM
brand and expand its foodservice business.
CO-PACK AGREEMENTS
MRS. BUTTERWORTH'S syrup is currently contract manufactured and distributed
under the transitional MBW Co-Pack Agreement which terminates on or prior to
December 31, 1997 and under the Red Wing Co-Pack Agreement. See "The
Acquisitions--The MBW Acquisition--MBW Co-Pack Agreement." The Company entered
into a co-pack agreement (the "Red Wing Co-Pack Agreement") with The Red Wing
Company, Inc. ("Red Wing"), dated as of June 9, 1997, pursuant to which Red Wing
will contract manufacture MRS. BUTTERWORTH'S syrup for a period of five years.
Founded in 1912, Red Wing is a contract manufacturer of preserves, jellies,
syrups, sauces, dressings and other food products. Subject to certain
conditions, the Company may terminate the Red Wing Co-Pack Agreement after two
years with 180 days prior written notice. The Red Wing Co-Pack Agreement is
non-exclusive and does not restrict the Company from entering into additional
co-pack agreements with third parties.
Red Wing will contract manufacture MRS. BUTTERWORTH'S syrup for conversion
fees which are less than those the Company has paid under the MBW Co-Pack
Agreement. Because Red Wing is one of the largest purchasers of corn syrup in
the United States, the Company believes that its raw material costs under the
Red Wing Co-Pack Agreement will be less than those incurred by the MBW
Predecessor. Under the Red Wing Co-Pack Agreement, MRS. BUTTERWORTH'S syrup will
be produced and distributed from Red Wing's San Jose, California and Streator,
Illinois facilities. The Company commenced transferring production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. See "The Acquisitions--The Red Wing
Co-Pack Agreement."
LOG CABIN syrups initially will be contract manufactured and distributed by
Kraft for up to nine months under the LC Co-Pack Agreement. See "The
Acquisitions--The LC Acquisition--LC Co-Pack Agreement." Prior to the end of the
term of the LC Co-Pack Agreement, the Company will enter into a co-packing
agreement with Red Wing or another third party for the manufacture of LOG CABIN
syrup products.
4
<PAGE>
THE ACQUISITIONS, FINANCINGS AND RELATED TRANSACTIONS
THE LC ACQUISITION
Pursuant to an Asset Purchase Agreement between the Company and Kraft, dated
as of May 7, 1997 (the "LC Asset Purchase Agreement"), on July 1, 1997 (the "LC
Acquisition Date") the Company purchased substantially all of the assets of the
LOG CABIN syrup business from Kraft for approximately $222.0 million. The assets
acquired by the Company include (i) the LOG CABIN U.S. and foreign trademarks
(except for those held in Mexico), (ii) the equipment for the manufacture of
syrup, (iii) inventories (raw materials, packaging and finished goods), (iv)
proprietary formulations for LOG CABIN syrups, (v) other product specifications
and customer lists and (vi) rights under certain contracts, licenses, purchase
orders and other arrangements and permits. Additionally, the Company entered
into (i) the LC Transition Services Agreement with Kraft, under which Kraft will
provide certain marketing, transactions processing, accounting and other
services for a period of up to six months from the LC Acquisition Closing Date;
(ii) the LC Co-Pack Agreement, under which Kraft will contract manufacture and
distribute syrup for the Company for a period of up to nine months from the LC
Acquisition Closing Date; and (iii) the LC Excluded Products Co-Pack Agreement
under which the Company will be obligated until February 13, 2000 to contract
manufacture and distribute syrup for that part of Kraft's syrup businesses not
disposed of pursuant to the LC Asset Purchase Agreement (the "Excluded
Products"). See "The Acquisitions--The LC Acquisition." Following the expiration
of the LC Co-Pack Agreement, the Company intends to move the syrup manufacturing
equipment to a third party manufacturing facility. If the equipment is not
necessary for the Company's syrup production requirements, the Company will
either store or sell the equipment.
Financing for the acquisition of the LOG CABIN syrup business and the
related expenses consisted of (i) $28.3 million of additional equity capital
provided by the Equity Investors; (ii) $40.0 million of term loans (the "Term
Facility") and $47.0 million of revolving loans (the "Revolving Facility")
borrowed under a senior secured credit facility among the Company, Holdings, the
lenders named therein, The Chase Manhattan Bank ("Chase Manhattan"), as
administrative agent, and Chase Securities Inc. ("CSI"), as arranging agent (the
"Senior Credit Facilities"); (iii) $102.5 million in proceeds received from the
offering of the Series C Notes (the "Series C Notes Offering"); and (iv) $12.0
million of cash on hand at the Company. The acquisition of the LOG CABIN syrup
business, the borrowings under the Term Facility and the Revolving Facility, the
Series C Notes Offering and the payment of transaction fees and expenses related
thereto are referred to herein as the "LC Acquisition." See "Use of Proceeds,"
"Description of Notes," "Security Ownership" and "Description of Senior Credit
Facilities."
The sources and uses of funds for the LC Acquisition were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
<S> <C>
SOURCES:
Cash on hand............................................................. $ 12.0
Senior Credit Facilities:
Revolving Facility(1).................................................. 47.0
Term Facility.......................................................... 40.0
The Series C Notes Offering(2)........................................... 102.5
Equity proceeds.......................................................... 28.6
-------
Total sources...................................................... $ 230.1
-------
-------
USES:
Purchase price........................................................... $ 222.0
Fees and expenses........................................................ 8.1
-------
Total uses......................................................... $ 230.1
-------
-------
</TABLE>
- ------------------------------
(1) Reflects borrowings under the $60.0 million Revolving Facility after giving
effect to the LC Acquisition. The Revolving Facility is available for
working capital and general corporate purposes and includes up to $5.0
million for letters of credit. See "Description of Senior Credit
Facilities."
5
<PAGE>
(2) Includes a $2.5 million premium received in connection with the Series C
Notes Offering.
THE MBW ACQUISITION
On December 31, 1996 (the "MBW Acquisition Closing Date"), the Company
acquired substantially all of the assets of the MRS. BUTTERWORTH'S syrup and
pancake mix business from a subsidiary of Unilever for approximately $114.1
million. The assets acquired by the Company include (i) the MRS. BUTTERWORTH'S
trademarks for the United States, Canada and Puerto Rico, (ii) the equipment for
the manufacture of syrup, (iii) inventories (raw materials, packaging and
finished goods), (iv) proprietary formulations for MRS. BUTTERWORTH'S syrups and
pancake mixes, (v) other product specifications and customer lists and (vi)
rights under certain contracts, licenses, purchase orders and other arrangements
and permits. See "The Acquisitions--The MBW Acquisition". Financing for this
acquisition and the related fees and expenses consisted of (i) $33.8 million of
equity capital provided by Equity Investors and; (ii) $95.0 million of bank
indebtedness. The acquisition of the Mrs Butterworth's syrup and pancake mix
business, the financing thereof (not including the offering of the Series A
Notes) and the payment of related transaction fees and expenses are referred to
herein as the "MBW Acquisition". See "Security Ownership" and "Description of
Senior Credit Facilities." On February 10,1997, the Company issued the Old Notes
(the "Series A Notes Offering") to repay a total of approximately $95.0 million
of bank indebtedness, to pay accrued and unpaid interest with respect to such
bank indebtedness being repaid and to pay certain fees and expenses incurred in
connection with the Series A Notes Offering. The Series A Notes Offering
together with the payment of such bank indebtedness is referred to herein as the
"MBW Refinancing."
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<PAGE>
THE EXCHANGE OFFER
The New Notes....... The forms and terms of the New Notes are identical in all
material respects to the terms of the Old Notes for which
they may be exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions, registration
rights and liquidated damages provisions relating to the
Old Notes described below under "Description of Notes" and
"Old Notes Exchange and Registration Rights Agreement."
The Exchange The Company is offering to exchange up to $100,000,000
Offer............. aggregate principal amount of the New Notes for up to
$100,000,000 aggregate principal amount of Old Notes. Old
Notes may be exchanged only in integral multiples of
$1,000.
Expiration Date; The Exchange Offer will expire at 5:00 p.m., New York City
Withdrawal of time, on , 1997, or such later date and time
Tender............ to which it is extended by the Company (the "Expiration
Date"). The tender of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration
Date. The Expiration Date will not in any event be
extended to a date later than , 1997. Any Old
Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or
termination of the Exchange Offer.
Certain Conditions
to the Exchange
Offer............. The Exchange Offer is subject to customary conditions,
which may be waived by the Company. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Procedures for Each holder of Old Notes wishing to accept the Exchange
Tendering Old Offer must complete, sign and date the Letter of
Notes............. Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any other
required documentation to the Exchange Agent at the
address set forth herein. By executing the Letter of
Transmittal, each holder will represent to the Company
that, among other things, (i) any New Notes to be received
by it will be acquired in the ordinary course of its
business, (ii) it has no arrangement with any person to
participate in the distribution of the New Notes and (iii)
it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate,
it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable. Each Holder whose Old Notes are held through
DTC and wishes to participate in the Exchange Offer may do
so through DTC's Automated Tender Offer Program ("ATOP")
7
<PAGE>
<TABLE>
<S> <C>
by which each tendering participant will agree to be bound
by the Letter of Transmittal as though each Holder had
executed such Letter of Transmittal.
Interest on the New Interest on the New Notes will accrue from the date of
Notes............. issuance (the "New Note Issue Date") at the rate of 9 7/8%
per annum, and will be payable semi-annually in arrears on
each February 15 and August 15, commencing on February 15,
1998. Holders of the New Notes will also on February 15,
1998 receive an amount equal to the accrued interest on
the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New
Notes.
Special Procedures
for Beneficial
Owners............ Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such Old Notes
in the Exchange Offer should contact such registered
holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing
the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership
of the Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take considerable
time and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Holders of Notes who wish to tender their Old Notes and
Procedure......... whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the Expiration
Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Registration The Company has agreed to use its best efforts to
Requirements...... consummate on or prior to 180 days after the date of
original issuance of the Old Notes (the "Issue Date") the
registered Exchange Offer pursuant to which holders of the
Old Notes will be offered an opportunity to exchange their
Old Notes for the New Notes which will be issued without
legends restricting the transfer thereof. In the event
that applicable interpretations of the staff of the
Commission do not permit the Company to effect the
Exchange Offer or in certain other circumstances, the
Company has agreed to file a Shelf Registration Statement
covering resales of the Old Notes and to use its best
efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act and, subject
to certain exceptions, keep such Shelf
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Registration Statement effective until three years after
the Issue Date. If the Company fails to consummate the
Exchange Offer on or prior to 180 days after the Issue
Date or, in the event that the Company is not in
compliance with certain obligations under the Exchange and
Registration Rights Agreement, the Company shall be
obligated to pay liquidated damages to holders of the Old
Notes. See "Old Notes Exchange and Registration Rights
Agreement."
Certain Federal
Income Tax
Considerations.... For a discussion of certain federal income tax
considerations relating to the exchange of the New Notes
for the Old Notes, see "Certain United States Federal
Income Tax Considerations."
Use of Proceeds..... There will be no proceeds to the Company from the exchange
of Notes pursuant to the Exchange Offer.
Exchange Agent...... Wilmington Trust Company is the Exchange Agent. The
address and telephone number of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent."
TERMS OF THE NOTES
Relationship to the The form and terms of the New Notes are substantially the
Old Notes......... same as the form and terms of the Old Notes except that
the New Notes are registered under the Securities Act and,
therefore, will not bear legends restricting the transfer
thereof and will not contain the registration rights and
liquidated damages provisions relating to the Old Notes.
See "Description of Notes" and "Old Notes Exchange and
Registration Rights Agreement."
Certain The Indenture restricts, among other things, the Company's
Restrictions...... ability to incur additional indebtedness, incur liens, pay
dividends or make certain other restricted payments, enter
into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company, merge
or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. The New
Notes are subordinated in right of payment to all existing
and future Senior Indebtedness of the Company, including
the Revolving Facility under the Senior Credit Facilities
which mature on December 31, 2003 (which Facilities may be
refinanced by the Company). A default under the Senior
Credit Facilities or other indebtedness of the Company for
any reason, including after a Change of Control, which
results in acceleration of such indebtedness in an amount
in excess of $5.0 million is an Event of Default under the
Indenture.
</TABLE>
9
<PAGE>
Relationship to the The occurrence of certain of the events that would
Senior Credit constitute a Change of Control under the Indenture would
Facilities........ also constitute a default under the Senior Credit
Facilities. These events include the following: (i) prior
to an initial public offering, Permitted Holders ceasing
to be the beneficial owner of a majority of the voting
securities of the Company; (ii) following an initial
public offering, any person other than a Permitted Holder
beneficially owning more than 35% of voting securities of
the Company while the Permitted Holders beneficially own
less than such an amount; and (iii) certain changes in the
composition of the Board of Directors of the Company. See
"Description of Senior Credit Facilities" and "Description
of Notes--Events of Default." Future Senior Indebtedness
of the Company and its Subsidiaries may contain
prohibitions of certain events that would constitute a
Change of Control or require such Senior Indebtedness to
be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require the
Company to repurchase the Notes would cause a default
under such Senior Indebtedness, even if the Change of
Control itself does not, due to the financial effect of
such repurchase on the Company unless the Company's
obligations under such Senior Indebtedness were satisfied
or a waiver were to be obtained from the holders of such
Senior Indebtedness. Finally, the Company's ability to pay
cash to the holders upon a repurchase may be limited by
the Company's then existing financial resources. There can
be no assurance that sufficient funds will be available
when necessary to make any required repurchase. The
Company's current ability to repurchase the New Notes upon
a Change of Control or Asset Sale would be determined by
the proceeds received upon such Change of Control or Asset
Sale. In addition, the Company would be prohibited from
repurchasing the New Notes without first satisfying its
obligations under any outstanding Senior Indebtedness.
Even if sufficient funds were otherwise available, the
terms of the Senior Credit Facilities prohibit the
Company's prepayment of the Notes prior to their scheduled
maturity unless the Company's obligations thereunder were
satisfied or a waiver were to be obtained. Consequently,
if the Company is not able to prepay the Senior Credit
Facilities and any other Senior Indebtedness containing
similar restrictions or obtain requisite consents or
waivers, as described above, the Company will be unable to
fulfill its repurchase obligations if holders of Notes
exercise their repurchase rights following a Change of
Control, thereby resulting in a default under the
Indenture. For a discussion of the restrictions and
remedies available in the event the Company were to fail
to repurchase the Notes, see "Description of Notes--Events
of Default." In the event of such a default, depending
upon the circumstances in
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<PAGE>
<TABLE>
<S> <C>
existence at such a time, the Company may amend the Change
of Control provisions contained in the Indenture. However,
the Indenture permits the provisions and protections
pertaining to Change of Control payments to be amended
with the consent of the Holders of at least a majority in
principal amount of the Notes.
Asset Upon an Asset Disposition, the Indenture and the Senior
Dispositions...... Credit Facilities require the Company to make certain
prepayments or payments due under the Senior Credit
Facilities or other Senior Indebtedness before it is
required to offer to purchase a portion of the Notes.
Further the terms of the Senior Credit Facilities
generally prohibit the Company's prepayment of the Notes
prior to their scheduled maturity.
Waiver of Certain Under the provisions of the Indenture, Holders of the
Liabilities....... Notes waive and release directors officers, employees or
stockholders of the Company from any liability or claims
arising under the Notes or the Indenture or in connection
therewith. To the extent that such waiver and release may
be deemed to apply to liability under the Securities Act,
the Company has been advised that in the opinion of the
Commission, any such waiver and release would be against
public policy as expressed in the Securities Act and
would, therefore, be unenforceable.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by participants in the Exchange Offer.
11
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited summary pro forma financial
data of the Company for the indicated periods. The unaudited summary pro forma
statement of operations data give effect to the MBW Acquisition, the MBW
Refinancing and the LC Acquisition (collectively, the "Transactions") as if they
had occurred on January 1, 1996 for the year ended December 31, 1996 and the six
months ended June 30, 1996 and June 28, 1997. The unaudited summary pro forma
balance sheet information gives effect to the LC Acquisition as if it had
occurred on June 28, 1997. The unaudited summary pro forma financial data do not
purport to represent what the Company's results of operations or financial
condition would have actually been had the Transactions been consummated as of
such dates or for such periods or project the Company's results of operations or
financial condition for any future period. The unaudited summary pro forma
financial data should be read in conjunction with the Pro Forma Financial
Information and the notes thereto. See "Pro Forma Financial Information" and the
separate historical financial statements of the Company, the MBW Predecessor and
the LC Business and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, --------------------------------
1996 JUNE 30, 1996 JUNE 28, 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................ $ 196,047 $ 96,015 $ 94,113
Cost of products sold............................................ 65,699 31,195 32,347
-------------- --------------- ---------------
Gross profit................................................... 130,348 64,820 61,766
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................................... 18,373 8,952 9,475
Trade promotions............................................... 41,067 20,107 16,531
Consumer marketing............................................. 14,829 9,929 4,964
-------------- --------------- ---------------
Total brokerage, distribution and marketing expenses........... 74,269 38,988 30,970
Selling, general and administrative expenses..................... 14,141 7,178 5,965
Amortization of goodwill and other intangibles................... 9,901 4,951 4,951
-------------- --------------- ---------------
Operating profit............................................... 32,037 13,703 19,880
Amortization of deferred financing fees.......................... 1,277 638 638
Interest expense................................................. 26,616 13,309 13,309
-------------- --------------- ---------------
Income (loss) before income taxes.............................. 4,144 (244) 5,933
Provision for (benefit from) income taxes........................ 1,595 (93) 2,285
-------------- --------------- ---------------
Net income (loss).............................................. $ 2,549 $ (151) $ 3,648
-------------- --------------- ---------------
-------------- --------------- ---------------
</TABLE>
12
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before
participating in the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company is significantly leveraged. At June 28, 1997, on a pro forma
basis after giving effect to the LC Acquisition, the Company would have had
outstanding $287.0 million in aggregate principal amount of indebtedness
(excluding trade payables and other liabilities) and availability of $13.0
million under the Revolving Facility. The degree to which the Company is
leveraged could have important consequences to holders of the Notes, including
the following: (i) the Company will have significant cash interest expense and
principal repayment obligations with respect to outstanding indebtedness,
including the Senior Credit Facilities, the Notes and the Other Notes; (ii) the
Company could be vulnerable to changes in general economic conditions or
increases in prevailing interest rates; (iii) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; (iv) the Company
may be substantially more leveraged than certain of its competitors, which may
place the Company at a competitive disadvantage; (v) all of the indebtedness
outstanding under the Senior Credit Facilities will be secured by substantially
all the assets of the Company and matures prior to the maturity of the Notes;
and (vi) the Company's substantial degree of leverage may limit its flexibility
to adjust to changing market conditions, reduce its ability to withstand
competitive pressures and make it more vulnerable to a downturn in general
economic conditions or its business. See "Description of Senior Credit
Facilities," "Description of Notes" and "Description of Other Notes."
The Company believes that its cash flow from operations will be sufficient
to meet its payment obligations under the Senior Credit Facilities and other
operational requirements. If the Company is unable to generate sufficient cash
flow from operations, it may be required to delay or forego its acquisition
strategy, reduce or delay planned product improvement initiatives or refinance
all or a portion of amounts outstanding under the Senior Credit Facilities at or
prior to their maturity, which is prior to the maturity of the Notes. Other
potential measures to raise cash include the sale of assets or equity. However,
the Company's ability to raise funds by selling assets is restricted by the
Senior Credit Facilities, and its ability to effect equity financings is
dependent on results of operations and market conditions. In the event that the
Company is unable to refinance such indebtedness or raise funds through asset
sales, sales of equity or otherwise, its ability to pay principal of, and
interest on, the Notes would be adversely affected.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indentures restrict among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, the Senior Credit Facilities contain
other and more restrictive covenants and prohibit the Company from prepaying its
other indebtedness (including the Notes and the Other Notes). See "Description
of Notes -- Certain Covenants," "Description of Senior Credit Facilities" and
"Description of Other Notes." The Senior Credit Facilities prohibit modification
of the terms of any Subordinated Indebtedness, including the Indentures, the
Notes and the Other Notes, which would increase the rate of interest on such
indebtedness, change to earlier dates the dates upon which principal and
interest are due or make any other changes adverse to the interests of the
lenders under the Senior Credit Facilities. Additionally, the Senior Credit
Facilities prohibit prepayment of the New Notes prior to maturity or refinancing
of amounts outstanding under the Senior Credit Facilities. The Senior Credit
Facilities require the Company to
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maintain specified financial ratios and satisfy financial condition tests. The
financial covenants require the Company to maintain (i) a minimum interest
coverage ratio of 1.35:1.00 until December 31, 1997, increasing to 1.65:1.00
thereafter until December 31, 1998, increasing to 1.90:1.00 thereafter until
December 31, 1999, increasing to 2.00:1.00 thereafter until December 31, 2000,
increasing to 2.25:1.00 thereafter until December 31, 2001 and then increasing
to 2.50:1.00 thereafter until termination; (ii) a maximum leverage ratio of
5.85:1.00 until December 31, 1997, decreasing to 5.50:1.00 thereafter until
December 31, 1998, decreasing to 5.00:1.00 thereafter until December 31, 1999,
decreasing to 4.50:1.00 thereafter until December 31, 2000, and then decreasing
to 4.00:1.00 thereafter until termination; (iii) a minimum fixed charge ratio of
1.10:1.00 until December 31, 1997, increasing to 1.25:1.00 until December 31,
1998, increasing to 1.40:1.00 until December 31, 1999, increasing to 1.50:1.00
until December 31, 2000, increasing to 1.55:1.00 until December 31, 2000, and
then increasing to 1.60:1.00 until termination; and (iv) a maximum consolidated
maintenance capital expenditures amount of $2.0 million for the year ending
December 31, 1997 and $2.0 million for each calendar year thereafter.
A breach of any of the above-referenced financial covenants would constitute
an event of default under the Senior Credit Facilities and would entitle the
Lenders under the Senior Credit Facilities to accelerate the indebtedness due
thereunder. If the amount of such indebtedness so accelerated were to be in
excess of $5 million, such acceleration would also constitute an Event of
Default under the Indenture. The Company's ability to meet those financial
ratios and tests can be affected by events beyond its control, and there can be
no assurance that the Company will meet those tests. A breach of any of these
covenants could result in a default under the Senior Credit Facilities and/or
the Indentures. Upon the occurrence of an event of default under the Senior
Credit Facilities, the lenders could elect to declare all amounts outstanding
under the Senior Credit Facilities, together with accrued interest, to be
immediately due and payable. If the Company were unable to repay those amounts,
the lenders could proceed against the collateral granted to them to secure that
indebtedness. If the lenders under the Senior Credit Facilities accelerate the
payment of the indebtedness, there can be no assurance that the assets of the
Company would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company, including the Notes. See "Description of Senior
Credit Facilities."
SUBORDINATION; ASSET ENCUMBRANCES
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness, including the Senior Credit Facilities, including the
principal of (and premium, if any) and interest on and all other amounts due on
or payable in connection with Senior Indebtedness. As of June 28, 1997, on a pro
forma basis after giving effect to the LC Acquisition, there would have been
$87.0 million of Senior Indebtedness outstanding (excluding unused commitments
of $13.0 million under the Revolving Facility). By reason of such subordination,
in the event of the insolvency, liquidation, reorganization, dissolution or
other winding-up of the Company or upon a default in payment with respect to, or
the acceleration of, any Senior Indebtedness, the holders of such Senior
Indebtedness and any other creditors who are holders of Senior Indebtedness and
creditors of subsidiaries that are not guarantors of the Notes must be paid in
full before the Holders of the Notes may be paid. The Company does not currently
have any subsidiaries, however, the Indenture does not restrict the ability of
the Company to create, acquire or capitalize subsidiaries in the future. The
Indenture permits subsidiaries of the Company to incur debt provided certain
conditions are met and such subsidiaries guarantee the Notes. If the Company
incurs any additional PARI PASSU debt, the holders of such debt would be
entitled to share ratably with the holders of the Notes and the Other Notes in
any proceeds distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company. This may have
the effect of reducing the amount of proceeds paid to Holders of the Notes. In
addition, no payments may be made with respect to the principal of (and premium,
if any) or interest on the Notes if a payment default exists with respect to
Senior Indebtedness and, under certain circumstances, no payments may be made
with respect to the principal of (and premium, if any) or interest on the Notes
for a period of up to 179 days if a non-payment default exists with respect to
Senior Indebtedness. See "Description of Notes."
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<PAGE>
The Company has granted the lenders under the Senior Credit Facilities
security interests in substantially all of the current and future assets of the
Company, including a pledge of all of the issued and outstanding shares of
capital stock of the Company's future domestic subsidiaries. In the event of a
default on such indebtedness (whether as a result of the failure to comply with
a payment or other covenant, a cross-default, or otherwise), the parties granted
such security interests will have a prior secured claim on the capital stock of
the Company and the assets of the Company and any guarantors under the Senior
Credit Facilities. If such parties should attempt to foreclose on their
collateral, the Company's financial condition and the value of the Notes would
be materially adversely affected. See "Description of Senior Credit Facilities."
LIMITATION ON CHANGE OF CONTROL
The Indentures require the Company, in the event of a Change of Control in
respect of which it has not elected to redeem the Notes or the Other Notes, to
repurchase any Notes and Other Notes that holders thereof desire to have
repurchased at 101% of the principal amount thereof, plus accrued interest to
the Change of Control repurchase date. See "Description of Notes -- Change of
Control."
The Change of Control purchase feature of the Notes and the Other Notes may
in certain circumstances discourage or make more difficult a sale or takeover of
the Company. There can be no assurance that the Company will have funds
available to redeem or repurchase the Notes upon the occurrence of a Change of
Control. In particular, a Change of Control may cause an acceleration of the
Senior Credit Facilities and other indebtedness, if any, of the Company, in
which case such indebtedness would be required to be repaid in full before
redemption or repurchase of the Notes. See "Description of Notes -- Change of
Control," "Description of Senior Credit Facilities" and "Description of Other
Notes." The occurrence of the events that would constitute a Change of Control
would also constitute a "Change of Control" under the Series C Indenture. The
inability to repay such indebtedness, if accelerated, or to redeem or repurchase
all of the Notes upon the occurrence of a Change in Control would constitute an
event of default under the Indenture.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. A number of these competitors have multiple product lines, have
substantially greater financial and other resources available to them and may be
substantially less leveraged than the Company, and there can be no assurance
that the Company can compete successfully with such other companies. Competitive
pressures or other factors could cause the Company's products to lose market
share or result in significant price erosion, which would have a material
adverse effect on the Company's results of operations. See "Business --
Competition."
RAW MATERIALS
The Company uses agricultural commodities, flavors, other raw materials and
packaging in the production of its products which are purchased from growers,
commodity processors, importers, other food companies and packaging
manufacturers. While all such materials are available from numerous independent
suppliers, commodity raw materials are subject to fluctuations in price
attributable to, among other things, changes in crop size and federal and state
agricultural programs. Such fluctuations could have a material adverse effect on
the performance of the Company. See "Business -- Raw Materials."
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<PAGE>
RISKS RELATING TO THE LC ACQUISITION
The process of integrating the assets acquired pursuant to the LC
Acquisition may result in unforeseen operating difficulties, may require
substantial attention from members of the Company's senior management and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of the Company's existing operations. In
addition, in connection with the LC Acquisition, the Company has entered into
the LC Co-Pack Agreement with Kraft which has agreed to manufacture and
distribute syrup for the Company at prices based on historical manufacturing
costs for a period of up to nine months from the LC Acquisition Closing Date.
Thereafter, the Company intends to enter into a new co-pack agreement with a
third party or manufacture the syrup in a new facility to be acquired or leased
by the Company. There can be no assurance that the Company will be able to enter
into a new co-pack agreement on substantially the same terms as the LC Co-Pack
Agreement or will be able to acquire or lease such facility. LOG CABIN syrup
products have historically been sold directly by Kraft's sales force. The
Company intends to sell the LOG CABIN syrup products through its network of
independent food brokers; however, there can be no assurance that this change in
sales channels will be effective. In addition, Kraft has historically provided
computer, accounting, sales and marketing support. The Company has entered into
the LC Transition Services Agreement pursuant to which Kraft will provide
various sales, marketing, transactions processing, and accounting services to
the Company for a period of up to six months after the LC Acquisition Closing
Date. There can be no assurance that the Company will be able to perform these
services at a comparable cost. In order to transition the LOG CABIN business
into the Company's operations, the Company will increase its sales department by
three people, its marketing department by four people and its general and
administration department by five people. In addition, to accommodate the
additional personnel, the Company will expand its offices. Following the
expiration of the LC Co-Pack Agreement, the Company intends to move the syrup
manufacturing equipment to a third party manufacturing facility. If the
equipment is not necessary for the Company's syrup production requirements, the
Company will either store or sell the equipment. The Company expects the total
costs of this transition will be approximately $5.1 million.
RISKS RELATING TO THE MBW ACQUISITION
The Company was formed for the purpose of the MBW Acquisition. The Company's
business was previously operated as a product line of Unilever. There can be no
assurance that the Company will not encounter unanticipated problems or expenses
in establishing MRS. BUTTERWORTH'S as an independent company. The Company
believes that the costs of hiring personnel, establishing its corporate
infrastructure and transferring the production of MRS. BUTTERWORTH'S syrup from
Conopco to Red Wing will be approximately $5.8 million. In addition, Conopco
historically provided computer, accounting and human resources support,
warehouse space, a network of third-party distribution services and a network of
regional food brokers. There can be no assurance that the Company will be able
to perform these services at a comparable cost. The majority of the existing
broker agreements were transferred to the Company concurrently with the MBW
Acquisition. Although the Company believes that it will be able to continue such
broker agreements on substantially the same terms as those previously negotiated
with Conopco, there can be no assurance that the Company will be able to do so.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company plans to continue to pursue additional acquisitions of well
recognized national and regional dry grocery brands. There can be no assurance,
however, that the Company will be able to identify additional acquisitions or
that, if consummated, any anticipated benefits will be realized from such
acquisitions. In addition, the availability of additional acquisition financing
cannot be assured and, depending on the terms of such additional acquisitions,
could be restricted by the terms of the Senior Credit Facilities and/or the
Indentures. The process of integrating acquired operations into the Company's
existing operations may result in unforeseen operating difficulties, may require
substantial
16
<PAGE>
attention from members of the Company's senior management and may require
significant financial resources that would otherwise be available for the
ongoing development or expansion of the Company's existing operations. Possible
future acquisitions by the Company could result in the incurrence of additional
debt, contingent liabilities and amortization expenses related to goodwill and
other intangible assets, all of which could materially adversely affect the
Company's financial condition and operating results.
IMPACT OF GOVERNMENTAL REGULATION
The Company is subject to numerous federal, state and local laws and
regulations concerning, among other things, health and safety matters, food
manufacture, product labeling, advertising and the environment. Compliance with
existing federal, state and local laws and regulations is not expected to have a
material adverse effect upon the earnings or competitive position of the
Company. However, the Company cannot predict the effect, if any, of laws and
regulations that may be enacted in the future, or of changes in the enforcement
of existing laws and regulations that are subject to extensive regulatory
discretion. See "Business -- Certain Legal and Regulatory Matters."
DEPENDENCE ON KEY MANAGEMENT
The Company's success will depend to a significant extent on Messrs. Ferraro
and Willett and upon Dartford. Although the Company has entered into employment
agreements with these executive officers and a management services agreement
with Dartford, there can be no assurance the Company will be able to retain its
executive officers and key personnel or attract additional qualified management
in the future.
CONTROL BY INVESTOR GROUP
All of the outstanding shares of the Company's Common Stock are beneficially
owned by MBW LLC. Accordingly, MBW LLC and the Equity Investors control the
Company and have the power to elect all of its directors, appoint new management
and approve any action requiring the approval of the holders of the Company's
Common Stock, including adopting amendments to the Company's Certificate of
Incorporation and approving mergers or sales of substantially all of the
Company's assets. See "Management." The directors elected by MBW LLC will have
the authority to make decisions affecting the capital structure of the Company,
including the issuance of additional capital stock, the implementation of stock
repurchase programs and the declaration of dividends. Pursuant to MBW LLC's
Limited Liability Company Agreement, for so long as MDC owns more than 50% of
the voting interests of MBW LLC, MDC will have the right to designate a majority
of the Board of Directors of the Company. See "Security Ownership."
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes or the Old
Notes. The Company does not intend to apply for listing of the New Notes on any
securities exchange or any automated dealer quotation system. Although the
Initial Purchaser has informed the Company that it currently intends to make a
market in the New Notes, it is not obligated to do so and any such market making
may be discontinued at any time without notice. There can be no assurance as to
the liquidity of any markets that may develop for the New Notes, the ability of
holders to sell the New Notes, or the price at which holders would be able to
sell the New Notes. Future trading prices of the New Notes will depend on many
factors, including among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the New Notes, including non-investment grade
debt, has been subject to disruptions that have caused substantial volatility in
the prices of such securities. There can be no assurance that any market for the
New Notes, if such market develops, will not be subject to similar disruptions.
17
<PAGE>
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the Series C Notes) in connection
with the LC Acquisition and payments to consummate the LC Acquisition with the
proceeds thereof are subject to review under relevant federal and state
fraudulent conveyance statutes in a bankruptcy or reorganization case or a
lawsuit by or on behalf of creditors of the Company. Under these statutes, if a
court were to find that obligations (such as the Series C Notes) were incurred
with the intent of hindering, delaying or defrauding present or future creditors
or that the Company received less than a reasonably equivalent value or fair
consideration for those obligations and, at the time of the incurrence of the
obligations, the Company either (i) was insolvent or rendered insolvent by
reason thereof, (ii) was engaged or was about to engage in a business or
transaction for which its remaining unencumbered assets constituted unreasonably
small capital or (iii) intended to or believed that it would incur debts beyond
its ability to pay such debts as they matured or became due, such court could
void the Company's obligations under the Series C Notes, subordinate the Series
C Notes to other indebtedness of the Company or take other action detrimental to
the holders of the Series C Notes. The measure of insolvency for purposes of a
fraudulent conveyance claim will vary depending upon the law of the jurisdiction
being applied. Generally, however, a company will be considered insolvent at a
particular time if the sum of its debts at that time is greater than the then
fair value of its assets or if the fair saleable value of its assets at that
time is less than the amount that would be required to pay its probable
liability on its existing debts as they become absolute and mature. There can be
no assurance, however, as to what standard a court would apply to evaluate the
parties' intent or to determine whether the Company was insolvent at the time
of, or rendered insolvent upon consummation of, the LC Acquisition or that,
regardless of the standard, a court would not determine that the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the LC
Acquisition.
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<PAGE>
THE ACQUISITIONS
THE LC ACQUISITION
LC ASSET PURCHASE AGREEMENT
Pursuant to the LC Asset Purchase Agreement, the Company acquired
substantially all of the assets of the LOG CABIN syrup business for a cash
purchase price of approximately $222.0 million. The purchase price to be paid on
the LC Acquisition Closing Date is subject to adjustment within 45 days of the
LC Acquisition Closing Date on a dollar-for-dollar basis to the extent that the
book value of the finished goods inventory is less than or greater than $3.8
million. The assets acquired by the Company include (i) the LOG CABIN U.S. and
foreign trademarks, patents, copyrights and other intellectual property rights
relating to LOG CABIN products (except for those intellectual property rights
held in Mexico), (ii) the machinery, equipment and spare parts used in the
manufacture of LOG CABIN syrups, (iii) inventories held by Kraft on the LC
Acquisition Closing Date, including raw materials, packaging and finished goods,
(iv) proprietary formulations for LOG CABIN syrups, (v) other product
specifications and customer lists and (vi) rights under certain contracts,
licenses, purchase orders and other arrangements and permits. The Company did
not assume any pre-closing liabilities or obligations of Kraft except for
liabilities for refunds, adjustments, exchanges, returns and warranty and
merchantability claims, provided, however, that the Company will have no
liability for returns of defective products sold prior to the LC Acquisition
Closing Date and returned within 60 days after the LC Acquisition Closing Date
to the extent the value of such products exceeds $100,000. The LC Asset Purchase
Agreement contains customary representations, covenants and indemnification
provisions.
LC CO-PACK AGREEMENT
The Company and Kraft entered into a co-pack agreement dated July 1, 1997
(the "LC Co-Pack Agreement") pursuant to which Kraft will contract manufacture
and distribute all of the Company's requirements for specified syrup, subject to
certain minimum supply limits. Prices for the products will be based upon
historical manufacturing costs and will be fixed as specified in the LC Co-Pack
Agreement, with certain scheduled increases, and will be subject to adjustment
based upon purchase price variances for raw materials and packaging supplies and
fluctuations in monthly production volumes below certain monthly minimum levels.
The LC Co-Pack Agreement will remain in effect for nine months from the LC
Acquisition Closing Date, unless earlier terminated by the Company with 60 days
prior written notice. In addition, pursuant to the LC Co-Pack Agreement, the
Company licenses Kraft to use certain equipment acquired by the Company and
located in Kraft's manufacturing facilities for the purpose of manufacturing,
processing and packaging Excluded Products. This license commenced on the LC
Acquisition Closing Date and will terminate 30 days before the date on which the
Company elects to remove such equipment.
THE LC EXCLUDED PRODUCTS CO-PACK AGREEMENT
The Company and Kraft entered into a co-pack agreement relating to the
Excluded Products dated July 1, 1997 (the "LC Excluded Products Co-Pack
Agreement") pursuant to which the Company will provide manufacturing, processing
and packaging for the Excluded Products. The Company will commence providing
these services on the date that the relevant equipment used to make the Excluded
Products is removed from Kraft's manufacturing facility and begins operating at
the Company's facility or that of a third-party co-packer engaged by the
Company. The Excluded Products consist of individual syrup portion packs
manufactured, marketed, distributed and sold by Kraft pursuant to an agreement
with Alliant Food Services, Inc. Sales of the Excluded Products were
approximately $4.9 million in 1996. During the term of the LC Excluded Products
Co-Pack Agreement, Kraft will pay the Company prices for the Excluded Products
based upon the Company's fully allocated costs, without a margin, calculated in
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the same manner as Kraft's prices that will be set forth in the LC Co-Pack
Agreement, and subject to the same type and frequency of adjustments as the
prices set forth in the LC Co-Pack Agreement. The Company's obligation under the
LC Excluded Products Co-Pack Agreement will terminate on February 13, 2000,
unless earlier terminated pursuant to the terms of the LC Excluded Products
Co-Pack Agreement.
LC TRANSITION SERVICES AGREEMENT
The Company and Kraft entered into a transition services agreement dated
July 1, 1997 (the "LC Transition Services Agreement"), pursuant to which Kraft
will provide to the Company marketing services, transactions processing
services, accounting services and other related services. Such services will
generally be provided at the cost historically allocated to the LOG CABIN syrup
business for such services, adjusted to reflect any changes in the nature or
level of services. The LC Transition Services Agreement will continue for a
period of six months from the date thereof, unless earlier terminated pursuant
to its terms.
THE MBW ACQUISITION
MBW ASSET PURCHASE AGREEMENT
On the MBW Acquisition Closing Date, pursuant to the Asset Purchase
Agreement between Conopco and the Company, dated as of December 18, 1996 (the
"MBW Asset Purchase Agreement"), the Company acquired substantially all of the
assets of the MRS. BUTTERWORTH'S syrup and pancake mix business for a cash
purchase price of $114.6 million. The purchase price paid on the MBW Acquisition
Closing Date was subsequently reduced by $483,000 pursuant to the purchase price
adjustment mechanism set forth in the MBW Asset Purchase Agreement. The assets
acquired by the Company include (i) the MRS. BUTTERWORTH'S trademarks for the
United States, Canada and Puerto Rico and patents, copyrights and other
intellectual property rights relating to MRS. BUTTERWORTH'S products, (ii) the
machinery, equipment and spare parts used in the manufacture of MRS.
BUTTERWORTH'S syrups, (iii) inventories held by Conopco on the MBW Acquisition
Closing Date, including raw materials, packaging and finished goods, (iv)
proprietary formulations for MRS. BUTTERWORTH'S syrups and pancake mixes, (v)
other product specifications and customer lists and (vi) rights under certain
contracts, licenses, purchase orders and other arrangements and permits. Except
for warranty and related claims not to exceed $150,000, the Company did not
assume any pre-closing liabilities or obligations of Conopco. The MBW Asset
Purchase Agreement contains customary representations, covenants and
indemnification provisions.
MBW CO-PACK AGREEMENT
Pursuant to a co-pack agreement between Van den Bergh Foods Company ("VDB"),
a division of Conopco, and the Company dated as of December 31, 1996 (the "MBW
Co-Pack Agreement"), VDB will contract manufacture and package all of the
Company's requirements for specified syrup and pancake mix products, subject to
certain minimum and maximum supply limits. Prices for the products are fixed
based on the Conopco's actual 1996 costs, with certain scheduled increases, and
are subject to adjustment based upon purchase price variances for raw materials
and packaging supplies and fluctuations in monthly production volumes below
certain monthly minimum or above certain monthly maximum levels. The Co-Pack
Agreement terminates on December 31, 1997, subject to earlier termination with
respect to one or more products by mutual agreement of the parties. The Company
has entered into the Red Wing Co-Pack Agreement pursuant to which Red Wing will
contract manufacture MRS. BUTTERWORTH'S syrup for a period of five years
See."--The Red Wing Co-Pack Agreement."
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<PAGE>
MBW TRANSITION SERVICES AGREEMENT
Pursuant to a transition services agreement between the Company and Conopco
dated as of December 31, 1996 (the "MBW Transition Services Agreement"), Conopco
provided the Company with certain operational and financial services which it
performed prior to the MBW Acquisition for a period not to exceed six months
from the MBW Acquisition Closing Date. The Company initially paid Conopco a
weekly fee of up to $17,000 for Conopco's sales services and a monthly fee of
$82,800 for all other services provided by Conopco under the MBW Transition
Services Agreement. The fees the Company pays to Conopco were reduced
proportionately as the Company assumed responsibility for the functions
described above. The MBW Transition Services Agreement terminated on June 30,
1997.
OTHER AGREEMENTS
Pursuant to a Shared Technology License Agreement dated as of December 31,
1996 between Conopco and the Company, Conopco granted the Company a
nonexclusive, perpetual and royalty-free right and license to use any
proprietary and/or confidential trade secrets, know-how, processes and other
technology used in connection with the MRS. BUTTERWORTH'S business.
Pursuant to a Flavor Supply Agreement dated as of December 31, 1996 (the
"Flavor Supply Agreement") between Quest International Flavors & Food
Ingredients Company ("Quest"), an affiliate of Unilever, and the Company, Quest
has agreed to provide the Company with certain flavor mixtures used in the
production of MRS. BUTTERWORTH'S syrups for a period of twelve years, subject to
certain minimum and maximum order limits. The Flavor Supply Agreement may be
terminated by either Quest or the Company upon written notice of a time period
specified therein. The Company believes that in the event that the Flavor Supply
Agreement is terminated, the Company could readily obtain an alternative supply
of flavor mixtures on comparable terms. Consequently, the Company does not
believe that it is dependent upon the Flavor Supply Agreement.
THE RED WING CO-PACK AGREEMENT
The Company entered into the Red Wing Co-Pack Agreement pursuant to which
Red Wing will contract manufacture and package all of the Company's requirements
for MRS. BUTTERWORTH'S syrup. Prices for the products are specified in the Red
Wing Co-Pack Agreement and are subject to adjustment based upon purchase price
variances for raw materials, packaging supplies and other production related
costs. Under the Red Wing Co-Pack Agreement, MRS. BUTTERWORTH'S syrup will be
produced and distributed from Red Wing's San Jose, California and Streator,
Illinois facilities. In consideration of certain additions made to Red Wing's
Streator, Illinois facility, the Company will pay additional charges on each
case of products produced up to an aggregate amount that is the lesser of the
actual construction costs of such additions or $1,850,000. During the initial
five year term, the Company will be subject to certain annual minimum purchase
requirements. The Company commenced transferring production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. The Company may terminate in whole or
in part the Red Wing Co-Pack Agreement on or after two years from the date
thereof with 180 days written notice. In the event the Company so terminates, it
will be obligated to pay within 30 days of such termination the charges that
would have been paid in connection with the additions to the Streator facility.
In addition, if the Company fails to fulfill the minimum annual purchase
requirements, an additional 180 days will be added to the two year period for
each year such purchase requirements are not met. Unless earlier terminated, the
Red Wing Co-Pack Agreement will expire five years from the date thereof, but is
subject to automatic renewal for additional one year terms unless either party
gives 180 days written notice of its intent not to renew.
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USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy obligations of the Company under
the Exchange and Registration Rights Agreement. The Company will not receive any
proceeds from the issuance of the New Notes offered hereby. In consideration for
issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange
Offer--Terms of the Exchange Offer." The Old Notes surrendered in exchange for
the New Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
28, 1997, reflecting the MBW Acquisition and the MBW Refinancing, and as
adjusted to give effect to the LC Acquisition. This table should be read in
conjunction with the "Pro Forma Financial Information" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 28, 1997
----------------------
<S> <C> <C>
AS ADJUSTED
ACTUAL (UNAUDITED)
--------- -----------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash................................................................................. $ 12.6 $ --
--------- -----------
--------- -----------
Long-term debt (including current maturities):
Revolving Facility(1).............................................................. -- 47.0
Term Facility...................................................................... -- 40.0
Series A Notes..................................................................... 100.0 100.0
Series C Notes(2).................................................................. -- 102.5
--------- -----------
Total long-term debt............................................................. 100.0 289.5
Total stockholder's equity(3)........................................................ 33.5 61.0
--------- -----------
Total capitalization................................................................. $ 133.5 $ 350.5
--------- -----------
--------- -----------
</TABLE>
- ------------------------------
(1) Reflects borrowings under a $60.0 Revolving Facility. See "Description of
Senior Credit Facilities."
(2) Includes a $2.5 million premium received in connection with the Series C
Notes Offering.
(3) Stockholder's equity, as adjusted, reflects an equity contribution from
Holdings of $27.5 million for the LC Acquisition, which is net of certain
transaction expenses of $1.1 million.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Exchange and Registration Rights Agreement, the Company has
agreed to file a registration statement with respect to an offer to exchange the
Old Notes for senior debt securities of the Company with terms substantially
identical to the Old Notes (except that the New Notes will not contain terms
with respect to transfer restrictions, registration rights and liquidated
damages) on or prior to 60 days after the Issue Date and to use best efforts to
cause such registration statement to become effective under the Securities Act
within 150 days after the Issue Date. The Old Notes were issued on February 10,
1997. In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer as
contemplated thereby, or if certain holders of the Old Notes notify the Company
that they are not eligible to participate in, or would not receive freely
tradeable New Notes in exchange for tendered Old Notes pursuant to, the Exchange
Offer, the Company will use its best efforts to cause to become effective a
shelf registration statement (the "Shelf Registration Statement") with respect
to the resale of the Old Notes and to keep the Shelf Registration Statement
effective until three years after the Issue Date. In the event that the Company
is not in compliance with certain obligations under the Exchange and
Registration Rights Agreement, the Company shall be obligated to pay liquidated
damages to holders of the Old Notes. See "Old Notes Exchange and Registration
Rights Agreement."
Each holder of the Old Notes that wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or Holdings or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holder's information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. Only
broker-dealers who acquired the Old Notes as a result of market-making
activities or other trading activities may participate in the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
23
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes surrendered pursuant to the Exchange Offer. Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $100.0 million aggregate principal amount
of the Series A Notes are outstanding. This Prospectus, together with the Letter
of Transmittal, is being sent to all registered holders of Old Notes. There will
be no fixed record date for determining registered holders of Old Notes entitled
to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Exchange and Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and continue to accrue interest and will
be entitled to the rights and benefits such holders have under the Indenture and
the Exchange and Registration Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 1 of
the Exchange and Registration Rights Agreement. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes from
the Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "-- Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth
24
<PAGE>
below under "--Certain Conditions to the Exchange Offer" shall not have been
satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders of Old Notes. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer, depending upon the significance of the amendment
and the manner of disclosure to the registered holders, if the Exchange Offer
would otherwise expire during such period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 9 7/8% per annum, payable
semi-annually, on February 15 and August 15 of each year, commencing on February
15, 1998. Holders of New Notes will receive interest on February 15, 1998 from
the date of initial issuance of the New Notes, plus an amount equal to the
accrued interest on the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the
25
<PAGE>
Company in whole or in part at any time and from time to time in its sole
discretion. The failure by the Company at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date or, in the alternative,
comply with DTC's ATOP procedures described below. In addition, either (i) Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at the Depository Trust Company (the "Book-Entry
Transfer Facility" or "DTC") pursuant to the procedure for book-entry transfer
described below or properly transmitted Agent's Message (as defined below) must
be received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder of Old Notes. The transfer of registered ownership
may take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the
26
<PAGE>
case may be, are required to be guaranteed, such guarantor must be a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
provide evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Old Notes to the Exchange Agent in accordance with
the Depositary's ATOP procedures for transfer. The Depositary will then send an
Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgement from a participant
in DTC's ATOP that is tendering Old Notes which are the subject of such book
entry confirmation, that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely Book-Entry Confirmation of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the
27
<PAGE>
terms and conditions of the Exchange Offer or if Old Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "--Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), or properly transmitted Agent's Message as well as all
tendered Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three (3) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
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<PAGE>
For a withdrawal to be effective, (i) a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent" or (ii) holders must comply with the appropriate procedures
of DTC's ATOP system. Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes were registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering" above at any time
on or prior to the Expiration Date.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Corporate Trust Administration c/o Harris Trust Company of New York,
1100 North Market Street as Agent
Rodney Square North 75 Water Street
Wilmington, Delaware 19890-0001 New York, New York 10004
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-8864
</TABLE>
29
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$250,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Old Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of Notes tendered, or if tendered Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth (i) in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws and (ii) otherwise set forth in the
Offering Memorandum dated February 10, 1997 distributed in connection with the
Series A Notes Offering. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. Based on interpretations by the
staff of the Commission, New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer. Any holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or such securities laws have been complied
with. The Company has agreed, pursuant to the Exchange and Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the New Notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the New Notes may request in writing.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--THE COMPANY AND MBW PREDECESSOR
The following table sets forth selected historical financial data of the MBW
Predecessor for the years ended December 31, 1994, 1995 and 1996 and the six
months ended June 30, 1996 and for the Company for the six months ended June 28,
1997. The selected historical statement of operations data for the years ended
December 31, 1994, 1995 and 1996 are derived from the audited financial
statements of the MBW Predecessor included elsewhere in this Prospectus which
have been audited by Price Waterhouse LLP. The selected historical statement of
operations data for the six months ended June 30, 1996 are derived from the
unaudited financial statements of the MBW Predecessor which are included
elsewhere in this Prospectus which, in the opinion of management, include all
normal, recurring adjustments. The selected historical statement of operations
data for the six months ended June 28, 1997 are derived from the unaudited
financial statements of the Company which are included elsewhere in this
Prospectus and which, in the opinion of management, include all normal,
recurring adjustments. This table should be read in conjunction with the
historical financial statements and related notes thereto of the Company and the
MBW Predecessor included elsewhere in this Prospectus and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MBW PREDECESSOR COMPANY
------------------------------------------------ ------------
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
---------------------------------- JUNE 30, JUNE 28,
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales...................................................... $ 96,729 $ 91,302 $ 89,541 $ 43,548 $ 42,891
Cost of products sold.......................................... 29,930 27,743 28,955 13,793 14,271
---------- ---------- ---------- ------------ ------------
Gross profit................................................. 66,799 63,559 60,586 29,755 28,620
---------- ---------- ---------- ------------ ------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution................................... 8,662 7,583 8,140 3,818 4,699
Trade promotions............................................. 21,911 19,380 17,672 8,697 7,074
Consumer marketing........................................... 15,297 13,291 10,835 6,140 4,367
---------- ---------- ---------- ------------ ------------
Total brokerage, distribution and marketing expenses......... 45,870 40,254 36,647 18,655 16,140
---------- ---------- ---------- ------------ ------------
Selling, general and administrative expenses................... 6,829 6,120 6,753 3,376 2,328
Amortization of goodwill and other intangibles................. -- -- -- -- 1,658
Transition costs............................................... -- -- -- -- 324
---------- ---------- ---------- ------------ ------------
Operating profit............................................. 14,100 17,185 17,186 7,724 8,170
---------- ---------- ---------- ------------ ------------
Amortization of deferred financing fees........................ -- -- -- -- 2,502
Interest expense, net.......................................... -- -- -- -- 5,093
---------- ---------- ---------- ------------ ------------
Income before income taxes................................... 14,100 17,185 17,186 7,724 575
Provision for income taxes..................................... 5,429 6,616 6,616 2,974 230
---------- ---------- ---------- ------------ ------------
Net income(1) $ 8,671 $ 10,569 $ 10,570 $ 4,750 $ 345
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
BALANCE SHEET DATA:
Total assets(2) NA NA NA NA $ 144,063
Long-term debt(2) NA NA NA NA 100,000
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(3).......................... NA NA NA NA 1.07
</TABLE>
- ------------------------------
(1) Amount represents net sales less direct and allocated expenses for the MBW
Predecessor.
(2) Total assets and long-term debt balance sheet data are not available for
the MBW Predecessor because Unilever did not maintain balance sheets or
separate asset and liability accounts by product line for the MBW
Predecessor.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as net income before provision for income taxes, plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of deferred financing fees and one-third of
rental expense on operating leases, representing that portion of rental
expense deemed by the Company to be attributable to interest. Unilever did
not allocate any fixed charges to the MBW Predecessor.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--LC BUSINESS
The following table sets forth selected historical financial data of the LC
Business for the periods indicated. The selected historical statement of
operations data for the years ended December 31, 1994, December 30, 1995 and
December 28, 1996 are derived from the audited financial statements of the LC
Business included elsewhere in this Prospectus which have been audited by
Coopers & Lybrand L.L.P. The selected historical statement of operations data
for the six months ended June 29, 1996 and June 28, 1997 are derived from the
unaudited financial statements of the LC Business which are included elsewhere
in this Prospectus and which, in the opinion of management, include all normal,
recurring adjustments. This information should be read in conjunction with the
historical financial statements and related notes thereto of the LC Business
appearing elsewhere in this Prospectus and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $115,894 $106,330 $104,466
Cost of products sold.................................. 35,254 35,804 36,237
------------ ------------ ------------
Gross profit......................................... 80,640 70,526 68,229
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................... 7,553 7,620 7,099
Trade promotions..................................... 20,898 23,239 21,355
Consumer marketing................................... 7,940 5,478 3,994
------------ ------------ ------------
Total brokerage, distribution and marketing
expenses............................................. 36,391 36,337 32,448
Selling, general and administrative expenses........... 7,863 7,738 7,388
Amortization of goodwill and other intangibles......... 1,350 1,350 1,350
------------ ------------ ------------
Operating profit..................................... 35,036 25,101 27,043
Provision for income taxes............................. 14,391 10,461 11,229
------------ ------------ ------------
Net income(1)........................................ $ 20,645 $ 14,640 $ 15,814
------------ ------------ ------------
------------ ------------ ------------
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2).................. NA NA NA
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JUNE 29, 1996 JUNE 28, 1997
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $51,509 $51,222
Cost of products sold.................................. 16,269 18,067
------------- -------------
Gross profit......................................... 35,240 33,155
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................... 3,589 3,239
Trade promotions..................................... 10,452 9,457
Consumer marketing................................... 3,789 597
------------- -------------
Total brokerage, distribution and marketing
expenses............................................. 17,830 13,293
Selling, general and administrative expenses........... 3,802 3,637
Amortization of goodwill and other intangibles......... 675 675
------------- -------------
Operating profit..................................... 12,933 15,550
Provision for income taxes............................. 5,303 6,376
------------- -------------
Net income(1)........................................ $ 7,630 $ 9,174
------------- -------------
------------- -------------
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2).................. NA NA
</TABLE>
- ------------------------
(1) Amount represents net sales less direct and allocated expenses for the
years ended December 31, 1994, December 30, 1995, and December 28, 1996 and
for the six months ended June 30, 1996.
(2) Kraft did not allocate any fixed charges to the LC Business.
32
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") for the year ended December 31, 1996 are based on the
audited financial statements of the MBW Predecessor and the LC Business which
are included elsewhere in this Prospectus. The Unaudited Pro Forma Balance Sheet
as of June 28, 1997 is based on unaudited financial information of the Company
and unaudited financial information of the LC Business which are included
elsewhere in this Prospectus, and which, in the opinion of management, include
all normal, recurring adjustments. The Unaudited Pro Forma Statement of
Operations for the six months ended June 30, 1996 is based on the unaudited
financial information of the MBW Predecessor and the LC Business which are
included elsewhere in this Prospectus, and which, in the opinion of management,
include all normal, recurring adjustments. The Unaudited Pro Forma Statement of
Operations for the six months ended June 28, 1997 is based on the unaudited
financial information of the Company and the LC Business, which are included
elsewhere in this Prospectus and which, in the opinion of management, include
all normal, recurring adjustments. The Pro Forma Financial Statements give
effect to the LC Acquisition as if it had occurred as of June 28, 1997 for
balance sheet data. For statement of operations data, the Pro Forma Financial
Statements give effect to the Transactions as if they had each occurred as of
January 1, 1996. See "Prospectus Summary--The Acquisitions, Financings and
Related Transactions".
The pro forma financial information set forth below reflects pro forma
adjustments that are based upon available information and assumptions that the
Company believes are reasonable. The pro forma financial information does not
purport to represent what the Company's results of operations or financial
condition actually would have been had the Transactions been consummated as of
such dates or for such periods or project the Company's results of operations or
financial condition for any future period. The Pro Forma Financial Statements
and accompanying notes should be read in conjunction with the historical
financial statements of the Company and the Predecessor and other financial
information pertaining to the Company including "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
33
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LC BUSINESS
STATEMENT OF COMPANY
COMPANY ASSETS TO BE PRO FORMA PRO FORMA
ACTUAL ACQUIRED(a) ADJUSTMENTS BALANCE SHEET
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Cash.................................................. $ 12,642 $ -- $ (11,665)(b) $ 977
Accounts receivable................................... 5,716 -- -- 5,716
Accounts receivable--other............................ 1,722 -- -- 1,722
Inventories........................................... 1,698 6,717 -- 8,415
Prepaid expenses...................................... 142 -- -- 142
----------- ------------- ------------ --------------
Total current assets.............................. 21,920 6,717 (11,665) 16,972
Machinery and equipment............................... 5,448 7,468 -- 12,916
Goodwill and other intangible assets.................. 109,807 -- 208,215(c) 318,022
Other assets.......................................... 6,888 -- 6,265(d) 13,153
----------- ------------- ------------ --------------
Total assets...................................... $ 144,063 $ 14,185 $ 202,815 $ 361,063
----------- ------------- ------------ --------------
----------- ------------- ------------ --------------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accrued expenses...................................... $ 10,523 $ -- $ 10,523
Net current deferred tax liability.................... 35 35
Revolving Facility.................................... -- 47,000(e) 47,000
Term Facility......................................... -- 40,000(e) 40,000
Series A Notes........................................ 100,000 -- 100,000
Series C Notes........................................ -- 102,500(f) 102,500
----------- ------------ --------------
Total liabilities................................. 110,558 189,500 300,058
Common stock.......................................... 33,160 27,500(g) 60,660
Retained earnings..................................... 345 -- 345
----------- ------------ --------------
Total stockholder's equity........................ 33,505 27,500 61,005
----------- ------------ --------------
Total liabilities and stockholder's equity........ $ 144,063 $ 217,000 $ 361,063
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Full financial statements, including complete historical balance sheets, of
the LC Business have not been presented as Kraft did not operate the LC
Business as a separate division. Accordingly, it is not practicable to
separate other components of assets, liabilities or cash flows related
specifically to the LC Business.
(b) Reflects the use of cash for the LC Acquisition.
(c) Reflects the excess of cost over the fair market value of the net tangible
assets acquired in connection with the LC Acquisition. Goodwill and
trademarks will be amortized on a straight-line basis over 40 years and
other intangibles over periods ranging from five to 20 years. The Company
will evaluate the net realizable value of intangible assets on an ongoing
basis relying on a number of factors, including operating results and future
undiscounted cash flows.
(d) Reflects deferred financing costs incurred in connection with the LC
Acquisition.
(e) Reflects borrowings under the Senior Credit Facilities.
(f) Reflects issuance of the Series C Notes including a $2.5 million premium
received in connection with the Series C Notes Offering.
(g) Reflects a $27.5 million equity contribution from Holdings, which is net of
certain transaction expenses of $1.1 million.
34
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW MBW LC INCREMENTAL
PREDECESSOR PRO FORMA MBW BUSINESS PRO FORMA COMPANY PRO
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS FORMA
----------- ----------------- ------------ ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........... $89,541 $ 2,040(a) $91,581 $104,466 $ -- $196,047
Cost of products
sold.............. 28,955 958(b)(c) 29,913(h) 36,237 (451)(k)(l) 65,699(q)
----------- ------- ------------ ---------- -------- -----------
Gross profit...... 60,586 1,082 61,668 68,229 451 130,348
----------- ------- ------------ ---------- -------- -----------
Brokerage,
distribution and
marketing
expenses:
Brokerage and
distribution.... 8,140 -- 8,140 7,099 3,134(m) 18,373
Trade
promotions...... 17,672 2,040(a) 19,712 21,355 -- 41,067
Consumer
marketing....... 10,835 -- 10,835 3,994 -- 14,829
----------- ------- ------------ ---------- -------- -----------
Total brokerage,
distribution and
marketing
expenses.......... 36,647 2,040 38,687 32,448 3,134 74,269
Selling, general and
administrative
expenses.......... 6,753 --(d) 6,753(i) 7,388 --(n) 14,141(r)
Amortization of
goodwill and other
intangibles....... -- 3,066(e) 3,066 1,350 5,485(o) 9,901
----------- ------- ------------ ---------- -------- -----------
Operating
profit.......... 17,186 (4,024) 13,162 27,043 (8,168) 32,037
Amortization of
deferred financing
fees.............. -- 856(f) 856 -- 421(p) 1,277
Interest expense.... -- 10,175(f) 10,175 -- 16,441(p) 26,616
----------- ------- ------------ ---------- -------- -----------
Income before
income taxes.... 17,186 (15,055) 2,131 27,043 (25,030) 4,144
Provision for income
taxes............. 6,616 (5,796)(g) 820 11,229 (10,454)(g) 1,595
----------- ------- ------------ ---------- -------- -----------
Net income........ $10,570 $(9,259) $ 1,311 $ 15,814 $(14,576) $ 2,549
----------- ------- ------------ ---------- -------- -----------
----------- ------- ------------ ---------- -------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations
35
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW MBW LC INCREMENTAL
PREDECESSOR PRO FORMA MBW BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........... $43,548 $ 958(a) $44,506 $ 51,509 $ -- $ 96,015
Cost of products
sold.............. 13,793 786(b)(c) 14,579(h) 16,269 347(k)(l) 31,195(q)
----------- ----------------- ----------- ---------- ----------------- -----------
Gross profit.... 29,755 172 29,927 35,240 (347) 64,820
----------- ----------------- ----------- ---------- ----------------- -----------
Brokerage,
distribution and
marketing
expenses:
Brokerage and
distribution.... 3,818 -- 3,818 3,589 1,545(m) 8,952
Trade
promotions...... 8,697 958(a) 9,655 10,452 -- 20,107
Consumer
marketing....... 6,140 -- 6,140 3,789 -- 9,929
----------- ----------------- ----------- ---------- ----------------- -----------
Total brokerage,
distribution and
marketing
expenses........ 18,655 958 19,613 17,830 1,545 38,988
Selling, general and
administrative
expenses.......... 3,376 --(d) 3,376(i) 3,802 --(n) 7,178(r)
Amortization of
goodwill and other
intangibles....... -- 1,533(e) 1,533 675 2,743(o) 4,951
----------- ----------------- ----------- ---------- ----------------- -----------
Operating
profit........ 7,724 (2,319) 5,405 12,933 (4,635) 13,703
Amortization of
deferred financing
fees.............. -- 428(f) 428 -- 210(p) 638
Interest expense.... -- 5,088(f) 5,088 -- 8,221(p) 13,309
----------- ----------------- ----------- ---------- ----------------- -----------
Loss before
income
taxes......... 7,724 (7,835) (111) 12,933 (13,066) (244)
Benefit from income
taxes............. 2,974 (3,016)(g) (42) 5,303 (5,354)(g) (93)
----------- ----------------- ----------- ---------- ----------------- -----------
Net loss........ $ 4,750 $(4,819) $ (69) $ 7,630 $ (7,712) $ (151)
----------- ----------------- ----------- ---------- ----------------- -----------
----------- ----------------- ----------- ---------- ----------------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations.
36
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW LC INCREMENTAL
COMPANY PRO FORMA MBW BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $42,891 $ -- $42,891 $ 51,222 $ -- $ 94,113
Cost of products sold...... 14,271 --(c) 14,271 18,067 9(k)(l) 32,347(q)
----------- ---------------- ----------- ---------- -------- -----------
Gross profit............. 28,620 -- 28,620 33,155 (9) 61,766
----------- ---------------- ----------- ---------- -------- -----------
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution........... 4,699 -- 4,699 3,239 1,537(m) 9,475
Trade promotions......... 7,074 -- 7,074 9,457 -- 16,531
Consumer marketing....... 4,367 -- 4,367 597 -- 4,964
----------- ---------------- ----------- ---------- -------- -----------
Total brokerage,
distribution and
marketing expenses..... 16,140 -- 16,140 13,293 1,537 30,970
Selling, general and
administrative
expenses................. 2,328 -- 2,328 3,637 --(n) 5,965(r)
Transition expenses........ 324 (324) (j) -- -- -- --
Amortization of goodwill
and other intangibles.... 1,658 -- 1,658 675 2,618(o) 4,951
----------- ---------------- ----------- ---------- -------- -----------
Operating profit......... 8,170 324 8,494 15,550 (4,164) 19,880
Amortization of deferred
financing fees........... 2,502 (2,074)(f) 428 -- 210(p) 638
Interest expense........... 5,093 (5)(f) 5,088 -- 8,221(p) 13,309
----------- ---------------- ----------- ---------- -------- -----------
Income before taxes...... 575 2,403 2,978 15,550 (12,595) 5,933
Provision for income
taxes.................... 230 917(g) 1,147 6,376 (5,238)(g) 2,285
----------- ---------------- ----------- ---------- -------- -----------
Net income............... $ 345 $ 1,486 $ 1,831 $ 9,174 $ (7,357) $ 3,648
----------- ---------------- ----------- ---------- -------- -----------
----------- ---------------- ----------- ---------- -------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations.
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(a) Represents the reclassification of amounts accounted for as cash discounts
by Conopco to trade promotions by the Company.
(b) Adjustment reflects net additional expenses related to cost of products sold
as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
COST OF PRODUCTS SOLD:
MBW Predecessor historical expenses.......................... $ 28,955 $ 13,793
Less Company expenses:
Co-pack agreements(1)...................................... 29,393 14,313
Depreciation(2)............................................ 520 266
-------- --------
MBW pro forma expenses................................... 29,913 14,579
-------- --------
Difference................................................... $ 958 $ 786
-------- --------
-------- --------
</TABLE>
- ------------------------------
(1) These expenses include the MBW Predecessor's historical volumes for
syrup and pancake mix products, as adjusted to give effect to the
contractual rates included in the MBW Co-Pack Agreement with Conopco.
(2) Represents depreciation of the Company's equipment, reflecting an
increase in depreciation expense over the MBW Predecessor's historical
expense as a result of a higher depreciable basis for the acquired
equipment. The equipment will be depreciated over an average life of
10 years.
(c) The Company entered into a co-pack agreement with Red Wing on June 9, 1997,
pursuant to which Red Wing will contract manufacture Mrs. Butterworth's
Syrup for a period of five years. Red Wing's conversion fees are less than
those the Company has paid under the MBW Co-Pack Agreement. Because Red Wing
is one of the largest purchasers of corn syrup in the United States, the
Company believes that its annual raw material costs under the Red Wing
Co-Pack Agreement will be $1.5 million less than those incurred by the MBW
Predecessor. The Company commenced transferring production of Mrs.
Butterworth's syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. However, as this potential
adjustment is not viewed as directly related to the MBW Acquisition, the pro
forma cost savings are not included in the pro forma statement of
operations.
(d) The Company has formal and informal agreements in place to operate the
business on a stand-alone basis, and at the MBW Acquisition Closing Date had
completed a thorough analysis of anticipated costs going forward. Based on
these agreements and analysis, the Company developed a detailed annual
operating budget which reflected approximately $3.7 million in factually
supportable selling, general and administrative costs, which is
approximately $3.0 million lower than Unilever's corporate allocated costs.
A substantial portion of these savings are attributable to a lower headcount
relative to the headcounts included in the historical allocations from
Unilever. These direct and indirect allocations included multiple layers of
Unilever management which the Company will not need to replicate. At the MBW
Acquisition Date, on a stand-alone basis, the Company budgeted for 22
employees, consisting of seven in executive and finance functions, four in
marketing functions, 10 in sales functions and one in research and
development. The table below reflects cost savings resulting from the new
personnel infrastructure of the Company as compared to the MBW Predecessor's
historical selling, general and administrative expenses.
38
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
MBW Predecessor historical expenses.......................... $ 6,753 $ 3,376
Less MBW pro forma expenses:
Executive and finance(1)................................... 1,568 784
Division management and marketing.......................... 302 152
Sales...................................................... 1,096 548
Research and development................................... 192 96
Other(2)................................................... 553 276
------- -------
Total MBW pro forma expenses................................. 3,711 1,856
------- -------
Difference................................................... $ 3,042 $ 1,520
------- -------
------- -------
</TABLE>
- ---------------------
(1) Includes aggregate annual and semiannual expenses of $850 and
$425, respectively, related to management and advisory services
provided by Dartford and MDC.
(2) Includes professional fees, facilities expenses and other related
expenses.
However, as these potential adjustments are not viewed as directly related to
the MBW Acquisition, the pro forma cost savings are not included in the
unaudited pro forma statements of operations.
(e) Reflects intangible amortization expense as a result of the MBW Acquisition.
Goodwill and the Mrs. Butterworth's trademark will be amortized on a
straight line basis over a 40-year period and other intangibles will be
amortized over periods ranging from five to 20 years.
(f) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The MBW Predecessor was not
allocated any interest expense from Conopco. The pro forma commitment fee on
the unused portion of the Revolving Facility is based on an unused balance
of $60.0 million. The table below presents pro forma interest expense, noted
with the respective interest rates or fee, and pro forma amortization of
deferred financing costs:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ------------------------------
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 28, 1997
------------------- -------------- --------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
PRO FORMA INTEREST EXPENSE:
Historical interest expense....................... $ -- $ -- $ 5,093
MBW pro forma interest expense
Series A Notes (9.875%)......................... 9,875 4,938 4,938
Commitment fee on Revolving Facility (.50%)..... 300 150 150
-------- -------------- --------------
MBW pro forma interest expense................ 10,175 5,088 5,088
-------- -------------- --------------
Difference........................................ $ 10,175 $ 5,088 $ (5)(1)
-------- -------------- --------------
-------- -------------- --------------
MBW Pro forma amortization of deferred financing
costs........................................... $ 856 $ 428 $ 428(2)
-------- -------------- --------------
-------- -------------- --------------
</TABLE>
- -------------------
(1) Difference reflects higher interest rates on the debt incurred at the
MBW Acquisition Closing Date than on the Series A Notes.
(2) A pro forma adjustment of $2,074 is required for the difference
between the historical amortization of the deferred financing fees on
the Senior Subordinated Credit Facility incurred on the MBW
Acquisition Closing Date and the pro forma amortization of deferred
financing fees on the Series A Notes.
39
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
(g) Reflects a reduction in the provision for income taxes, as a result of the
pro forma decrease in income before income taxes and the effect of the
Company's amortization of goodwill being deductible for income tax purposes.
(h) Pro forma depreciation expense included in cost of products sold is $520,000
and $260,000 for the year ended December 31, 1996 and the six month period
ended June 30, 1996, respectively.
(i) Pro forma depreciation expense included in selling, general and
administrative expenses is $76,000 and $38,000 for the year ended December
31, 1996 and the six month period ended June 30, 1996, respectively. Pro
forma operating lease expense included in selling, general and
administrative expenses is $135,000 and $67,500 for the year ended December
31, 1996 and the six month period ended June 30, 1996, respectively.
(j) Represents one-time costs incurred by the Company to establish operations
including broker conversions and orientations, recruiting fees and costs
related to the MBW Transition Services Agreement.
(k) Adjustment to convert cost of products sold from a Last-In, First-Out
inventory basis to a First-In, First-Out basis to be consistent with the
inventory accounting policy of the Company.
(l) Log Cabin syrups initially will be contract manufactured and distributed by
Kraft for up to nine months under the LC Co-Pack Agreement. Prior to the end
of the term of the LC Co-Pack Agreement, the Company will enter into a
co-packing agreement with Red Wing or another third party for the
manufacture of Log Cabin syrup products. The Company believes that its
annual raw material costs under a new co-pack agreement will be $1.5 million
less than those incurred by the Log Cabin Business. However, as this
potential adjustment is not viewed as directly related to the LC
Acquisition, the pro forma cost savings are not included in the pro forma
statement of operations.
(m) Reflects brokerage expense at the contractual rates which the Company will
be charged under its existing contracts with its broker network for the sale
of LOG CABIN syrup products. See note (n) below.
(n) Based on the Company's operations to date, it has developed a detailed
annual operating budget which reflects approximately $6.0 million in
factually supportable selling, general and administrative costs. The LC
Business historical expenses included multiple layers of Kraft management
which the Company does not have. A substantial portion of the savings the
Company will realize is attributable to a lower headcount relative to the
headcounts included in the historical allocations from Kraft. The Company is
budgeting for an increase from 22 to 34 employees in connection with the LC
Acquisition. The table below reflects cost savings resulting from the new
personnel infrastructure of the Company as compared to the historical
selling, general and administrative expenses of the MBW Predecessor and LC
Business.
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED -------------------------------
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 28, 1997
------------------- --------------- --------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
MBW Predecessor historical expenses................ $ 6,753 $ 3,376 $ 2,328
LC Business historical expenses.................... 7,388 3,802 3,637
-------- ------- -------
14,141 7,178 5,965
Less Company pro forma expenses:
Executive and finance(1)......................... 2,551 1,276 1,276
Division management and marketing................ 746 373 373
Sales and marketing.............................. 1,953 976 976
Other(2)......................................... 721 360 360
-------- ------- -------
Total Company pro forma expenses................... 5,971 2,985 2,985
-------- ------- -------
Difference......................................... $ 8,170 $ 4,193 $ 2,980
-------- ------- -------
-------- ------- -------
</TABLE>
------------------------------
(1) Includes aggregate annual and semi-annual expenses of $850 and $425,
respectively, related to management and advisory services provided by
Dartford and MDC.
(2) Includes professional fees, facilities expenses and other related
expenses.
However, as these potential adjustments are not viewed as directly related to
the acquisition of the LC Business, the pro forma cost savings are not
included in the unaudited pro forma statements of operations.
(o) Reflects intangible amortization expense as a result of the LC Acquisition.
Goodwill and the Log Cabin trademark will be amortized on a straight line
basis over a 40 year period and other intangibles will be amortized over
periods ranging from five to 20 years.
(p) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The LC Business was not allocated
any interest expense from Kraft. The pro forma commitment fee on the unused
portion of the Revolving Facility is based on an unused balance of $13.0
million. The pro forma amortization of deferred financing costs is based on
the terms of the respective debt facilities. The table below presents pro
forma net interest expense noted with the respective interest rate or fee,
and pro forma amortization of deferred financing costs:
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, ------------------------------
1996 JUNE 30, 1996 JUNE 28, 1997
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
COMPANY PRO FORMA INTEREST EXPENSE:
Incremental interest expense adjustments:
Revolving Facility (8.0%)........................... $ 3,760 $ 1,880 $ 1,880
Term Facility (8.0%)................................ 3,200 1,600 1,600
Series C Notes(1)................................... 9,716 4,858 4,858
Commitment fee on Revolving Facility (0.50%)........ 65 33 33
Reduction in commitment fee on Revolving Facility
(0.50%)(2)........................................ (300) (150) (150)
-------------- -------------- --------------
Incremental interest expense........................ 16,441 8,221 8,221
MBW pro forma interest expense........................ 10,175 5,088 5,088
-------------- -------------- --------------
Total Company pro forma interest expense.............. $ 26,616 $ 13,309 $ 13,309
-------------- -------------- --------------
-------------- -------------- --------------
Incremental pro forma amortization of deferred
financing costs..................................... $ 421 $ 210 $ 210
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
----------------------------
(1) Interest expense on a principal amount of the Series C Notes reflects an
interest rate of 9.875% on a principal amount of $100.0 million, offset
by amortization of the bond premium of $2.5 million received in
connection with the Series C Notes Offering.
(2) Reflects a decrease in commitment fees payable as set forth in note (e)
above as a result of the use of the Revolving Facility for the LC
Acquisition.
(q) Pro forma depreciation expense for the total Company included in cost of
products sold is $949,000, $475,000 and $475,000 for the year ended December
31, 1996 and the six month periods ended June 30, 1996 and June 28, 1997,
respectively.
(r) Pro forma depreciation expense for the total Company included in selling,
general and administrative expenses is $76,000, $38,000 and $38,000 for the
year ended December 31, 1996 and the six month periods ended June 30, 1996
and June 28, 1997, respectively. Pro forma operating lease expense included
in selling, general and administrative expenses is $135,000, $67,500, and
$67,500 for the year ended December 31, 1996 and the six month periods ended
June 30, 1996 and June 28, 1997, respectively.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY AND MBW PREDECESSOR
The Company markets and sells the MRS. BUTTERWORTH'S brand of syrup and
pancake mix products. As product lines of Unilever, MRS. BUTTERWORTH'S was not
accounted for as a separate legal entity or division. The discussion which
follows is based on the historical financial information of the Company and the
MBW Predecessor.
The MBW Predecessor's selling, general and administrative expenses have
consisted solely of corporate allocations from Conopco. As a result, the level
of these expenses does not reflect the actual expenses required to operate the
Company on a stand-alone basis. Management has established a new corporate
infrastructure to operate the Company on a stand-alone basis and has staffed
approximately 90% of its sales and marketing functions. See "Pro Forma Financial
Information."
Under Conopco's ownership, MRS. BUTTERWORTH'S aggregate marketing
expenditures were reduced consistently over the last several years and
emphasized a trade-oriented marketing strategy. Management intends to maintain
aggregate marketing expenditures at a level consistent with recent experience,
but to reallocate those expenditures by placing a greater emphasis on
advertising and consumer marketing. See "Business--MRS. BUTTERWORTH'S Growth
Strategy."
In May 1996, MRS. BUTTERWORTH'S adopted a "value pricing" strategy to
position its brand as the best value among the three national syrup brands. MRS.
BUTTERWORTH'S began the implementation of this strategy by reducing the
wholesale list prices of certain of its products, resulting in lower everyday
shelf prices to the consumer. This strategy was adopted to decrease MRS.
BUTTERWORTH'S reliance on price discounting and to reduce costly
buy-one-get-one-free promotions and was intended to increase sales volume and
decrease overall marketing expenditures. The initial results of this strategy
are reflected in MRS. BUTTERWORTH'S performance for the year ended December 31,
1996 and the six months ended June 28, 1997 and the related discussion below.
43
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
MBW PREDECESSOR
----------------------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- JUNE 30,
1994 1995 1996 1996
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 96,729 100.0% $ 91,302 100.0% $ 89,541 100.0% $ 44,507(1) 100.0%
Cost of products sold......... 29,930 30.9 27,743 30.4 28,955 32.3 13,793 31.0
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Gross profit................ 66,799 69.1 63,559 69.6 60,586 67.7 30,714 69.0
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution.............. 8,662 8.9 7,583 8.3 8,140 9.1 4,776 10.7
Trade promotions.......... 21,911 22.7 19,380 21.2 17,672 19.7 8,697(1) 19.5
Consumer marketing........ 15,297 15.8 13,291 14.6 10,835 12.1 6,140 13.8
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total brokerage,
distribution and marketing
expenses.................. 45,870 47.4 40,254 44.1 36,647 40.9 19,613 44.0
Selling, general and
administrative expenses..... 6,829 7.1 6,120 6.7 6,753 7.6 3,376 7.6
Transition costs.............. -- -- -- -- -- -- -- --
Amortization of goodwill and
other intangibles........... -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Operating profit............ 14,100 14.6 17,185 18.8 17,186 19.2 7,725 17.4
Amortization of deferred
financing fees.............. -- -- -- -- -- -- -- --
Interest expense, net......... -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Income before income taxes.. 14,100 14.6 17,185 18.8 17,186 19.2 7,725 17.4
Provision for income taxes.... 5,429 5.6 6,616 7.2 6,616 7.4 2,974 6.7
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Net income (2).............. $ 8,671 9.0% $ 10,569 11.6% $ 10,570 11.8% $ 4,751 10.7%
----------- --------- ----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
COMPANY
----------------------
SIX MONTHS
ENDED
JUNE 28,
1997
----------------------
<S> <C> <C>
AMOUNT %
----------- ---------
<S> <C> <C>
Net sales..................... 42,891 100.0%
Cost of products sold......... 14,271 33.3
----------- ---------
Gross profit................ 28,620 66.7
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution.............. 4,699 11.0
Trade promotions.......... 7,074 16.5
Consumer marketing........ 4,367 10.2
----------- ---------
Total brokerage,
distribution and marketing
expenses.................. 16,140 37.7
Selling, general and
administrative expenses..... 2,328 5.4
Transition costs.............. 324 0.7
Amortization of goodwill and
other intangibles........... 1,658 3.9
----------- ---------
Operating profit............ 8,170 19.0
Amortization of deferred
financing fees.............. 2,502 5.8
Interest expense, net......... 5,093 11.9
----------- ---------
Income before income taxes.. 575 1.3
Provision for income taxes.... 230 0.5
----------- ---------
Net income (2).............. $ 345 0.8%
----------- ---------
----------- ---------
</TABLE>
- ------------------------
(1) Net sales and trade promotions for the MBW Predecessor for the six months
ended June 30, 1996 reflect the reclassification of cash discounts to
provide consistency with the Company's presentation and accounting policy
and to facilitate comparison between periods. However, net sales and trade
promotions for the years ended December 31, 1994, 1995 and 1996 reflect the
MBW Predecessor's historical presentation of these amounts.
(2) Amount represents net sales less direct and allocated expenses for the MBW
Predecessor.
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET SALES declined 3.6% to $42.9 million for the six months ended June 28,
1997 as compared to $44.5 million for the six months ended June 30, 1996. Sales
volume increased 4.2% to 47.3 million pounds in the 1997 period from 45.4
million pounds in the 1996 period.
Syrup sales decreased $1.7 million to $38.1 million in the 1997 period from
$39.8 million in the 1996 period. In May 1996, MRS. BUTTERWORTH'S adopted a
value pricing strategy to position its brand as the best value among the three
premium priced national brands. The value pricing strategy has benefitted the
brand through higher volumes and lower trade and consumer marketing expenses,
but resulted in a net decrease in syrup sales during the six months ended June
28, 1997. The decrease in net syrup sales is a result of lower list prices for
the Company's syrup products in the 1997 period as compared to the 1996 period
because of the adoption of the value pricing strategy in May 1996. The effect on
the sales line was partially offset by an increase in syrup volume.
Syrup volume increased 4.4% to 40.0 million pounds in the 1997 period from
38.3 million pounds in the 1996 period. The increase in syrup volume was
attributable to increases in sales of the Company's
44
<PAGE>
ORIGINAL brand, club and foodservice syrups, which was partially offset by
decreases in sales of its COUNTRY BEST RECIPE brand.
Pancake mix sales increased 4.3% to $4.9 million in the 1997 period from
$4.7 million in the 1996 period. Pancake mix volume improved 2.8% to 7.3 million
pounds in the 1997 period from 7.1 million pounds in the 1996 period. Pancake
mix results increased primarily due to improved merchandising support.
GROSS PROFIT as a percentage of net sales was 66.7% for the 1997 period as
compared to 69.0% for the 1996 period. The decrease in gross margin was
primarily due to lower list prices related to the value pricing strategy adopted
in May 1996. The decline was also attributable to increased sales of lower
margin pancake mix and foodservice syrup products.
OPERATING PROFIT as a percentage of net sales increased to 19.0% in the 1997
period as compared to 17.4% in the 1996 period. The improvement in the operating
profit margin was primarily due to lower marketing spending and lower selling,
general and administrative expenses. Total marketing expenses in the 1997 period
were lower than in the comparable 1996 period due to lower trade promotion
spending as the result of the value pricing strategy and a reduction in high
value in-ad coupons used in the 1996 period. Selling, general and administrative
expenses were $2.3 million in the 1997 period under the Company's stand-alone
structure as compared to $3.4 million allocated to the business by Unilever in
the prior year period. Operating profit for the 1997 period also reflects $1.7
million of goodwill amortization and $0.3 million of transition expenses related
to the MBW Acquisition.
PROVISION FOR INCOME TAXES. The provision for income taxes of $0.2 million
in the 1997 represented an effective tax rate of 40.0% as compared to 38.5% in
the 1996 period.
NET INCOME was $0.3 million in the 1997 period as compared to net sales less
direct and allocated expenses of $4.8 million in the 1996 period. The decline in
the 1997 period from the 1996 period has the result of interest expense and
amortization of deferred financing costs associated with the MBW Acquisition.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES declined 1.9% to $89.5 million for the year ended December 31,
1996 as compared to $91.3 million for the year ended December 31, 1995. Sales
volume increased 2.7% to 94.7 million pounds in 1996 from 92.2 million pounds in
1995.
Syrup sales decreased $1.8 million to $79.1 million in 1996 from $80.9
million in 1995. Syrup volume increased 3.4% to 78.6 million pounds in 1996 from
76.0 million pounds in 1995. Adoption of the value pricing strategy in May 1996,
has benefitted the brand through higher volumes and savings on consumer
marketing expenses, but resulted in a net decrease in syrup sales during 1996.
Management does not believe that this decrease represents a continuing material
declining trend.
Pancake mix sales remained constant at $10.4 million in 1996, the same as in
1995. Pancake mix was flat at 16.1 million pounds in 1996 which was the same
volume achieved in 1995.
GROSS PROFIT as a percentage of net sales was 67.7% for the year ended
December 31, 1996 as compared to 69.6% for the year ended December 31, 1995. The
decrease in gross profit margin was primarily due to lower wholesale prices
related to the Company's value pricing strategy.
OPERATING PROFIT as a percentage of net sales improved to 19.2% for the year
ended December 31, 1996 as compared to 18.8% for the year ended December 31,
1995. The operating margin improvement was primarily the result of a reduction
in consumer marketing expense as a percentage of net sales to 12.1% in 1996 from
14.6% in 1995 due to a reduction in costly buy-one-get-one-free promotions.
45
<PAGE>
PROVISION FOR INCOME TAXES. The provision for income taxes of $6.6 million
in 1996 represented an effective tax rate of 38.5%, the same as in 1995.
NET SALES less direct and allocated expenses was $10.6 million in 1995 and
1996 due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES decreased 5.6% to $91.3 million in the year ended December 31,
1995 from $96.7 million in the year ended December 31, 1994. Sales volume
decreased 10.1% to 92.2 million pounds in 1995 from 102.6 million pounds in
1994.
Syrup sales decreased $3.0 million to $80.9 million in 1995 from $83.9
million in 1994, and syrup volume declined 8.4% to 76.1 million pounds from 83.1
million pounds in 1994. Syrup sales and volume declines were primarily due to
the phasing out of the MAPLE VALLEY syrup brand, one of the MBW Predecessor's
lower priced brands, and an overall decrease in promotional support for MRS.
BUTTERWORTH'S. The declines were partially offset by the impact during 1995 of
an industry-wide price increase in August 1994.
Pancake mix sales declined $2.4 million to $10.4 million in 1995 from $12.8
million in 1994. Pancake mix volume decreased 17.0% to 16.1 million pounds from
19.4 million pounds in 1994. Increased competition in MRS. BUTTERWORTH'S key
Central and Mid-Central regions was the primary cause of the decrease in sales
and volume.
GROSS PROFIT as a percentage of net sales was 69.6% in 1995 as compared to
69.1% in 1994. The increase in gross profit margin was primarily a result of the
impact during 1995 of the August 1994 price increase, which resulted in the
average price of retail syrup increasing from 1994 to 1995 while raw materials
costs as a percentage of net sales remained essentially unchanged. Also
contributing to the gross margin increase during 1995 was the phasing out of the
MAPLE VALLEY brand, one of the MBW Predecessor's lower margin brands.
OPERATING PROFIT as a percentage of net sales increased to 18.8% in 1995 as
compared to 14.6% in 1994. This increase was primarily the result of the August
1994 price increase and reductions in trade promotions, consumer marketing and
brokerage and distribution expense as a percentage of net sales.
PROVISION FOR INCOME TAXES. The provision for income taxes of $6.6 million
in 1995 represented an effective tax rate of 38.5%, the same as in 1994.
NET SALES less direct and allocated expenses increased to $10.6 million in
1995 compared to $8.7 million in 1994 due to the factors discussed above.
LC BUSINESS
The Company markets and sells the LOG CABIN, COUNTRY KITCHEN and WIGWAM
brands of syrup. As product lines of Kraft, LOG CABIN, COUNTRY KITCHEN and
WIGWAM were not accounted for as separate legal entities or divisions. The LOG
CABIN label is positioned as a premium syrup and the COUNTRY KITCHEN label is
positioned as an economy syrup. For the year ended December 31, 1996, the LOG
CABIN brand accounted for 69% and 74% of LOG CABIN'S net sales and product
profit, respectively. The discussion which follows is based on the historical
financial information of the LC Business.
46
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1995 1996
--------------- --------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales........................................ $115,894 100.0 $106,330 100.0 $104,466 100.0
Cost of products sold............................ 35,254 30.4 35,804 33.7 36,237 34.7
-------- ----- -------- ----- -------- -----
Gross profit................................... 80,640 69.6 70,526 66.3 68,229 65.3
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................... 7,553 6.5 7,620 7.1 7,099 6.8
Trade promotions............................... 20,898 18.0 23,239 21.9 21,355 20.5
Consumer marketing............................. 7,940 6.9 5,478 5.2 3,994 3.8
-------- ----- -------- ----- -------- -----
Total brokerage, distribution and marketing
expenses..................................... 36,391 31.4 36,337 34.2 32,448 31.1
Selling, general and administrative expenses..... 7,863 6.8 7,738 7.2 7,388 7.0
Amortization of goodwill......................... 1,350 1.2 1,350 1.3 1,350 1.3
-------- ----- -------- ----- -------- -----
Operating Profit............................... 35,036 30.2 25,101 23.6 27,043 25.9
Provision for income taxes....................... 14,391 12.4 10,461 9.8 11,229 10.7
-------- ----- -------- ----- -------- -----
Net sales less direct and allocated expenses... $ 20,645 17.8 $ 14,640 13.8 $ 15,814 15.2
-------- ----- -------- ----- -------- -----
-------- ----- -------- ----- -------- -----
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 29, 1996 JUNE 28, 1997
-------------- --------------
AMOUNT % AMOUNT %
------- ----- ------- -----
<S> <C> <C> <C> <C>
Net sales........................................ $51,509 100.0 $51,222 100.0
Cost of products sold............................ 16,269 31.6 18,067 35.3
------- ----- ------- -----
Gross profit................................... 35,240 68.4 33,155 64.7
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................... 3,589 7.0 3,239 6.3
Trade promotions............................... 10,452 20.3 9,457 18.5
Consumer marketing............................. 3,789 7.4 597 1.1
------- ----- ------- -----
Total brokerage, distribution and marketing
expenses..................................... 17,830 34.7 13,293 25.9
Selling, general and administrative expenses..... 3,802 7.4 3,637 7.1
Amortization of goodwill......................... 675 1.3 675 1.3
------- ----- ------- -----
Operating Profit............................... 12,933 25.0 15,550 30.4
Provision for income taxes....................... 5,303 10.3 6,376 12.4
------- ----- ------- -----
Net sales less direct and allocated expenses... $7,630 14.7 $9,174 18.0
------- ----- ------- -----
------- ----- ------- -----
</TABLE>
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
NET SALES decreased 0.6% to $51.2 million for the six months ended June 28,
1997, as compared to $51.5 million for the comparable period in 1996.
Retail syrup sales increased $0.4 million to $47.7 million in the 1997
period from $47.3 million in the 1996 period. The increase in sales was
primarily attributable to an increase in COUNTRY KITCHEN sales, which was
partially offset by a decline in LOG CABIN sales. LOG CABIN brand sales of $33.8
million in the 1997 period decreased $1.9 million from sales of $35.7 million in
the 1996 period due to reduced promotional activity on the brand. Furthermore,
LOG CABIN is listed at a higher average price than any of its competitors which
has driven down sales. COUNTRY KITCHEN sales increased $2.3 million to $13.9
million in the 1997 period from sales of $11.6 million in the 1996 period due to
increased consumer demand in the economy price segment.
Foodservice sales declined $.7 million to $2.0 million in the 1997 period
from $2.7 million in the 1996 period.
GROSS PROFIT as a percentage of net sales was 64.7% for the 1997 period as
compared to 68.4% for the 1996 period. In the 1997 period, the allocation of
fixed manufacturing expense to the LC Business increased by approximately $1.5
million relative to the 1996 period. The 1996 period also included a LIFO
inventory adjustment which resulted in a $0.3 million reduction in cost of
products sold. Adjusting for these two factors, the gross margin in the 1997
period was 67.7% as compared to 67.8% in the 1996 period.
OPERATING PROFIT as a percentage of net sales improved to 30.4% for the 1997
period as compared to 25.0% for the 1996 period. The improvement in the
operating profit margin primarily was the result of a decrease in marketing
expenditures. Total marketing spending as a percent of net sales reduced to
19.6% in the 1997 period from 27.7% in the 1996 period.
47
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES decreased 1.7% to $104.5 million for the year ended 1996, as
compared to $106.3 million for the year ended 1995.
Retail syrup sales declined $2.0 million to $96.3 million in 1996 from $98.3
million in 1995. The sales decline was primarily attributable to decreases in
the COUNTRY KITCHEN brand. COUNTRY KITCHEN sales decreased $1.7 million to $24.0
million in 1996 from sales of $25.7 million in 1995 due to a decline in
promotional support from 1995 levels. LOG CABIN sales were $72.3 million in 1996
as compared to $72.6 million in 1995. LOG CABIN brand sales stabilized in 1996,
after declines in 1994 and 1995, primarily as the result of a refocusing of the
LOG CABIN brand through increased marketing support.
Foodservice sales decreased $0.2 million to $5.1 million in 1996 from $5.3
million in 1995.
GROSS PROFIT as a percentage of net sales was 65.3% in 1996 as compared to
66.3% in 1995 primarily due to increased prices for corn syrup.
OPERATING PROFIT as a percentage of net sales improved to 25.9% in 1996 as
compared to 23.6% in 1995. The improvement in the operating profit margin was
the result of a reduction in total trade promotions and advertising. Total
marketing spending as a percentage of net sales was reduced to 24.3% in 1996
from 27.1% in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES declined 8.3% to $106.3 million for the year ended 1995, as
compared to $115.9 million for the year ended 1994.
Retail syrup sales decreased $11.5 million to $98.3 million in 1995 from
$109.8 million in 1994. The decrease in sales was principally due to a decrease
in sales of the LOG CABIN brand. Sales of COUNTRY KITCHEN increased by $2.9
million to $25.7 million in 1995 from $22.8 million in 1994 due to increased
trade promotions in response to increased competition from COUNTRY RICH, AUNT
JEMIMA'S comparable economy brand. Sales of LOG CABIN decreased $14.4 million to
$72.6 million 1995 from $87.0 million in 1994. LOG CABIN sales level declined
primarily due to two factors: (i) a shift in trade promotions and consumer
marketing support from LOG CABIN to COUNTRY KITCHEN, and (ii) an organizational
re-alignment within Kraft which resulted in decreased management focus on the
LOG CABIN brand. During 1995, the LOG CABIN brand was transitioned into a new
salesforce and marketing support team.
Foodservice sales increased $2.0 million to $5.3 million in 1995 from $3.3
million in 1994. The increase in sales was the result of increased sales of LOG
CABIN gallon jugs and an increase in private label sales.
GROSS PROFIT as a percentage of net sales was 66.3% in 1995 as compared to
69.6% in 1994. The decrease in the gross profit margin was the result of higher
product costs, specifically increased corn syrup prices and packaging costs,
that were unable to be absorbed by the industry-wide price increase that was
taken in June 1994.
OPERATING PROFIT as a percentage of net sales decreased to 23.6% in 1995
from 30.2% in 1994. The operating profit margin decrease was the result of lower
gross margins, higher freight costs and an increase in marketing expenses. While
there was an allocation shift in dollars spent from advertising and consumer
marketing to trade promotions, total marketing as a percent of net sales
increased to 27.1% in 1995 from 24.9% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred substantial indebtedness in connection with the MBW
Refinancing and the LC Acquisition. Interest payments on the Notes, the Other
Notes and the Senior Credit Facilities
48
<PAGE>
represent significant cash requirements for the Company. As of June 28, 1997, on
a pro forma basis, after giving effect to the LC Acquisition, the Company would
have had $100.0 million in aggregate principal amount of indebtedness
outstanding under the Old Notes, $100.0 million in aggregate principal amount of
indebtedness outstanding under the Other Notes; $40.0 million outstanding under
the Term Facility and $47.0 million under the Revolving Facility. The Company
will be required to make periodic payments of interest on the Notes, the Other
Notes and the Senior Credit Facilities. See "Description of Notes" and
"Description of Senior Credit Facilities."
In addition to its debt service obligations, the Company's liquidity needs
will be for working capital, capital expenditures and acquisitions. The assets
of the Mrs. Butterworth's business capitalized relating to machinery and
equipment acquired in the MBW Acquisition, and referred to elsewhere herein as
capital expenditures, were $21,000, $64,000 and $470,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. The Company believes the costs
of building its corporate organization and transferring the production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing will be approximately $5.8 million.
The assets of the Log Cabin business capitalized relating to machinery and
equipment acquired in the LC Acquisition, and referred to elsewhere herein as
capital expenditures, were $800,000, $1,200,000 and $500,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. Capital expenditure requirements
have historically been financed with internally generated funds and have been
primarily related to refurbishments and improvements of manufacturing equipment.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Facility. After consummation of the LC
Acquisition, $13.0 million is available to the Company for borrowing under the
Revolving Facility. See "Description of the Senior Credit Facilities."
The Company anticipates that available cash, cash flow from operations and
availability under its Revolving Facility will be sufficient to meet the
Company's working capital requirements, capital expenditures, interest payments
on the Notes and Other Notes and interest and amortization requirements under
the Senior Credit Facilities for the next twelve months.
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Financial Statements included herein.
49
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company markets and sells MRS. BUTTERWORTH'S, the number one brand of
regular syrup in the United States. Originally introduced in 1960, MRS.
BUTTERWORTH'S syrup is well known for its unique buttery flavor and distinctive
grandmother-shaped bottle and enjoys 100% aided brand awareness among syrup
consumers. In addition to its strong national presence, MRS. BUTTERWORTH'S is
the number one brand of syrup in the Central and Mid-Central United States, the
two regions of the country with the highest per capita syrup consumption. MRS.
BUTTERWORTH'S strong market position in syrup is complemented by the Company's
pancake mix products in which it is the fourth leading brand. MRS. BUTTERWORTH'S
leading market positions and strong brand recognition have enabled it to realize
a long history of high operating margins, stable sales and growth in operating
profit.
On July 1, 1997, the Company acquired substantially all the assets of the
LOG CABIN syrup business from Kraft. THE LOG CABIN syrup business consists of
the retail syrup business marketed under the LOG CABIN and COUNTRY KITCHEN
brands and the foodservice syrup business marketed under the LOG CABIN and
WIGWAM brands. The LOG CABIN trademark dates back to 1888 and, the Company
believes it is one of the oldest and most widely recognized trademarks in the
United States. LOG CABIN syrup products have the number one market share overall
in the United States. LOG CABIN'S premium maple heritage, together with its
geographic strength on the east and west coasts, complements MRS. BUTTERWORTH'S
buttery flavor and strength in the central United States. Further extending the
Company's customer base is the addition of the COUNTRY KITCHEN and WIGWAM
trademarks. Introduced in 1954, COUNTRY KITCHEN is an economy-priced syrup
targeted towards the price conscious consumer and has the leading market share
in that segment.
The Company plans to combine the manufacture and distribution of LOG CABIN
syrup products with its MRS. BUTTERWORTH'S products and as a result expects to
realize $3.0 million in annual cost savings. LOG CABIN products will be sold by
the Company's independent food brokers and will be marketed and administered by
the Company, which will expand its corporate organization from 22 to 34 persons.
For the twelve months ended June 28, 1997, the Company's combined pro forma
sales, EBITDA and income before taxes were $194.1 million, $49.1 million and
$10.3 million, respectively (which amounts do not reflect the expected
manufacturing and distribution annual cost savings of $3.0 million discussed
above.) The Company believes that EBITDA is a useful measurement. MRS.
BUTTERWORTH'S and LOG CABIN products represented 46% and 54%, respectively, of
the Company's pro forma sales for the same period.
In order to effect the transition to an independent operating company, the
Company established a corporate infrastructure which is organized into three
operational groups--the product management group, the financial/administrative
group and the sales group. In addition, in connection with the Red Wing Co-Pack
Agreement, the Company is in the process of transferring the production of MRS.
BUTTERWORTH'S syrup and the related equipment from Conopco's facilities to Red
Wing's facilities. The Company expects to complete this transfer by December 31,
1997. The total cost of this transition is expected to be approximately $5.8
million.
In connection with the LC Acquisitions, the Company has expanded its
corporate organization from 22 to 34 persons. The Company will also increase its
office space in connection with this expansion. In addition, the Company is
negotiating with Red Wing and other third parties for the contract manufacture
of its LOG CABIN syrup products. The Company estimates that the transition costs
related to the LOG CABIN syrup business will be approximately $5.1 million.
The syrup and pancake mix categories in the United States are stable and are
characterized by broad household penetration and steady growth. Sales of syrup
products are driven by the consumption of host foods, product innovation and
consumers' desire for more traditional "home style" meals. From 1993 to 1996,
the syrup and pancake mix categories grew at compound annual rates of
approximately
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1.4% and 3.5%, respectively. The Company's products are sold nationally through
an independent broker network to retail grocery stores, mass merchandisers,
military exchanges and foodservice distributors. The Company's syrups and
pancake mixes are sold in nearly 100% and 63%, respectively, of all retail
grocery stores in the United States. For the twelve months ended June 28, 1997,
the Company's syrup and pancake mix sales represented approximately 95% and 5%
of pro forma sales, respectively.
The Company believes that its brands provide an attractive platform upon
which to build a focused, branded dry grocery products company. The Company
believes that the performance of certain dry grocery categories and brands has
suffered in recent years as a result of declining levels of marketing support
and little or no new product innovation by the major food companies.
Consequently, the Company believes that many of these undermanaged brands are
likely candidates for divestiture from their corporate parents. While these
categories and brands tend to be mature, there are expanding segments within the
categories and growth opportunities that have not been realized. As a result,
the Company believes that an attractive opportunity exists for building a
branded dry grocery products company through strategic acquisitions of
established, well-recognized national and regional brands that have been
undermanaged in recent years. The Company's objective is to renew the growth of
the brands it acquires by providing them the focus, strategic direction,
marketing resources and dedicated sales and marketing organizations that they
have lacked.
The Company's principal executive office is located at Community Corporate
Center, 445 Hutchinson Avenue, Columbus, Ohio 43235. The Company's telephone
number is (614) 436-8600.
MRS. BUTTERWORTH'S GROWTH STRATEGY
The Company believes that MRS. BUTTERWORTH'S has significant growth
potential which has not been realized due to a lack of corporate support and
marketing resources from Unilever in recent years. The Company plans to improve
MRS. BUTTERWORTH'S performance by increasing management attention to the brand
and by devoting the marketing resources necessary to exploit opportunities in
the syrup and pancake mix categories. The Company intends to implement its
strategy through the following initiatives:
- POSITION BRAND AS BEST VALUE. The Company plans to position MRS.
BUTTERWORTH'S as the best value among the three leading national syrup brands by
continuing to provide its distinctive, premium quality product at prices which
are moderately below those of the other national brands. In May 1996, MRS.
BUTTERWORTH'S lowered the everyday prices of its syrup products. To offset the
cost of lowering everyday prices, MRS. BUTTERWORTH'S also reduced its costly and
relatively ineffective buy-one-get-one-free promotions. The Company believes
that full implementation of MRS. BUTTERWORTH'S value pricing strategy will
result in continued increases in sales and market share.
- REFORMULATE LITE PRODUCT. MRS. BUTTERWORTH'S LITE has not been
reformulated or improved since its introduction in 1985. Over the last five
years, competitors have focused their research and development efforts on the
lite syrup segment, taking advantage of newly developed ingredients and
formulations. While MRS. BUTTERWORTH'S is the leading brand in the regular syrup
segment, MRS. BUTTERWORTH'S share of the lite syrup segment is 15.0% and is
significantly below AUNT JEMIMA'S leading 32.6% share of the segment. The
Company plans to reformulate and improve the taste of MRS. BUTTERWORTH'S LITE.
Management believes that this reformulation, coupled with MRS. BUTTERWORTH'S
leading position in the regular syrup segment and increased marketing support,
can expand the Company's share of the lite segment and further strengthen the
Company's overall syrup market share.
- ROLL OUT PRODUCT LINE EXTENSIONS. Management believes MRS. BUTTERWORTH'S
strong brand equity and leading market shares in the syrup category present
considerable opportunities for product line extensions. For example, an
opportunity exists to develop a product which is directed at children and
packaged in plastic, as compared to the current glass packaging. Opportunities
also exist for MRS. BUTTERWORTH'S in the flavored syrup segment, as none of the
major national brands currently offer
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these specialty products. In addition, management believes that opportunities
exist for growth in the Company's pancake mix business with increased marketing
and sales support for its recently redesigned and updated packaging.
- ADOPT CONSUMER BASED MARKETING STRATEGY. Over the next two years, the
Company plans to reduce its reliance on costly and relatively inefficient trade
spending and periodic price discounting and increase its advertising and
consumer promotional events. The Company plans to reduce or eliminate
buy-one-get-one-free promotions and its heavy reliance on coupons in free
standing inserts. The Company will reallocate those marketing dollars to
advertising and more focused consumer promotions such as cross-promotions with
host foods. In addition, the Company will direct its advertising expenditures to
support the introduction of new or improved products and reinforce MRS.
BUTTERWORTH'S unique brand equity and positioning as the best value among the
national brands.
LOG CABIN GROWTH STRATEGY
LOG CABIN'S overall share of the retail syrup category has decreased from
35% in 1972 to 19% in 1996. The Company attributes the decrease to declining
levels of corporate support and marketing resources from Kraft over this period
of time. The Company plans to undertake the following initiatives to revitalize
the LOG CABIN brand and profitably grow the business:
- RESTORE LOG CABIN'S PREMIUM IMAGE. The Company believes that historically,
the LOG CABIN brand has been perceived by the consumer as a premium, real
maple syrup. In recent years, LOG CABIN'S premium image has eroded due to
a lack of marketing support. For example, packaging of LOG CABIN syrup
products has been downgraded from glass to clear plastic to opaque
plastic. Advertising support for the brand was eliminated in 1994. The
Company plans to restore LOG CABIN'S premium image by upgrading LOG
CABIN'S packaging and renewing advertising support for the brand that
promotes its premium, real maple heritage and warm, homespun image.
- RETURN TO CONSUMER BASED MARKETING STRATEGY. Over the last four years, LOG
CABIN'S marketing program has consisted almost entirely of trade spending
and price discounting. Little or no money was spent promoting LOG CABIN
products to the consumer through coupons or advertising. In order to bring
consumers back to the LOG CABIN brand, the Company plans to increase
advertising support for the brand and implement focused consumer
promotional activities such as point-of-sale coupons and cross-promotions
with host foods. The Company expects to fund these programs in part
through the elimination of certain inefficient trade programs.
- BENEFIT FROM GROWTH IN HOST FOOD. Sales of syrup products are related to
sales of host foods, which include pancakes, waffles and french toast.
Over the last five months, following little or no growth over the last
three years, sales of frozen breakfast products have grown at
approximately a 10% annual rate as a result of increased marketing
activity by host food manufacturers. The Company believes that sales of
syrup products will benefit from renewed growth in host foods.
- EXPAND DISTRIBUTION CHANNELS. The Company plans to expand distribution of
the economy-priced COUNTRY KITCHEN brand into the mass merchandise and
drugstore channels of trade. The Company also plans to leverage its WIGWAM
brand and expand its foodservice business.
INDUSTRY
The U.S. syrup category is approximately $463 million. Sales of syrup are
driven by the consumption of host foods, product innovation and consumers'
desire for traditional "home style" meals. Sales in the syrup category increased
in 1991 and 1992 due to the increased consumption of host foods, which was
driven primarily by new product introductions of host foods. Growth in the syrup
category has also been driven by product innovation, such as the development of
lite and specialty flavored syrups. Syrup is widely consumed across the United
States and has a 60% household penetration rate. Approximately 95% of syrup is
consumed with pancakes, waffles and french toast, and syrup is consumed with 7%
of all U.S. breakfasts, equal in frequency of consumption to hot cereals and
baked goods. On average, syrup
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users consume the product once every two weeks and purchase syrup approximately
once every three months. The most common purchase size is 24 ounces. Consumption
increases slightly during the winter months.
The syrup category has three major segments: regular, lite and pure
maple/specialty flavored, which represent approximately 59%, 29% and 12% of
syrup sales, respectively. Regular syrup is a full-calorie, corn syrup based
product. Lite syrup is also a corn syrup based product, but has only half the
calories of regular syrup. Pure maple, diet and other specialty syrups, all of
which are non-corn syrup based products, occupy market niches and are not
currently offered by any of the major national syrup manufacturers.
The three leading brands of syrup (AUNT JEMIMA, MRS. BUTTERWORTH'S and LOG
CABIN) account for approximately 53% of total syrup sales in the United States.
The remaining 47% is fragmented, with private label accounting for approximately
20% of sales and numerous other national and regional brands accounting for the
remainder. Management believes that private label's share of the syrup market
will remain relatively flat due to the lack of opportunity for growth in
distribution of private label syrup and the relatively high level of private
label syrup which is currently sold on promotion. Private label syrup currently
has approximately 96% distribution to retail grocery stores, leaving little room
for growth in distribution. In addition, approximately 35% of private label
syrup is sold on promotion, a relatively high percentage of promoted sales for a
private label product. Finally, since 1988 private label syrup prices have
increased at nearly double the rate of the three leading syrup brands, reducing
the premium for branded syrups from approximately 80% to 55%.
The U.S. retail grocery pancake mix category had sales of $145 million in
1996 and grew at a compound annual rate of 3.5% from 1993 to 1996, largely due
to a trend among consumers to return to traditional meals and the perceived
value offered by pancake mix compared with substitute products. Pancake mix has
a household penetration rate of 30%. The purchase cycle is once every three
months, similar to syrup. The pancake mix category is less fragmented than the
syrup category with the four leading brands (AUNT JEMIMA, HUNGRY JACK, KRUSTEAZ
and MRS. BUTTERWORTH'S) accounting for approximately 70% of sales. Private label
and smaller national and regional competitors account for the remainder. See
"--Competition."
PRODUCTS AND MARKETS
MRS. BUTTERWORTH'S (46% of pro forma Company sales)
The Company markets and sells the MRS. BUTTERWORTH'S brand of syrup and
pancake mix. The retail grocery channel is the primary market for the Company's
products and accounted for approximately 85% of MRS. BUTTERWORTH'S sales for the
year ended December 31, 1996. In this channel, the MRS. BUTTERWORTH'S syrup
products are primarily sold in 12, 24 and 36 ounce bottles and pancake mix
products are primarily sold in two pound paperboard boxes. The remaining 15% of
the MRS. BUTTERWORTH'S sales are in other channels, including membership
warehouses, convenience stores, mass merchandisers, foodservice and the U.S.
military. In these channels, MRS. BUTTERWORTH'S syrup products are also sold in
gallon and portion pack units and pancake mix products are also sold in five
pound polybags.
SYRUPS (89% of MRS. BUTTERWORTH'S sales). MRS. BUTTERWORTH'S syrup products
include regular syrup, which is a full-calorie corn syrup based product, and
lite syrup, which is a half-calorie corn syrup based product. MRS. BUTTERWORTH'S
syrups are primarily sold in highly recognizable grandmother-shaped glass
bottles. MRS. BUTTERWORTH'S is the leading brand of regular syrup in the United
States with an 18.1% share of the regular syrup segment. MRS. BUTTERWORTH'S
produces and sells regular syrup under its ORIGINAL label, which was introduced
in 1960, and its COUNTRY BEST RECIPE label, a cinnamon-vanilla flavor introduced
in 1994. MRS. BUTTERWORTH'S ORIGINAL 24 ounce stock keeping unit ("SKU") is the
number one ranked SKU in the syrup category and sales of all MRS. BUTTERWORTH'S
ORIGINAL sizes accounted for approximately 47% of the Company's sales for the
year ended December 31, 1996. MRS. BUTTERWORTH'S
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LITE, introduced in 1985, is the third leading brand in the lite syrup segment,
with a 15.0% share of that segment.
PANCAKE MIXES (11% of MRS. BUTTERWORTH'S sales). MRS. BUTTERWORTH'S pancake
mixes include add-in mixes, to which the user adds eggs and vegetable oil, and
complete mixes, to which the user adds only water. The Company's add-in mix is
sold under the MRS. BUTTERWORTH'S OLD-FASHIONED label. The Company's complete
mixes are sold under its MRS. BUTTERWORTH'S BUTTERMILK COMPLETE and MRS.
BUTTERWORTH'S ORIGINAL COMPLETE labels. The Company's pancake mixes are
manufactured by Cereal Food Processors, Inc. and Gooch Milling and Elevator Co.,
Inc.
LOG CABIN (54% of pro forma Company sales)
The Company also markets and sells the LOG CABIN and COUNTRY KITCHEN brands
of syrup. The retail grocery channel is the primary market for LOG CABIN'S
products and accounted for approximately 84% of
LOG CABIN'S sales for the year ended December 31, 1996. In this channel, LOG
CABIN'S retail products are primarily sold in 12, 24, and 36 ounce sizes. In
addition, approximately 11% of LOG CABIN'S sales are in other channels including
mass merchandisers, club stores and the U.S. military. The remaining 5% of LOG
CABIN'S sales are in foodservice. The Company's foodservice products are sold in
portion-control packs and gallon jugs under the LOG CABIN, LOG CABIN LITE and
WIGWAM labels and under private label arrangements to the restaurant and
institution channels.
LOG CABIN'S product lines include LOG CABIN, which is a premium priced
syrup, and COUNTRY KITCHEN, which is an economy syrup. Together, the two brands
have a 19.3% share of the syrup category.
LOG CABIN has a 16.3% market share of the regular syrup segment. The
heritage of the LOG CABIN brand dates back to 1887 and enjoys a strong consumer
awareness. Additionally, LOG CABIN LITE was introduced in 1985 and is the second
leading brand in the lite syrup segment with a 15.7% share of that segment.
COUNTRY KITCHEN has an 8.9% market share of the regular syrup segment.
Introduced in 1954, the product is positioned to target the economy segment of
the syrup category, providing a lower cost alternative for price conscious
consumers. Of this economy segment, COUNTRY KITCHEN has the highest share
amongst its competitors such as AUNT JEMIMA'S COUNTRY RICH and numerous regional
brands. COUNTRY KITCHEN is marketed under both a regular and lite version.
MARKETING, SALES AND DISTRIBUTION
MRS. BUTTERWORTH'S
The MRS. BUTTERWORTH'S trademark has been developed over 36 years and has
been supported through a mix of trade promotions, consumer marketing and
advertising. In addition, MRS. BUTTERWORTH'S unique grandmother-shaped bottle
provides strong brand identification at the point of sale. MRS. BUTTERWORTH'S
products are sold by a network of independent brokers and are distributed on a
national basis from Conopco's Olathe, Kansas facility.
Originally introduced in 1960, MRS. BUTTERWORTH'S is a well-recognized
trademark in the United States. MRS. BUTTERWORTH'S warm, homespun and
"grandmotherly" image appeals to young and old consumers alike. According to a
1995 Nielsen Brandbuilder study, MRS. BUTTERWORTH'S has 100% aided brand
awareness among syrup consumers. MRS. BUTTERWORTH'S also has significantly
higher Nielsen scores than its competitors in key consumer areas including "rich
tasting", "attractive packaging" and "attractive advertising". Consumer
awareness and attraction to the MRS. BUTTERWORTH'S brand is reinforced through
MRS. BUTTERWORTH'S unique grandmother-shaped glass bottle, which provides
customers with strong point-of-purchase brand identification.
MRS. BUTTERWORTH'S trade promotions have consisted of price discounting,
in-store advertising and couponing in retailer flyers. In the second quarter of
1996, MRS. BUTTERWORTH'S adopted a strategy to position its syrup products as
the best value among the three leading national brands. MRS. BUTTERWORTH'S
reduced its wholesale prices, resulting in lower everyday shelf prices to the
consumer for MRS. BUTTERWORTH'S regular syrup products. This strategy was
adopted to decrease reliance on price discounting.
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MRS. BUTTERWORTH'S consumer marketing has relied heavily on coupons in free
standing inserts, which historically have had low average redemption rates, and
costly buy-one-get-one-free promotions. The pricing strategy implemented in the
second quarter of 1996 was adopted to decrease reliance on buy-one-get-one-free
promotions and has resulted in a reduction in MRS. BUTTERWORTH'S consumer
marketing expenditures. The Company intends to shift the focus of its consumer
marketing to targeted couponing, such as cross-promotions with host food
products.
MRS. BUTTERWORTH'S advertising has been limited in recent years.
Historically, MRS. BUTTERWORTH'S advertising consisted primarily of television
advertising which was aimed at promoting MRS. BUTTERWORTH'S unique brand image.
The Company's advertising emphasized the old-fashioned "grandmotherly" image
associated with the brand and its homemade quality and wholesome taste.
Additionally, MRS. BUTTERWORTH'S advertising campaign, which used a "talking
syrup bottle," appeals to both children and adults. MRS. BUTTERWORTH'S
advertising has a strong recall score and has been highly effective in
motivating the purchase of MRS. BUTTERWORTH'S products and the Company intends
to continue this advertising.
The majority of MRS. BUTTERWORTH'S syrup and pancake mix products are sold
through a network of approximately 60 independent brokers to retail grocery
stores, membership warehouses, convenience stores and mass merchandisers. Retail
grocery sales account for approximately 85% of MRS. BUTTERWORTH'S sales of
syrups and pancake mixes. A small number of these brokers also sell products
manufactured by the Company's competitors. The Company also uses a separate
broker network of approximately 40 independent brokers which sells syrups and
pancake mixes to the foodservice distributors and operators. The Company's food
brokers do not distribute its products. They perform the sales and merchandising
functions necessary for the business. Distribution of products from the
Company's warehouses is arranged by the purchaser of the products. MRS.
BUTTERWORTH'S syrups and pancake mixes are distributed on a national basis from
Conopco's Olathe, Kansas facility. None of the Company's customers account for
more than 10% of the Company's sales.
LOG CABIN
The LOG CABIN brand has a heritage dating back over a century and is widely
recognized as the "real" maple syrup people "grew up with." While LOG CABIN
remains the number one brand of syrup overall, a significant reduction in
corporate marketing support for the brand combined with aggressive marketing
programs by its principal national competitors have led to an erosion in its
market share from 35% in 1972 to 19%. LOG CABIN'S number one market position has
endured primarily on the basis of the brand's longevity in the market and strong
consumer awareness.
LOG CABIN'S marketing activities over the last four years have principally
consisted of trade promotions and price discounting. During this period, the
brand also developed an "animated cabin" television advertisement which achieved
above average consumer enjoyment, brand rating and memorability. However, in
response to heavy price promotions from MRS. BUTTERWORTH'S, AUNT JEMIMA and
HUNGRY JACK during the 1993 through 1995 period, LOG CABIN redirected its
advertising spending to price discounting and buy-one-get-one free promotions.
The Company intends to revitalize the LOG CABIN brand by reducing the
brand's reliance on inefficient trade spending and increasing consumer-based
promotional events and advertising. The shift from trade spending will refocus
LOG CABIN'S marketing emphasis on the consumer.
LOG CABIN'S products have historically been sold through Kraft's direct
sales force to retail grocery stores, mass merchandisers, club stores,
foodservice and the U.S. military. The Company intends to transition LOG CABIN
sales to its existing broker network shortly after the LC Acquisition is
completed.
COMPETITION
The three major national brands of syrup are AUNT JEMIMA, MRS. BUTTERWORTH'S
and LOG CABIN. Sales of these three brands account for approximately 53% of
total syrup sales in the United States. Smaller
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national and regional brands, including MAPLE GROVE FARMS, GOLDEN GRIDDLE and
VERMONT MAID, and private label syrups also compete in the syrup category.
Competition is based primarily on price and consumer positioning.
LOG CABIN (including the COUNTRY KITCHEN brand) is the number one national
brand of syrup overall with a 19.3% market share, followed by AUNT JEMIMA and
MRS. BUTTERWORTH'S with market shares of 18.5% and 15.0%, respectively. MRS.
BUTTERWORTH'S is the number one brand of regular syrup in the United States,
with an 18.1% share of the regular syrup segment, followed by LOG CABIN
(excluding the COUNTRY KITCHEN brand) and AUNT JEMIMA with regular segment
shares of 16.3% and 13.6%, respectively. In addition, COUNTRY KITCHEN is the
leading national brand of economy-priced syrup with the highest market share
among its economy-priced competitors, which include Aunt Jemima's COUNTRY RICH
and numerous regional brands.
MRS. BUTTERWORTH'S is also the leading brand of syrup in the Central
(Chicago, Denver, Kansas City) and Mid-Central (Detroit, Indianapolis,
Pittsburgh) regions of the United States, the two regions of the country with
the highest per capita syrup consumption. LOG CABIN sales are strongest in the
eastern and western regions of the United States.
The U.S. pancake mix category is more concentrated than the syrup category,
with four major brands representing approximately 70.0% of the total market.
AUNT JEMIMA is the leader in the pancake mix category, with a 30.9% market
share, followed by HUNGRY JACK, KRUSTEAZ and MRS. BUTTERWORTH'S, with market
shares of 15.6%, 14.9% and 6.3%, respectively.
RAW MATERIALS
The Company utilizes a variety of basic raw materials in the manufacture of
its syrup and pancake mix products, including corn syrup, liquid sucrose, flour,
sugar, maple sugar and flavorings. The Company also utilizes significant
quantities of glass, plastic and cardboard for its packaging require-
ments. Supplies of ingredients and packaging requirements are readily available
from a number of sources and are purchased based on price. See "The
Acquisitions."
PRODUCTION AND EQUIPMENT
MRS. BUTTERWORTH'S syrup is manufactured and packaged at Conopco's Olathe,
Kansas facility under the MBW Co-Pack Agreement between the Company and Conopco
pursuant to which Conopco has agreed to contract manufacture syrup for the
Company for a period of up to one year from the MBW Acquisition Closing Date at
prices which are based on historical manufacturing costs. In addition, the
Company has entered into the Red Wing Co-Pack Agreement pursuant to which Red
Wing will contract manufacture MRS. BUTTERWORTH'S syrup products. In August
1997, the Company commenced transferring production of MRS. BUTTERWORTH'S syrup
from Conopco to Red Wing. See "The Acquisitions--The Red Wing Co-Pack
Agreement." Raw materials, packaging supplies and finished goods related to the
MRS. BUTTERWORTH'S syrup business are also warehoused at Conopco's Olathe,
Kansas facility.
The Company owns all of the equipment used in each stage of the production
of MRS. BUTTERWORTH'S syrup, including batching, filling and case-packing the
products. The equipment was purchased by the Company in the MBW Acquisition and
has the capacity to produce approximately two times the number of cases of syrup
as has been produced historically. All of the equipment is located in Conopco's
Olathe, Kansas facility.
MRS. BUTTERWORTH'S retail pancake mixes are manufactured and packaged by two
third parties under co-packing agreements. The Company assumed these agreements
at their historical prices at the MBW Acquisition Closing Date. MRS.
BUTTERWORTH'S foodservice pancake mixes, which account for approximately 1% of
the Company's sales, are manufactured at a separate facility owned by Conopco.
LOG CABIN syrup products are manufactured and packaged at Kraft's Chicago,
Illinois and Lehigh Valley, Pennsylvania facilities under the LC Co-Pack
Agreement between the Company and Kraft pursuant to which Kraft has agreed to
contract manufacture syrup for the Company for a period of up to nine
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months from the LC Acquisition Closing Date at prices which are based on
historical manufacturing costs. Prior to the end of the term of the LC Co-Pack
Agreement, the Company will either enter into a co-packing agreement with Red
Wing or another third party for the manufacture of LOG CABIN syrup products. Raw
materials, packaging supplies and finished goods related to the syrup business
are also warehoused at Kraft's Chicago and Lehigh Valley facilities.
TRADEMARKS
In the MBW Aquisition, the Company acquired a number of registered
trademarks in the United States, Canada and Puerto Rico. In the LC Acquisition,
the Company acquired the U.S. and foreign trademarks (excluding Mexico) of the
LC Business, including LOG CABIN and COUNTRY KITCHEN. Management is not aware of
any fact that would negatively impact the continued use of any of its trademarks
and trade names.
EMPLOYEES
The Company's labor requirements related to the manufacturing of MRS.
BUTTERWORTH'S syrup and foodservice pancake mix will be covered under the MBW
Co-Pack Agreement until December 31, 1997 and thereafter under the Red Wing
Co-Pack Agreement. The Company's labor requirements related to the manufacturing
of LOG CABIN syrup products will be covered under the LC Co-Pack Agreement for a
period of up to nine months from the LC Acquisition Closing Date. The Company
has filled substantially all senior management positions and has staffed
approximately ninety percent of its sales, marketing and administrative
functions. The Company has completed the transition of all services previously
provided by Conopco under the MBW Transition Services Agreement, which expires
on June 30, 1997. In connection with the LC Acquisition, the Company entered
into the LC Transition Services Agreement, pursuant to which Kraft will provide
the Company with marketing services, transaction processing services, accounting
services and other services related to the LOG CABIN syrup products for a period
of up to six months from the LC Acquisition Closing Date. The Company will
increase its corporate staff from 22 to 34, primarily in the sales and marketing
areas to accomodate the additional volume and products of the LOG CABIN syrup
business.
CERTAIN LEGAL AND REGULATORY MATTERS
LITIGATION
The Company did not assume any litigation relating to the MBW Predecessor or
the LC Business that was pending as of the MBW Acquisition Closing Date or the
LC Acquisition Closing Date. Conopco and Kraft have agreed to indemnify, subject
to certain limitations, the Company with respect to any litigation that may
arise in the future to the extent such litigation relates to the conduct of the
MBW Predecessor prior to the MBW Acquisition Closing Date and the LC Business
prior to the LC Acquisition Closing Date, respectively. See "The Acquisitions."
Historically, each of Conopco and Kraft has been the defendant in various legal
actions related to its respective businesses, none of which had, or were
expected to have, a material adverse effect on the operations or financial
condition of the MBW Predecessor or the LC Business, respectively.
PUBLIC HEALTH
The Company is subject to the Federal Food, Drug and Cosmetic Act and
regulations promulgated thereunder by the Food and Drug Administration (the
"FDA"). This comprehensive regulatory program governs, among other things, the
manufacturing, composition and ingredients, labeling, packaging and safety of
food. For example, the FDA regulates manufacturing practices for foods through
its current "good manufacturing practices" regulations, and specifies the
"recipes," called standards of identity, for certain foods. In addition, the
Nutrition Labeling and Education Act of 1990, as amended, prescribes the format
and content of certain information required to appear on the labels of food
products. The
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Company is subject to regulation by certain other governmental agencies,
including the U.S. Department of Agriculture.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of the
facilities. Enforcement actions for violations of federal, state and local
regulations may include seizure and condemnation of violative products, cease
and desist orders, injunctions and/or monetary penalties. Management believes
that the Company's facilities and practices are sufficient to maintain
compliance with applicable government regulations, although there can be no
assurances in this regard.
ENVIRONMENTAL
The Company did not assume any liabilities for environmental matters
relating to the operation of the MBW Predecessor prior to the MBW Acquisition
Closing Date or the LC Business prior to the LC Acquisition Closing Date. Like
all other businesses, the Company is subject to a full range of federal, state
and local laws and regulations pertaining to the environment, including the
discharge of materials into the environment and the handling and disposal of
wastes (including solid and hazardous wastes). These laws include, but are not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 6901 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 9601 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Toxic Substances Control At, 15 U.S.C Section 2601 et seq.; the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et
seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Section 651 et seq.; and their state and local counterparts and equivalents.
However, because of the nature of its business, the Company does not expect the
costs of compliance with, or any liability under, such laws and regulations to
have a material adverse effect on its operations or financial condition.
58
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------- --------- ----------------------------------------------------
<S> <C> <C>
Ian R. Wilson....................................... 67 Chairman of the Board of Directors
Thomas J. Ferraro................................... 48 President and Director
Dirk C. Grizzle..................................... 35 Chief Financial Officer
James B. Ardrey..................................... 39 Executive Vice President and Director
Ray Chung........................................... 48 Executive Vice President and Director
C. Gary Willett..................................... 43 Executive Vice President
Alan Mintz.......................................... 54 Vice President, Sales
M. Laurie Cummings.................................. 33 Vice President and Secretary
David E. De Leeuw................................... 52 Director
Charles Ayres....................................... 37 Director
Tyler T. Zachem..................................... 31 Director
Peter Lamm.......................................... 45 Director
Richard C. Dresdale................................. 40 Director
</TABLE>
IAN R. WILSON, Chairman of the Board of Directors of the Company since
December 1996. Mr. Wilson is the Managing Partner of Dartford. Mr. Wilson
currently serves as Chairman of the Board of Directors of Van de Kamp's and
Windy Hill. Prior to forming Dartford, Mr. Wilson served as Chairman and Chief
Executive Officer of Windmill. Prior to that, Mr. Wilson was Chairman and Chief
Executive Officer of Wyndham. From 1983 to 1984 Mr. Wilson was the Chairman and
Chief Executive Officer of Castle & Cooke, Inc. (now known as Dole Food Company,
Inc.), an international food and real estate concern. Prior to Castle & Cooke,
Inc., Mr. Wilson spent 25 years with The Coca-Cola Company in a series of
management positions, most recently as Vice Chairman of The Coca-Cola Company
and President of the Pacific Group. Mr. Wilson's past and present service as a
director includes membership on the boards of Novell, Inc., Revlon, Inc., Crown
Zellerbach Corporation, Castle & Cooke, Inc., Wilson Bottling Corporation,
Golden State Foods, New Age Beverages, Ltd., Van de Kamp's and Windy Hill.
THOMAS J. FERRARO, President and Director of the Company since December
1996. Prior to joining the Company, Mr. Ferraro served as President of Campfire,
Inc. from September 1994 to June 1996, which recently merged into International
Home Foods, Inc. Prior to joining Campfire, Inc. Mr. Ferraro spent eleven years
at Borden, Inc. serving as Vice President of Sales for the Niche Grocery
division from 1991 to 1994. Mr. Ferraro's experience with niche grocery products
extends back to his early career from 1978 to 1983 with RJR Nabisco Inc. and
from 1973 to 1978 with Drackett Products, a division of Bristol-Meyers Squibb
Company, where he held a variety of marketing and sales positions.
DIRK C. GRIZZLE, Chief Financial Officer of the Company since June 1997.
Prior to joining the Company, Mr. Grizzle served as Vice President of Finance at
the BISYS Group, Inc. from August 1995 to June 1997. From November 1992 to
August 1995, Mr. Grizzle served as Controller, Treasurer and Secretary for Bell
Atlantic International, Inc. from 1984 to 1992, Mr. Grizzle served in a series
of various positions with KPMG Peat Marwick, most recently as a Senior Manager
in KPMG's International Services practice in London, England. Prior to joining
KPMG, Mr. Grizzle was the Controller of Scioto Investment Company from 1982 to
1984.
JAMES B. ARDREY, Executive Vice President and Director of the Company since
December 1996. Mr. Ardrey is a Partner in Dartford. From January 1993 to
February 1995, Mr. Ardrey was a consultant to Windmill, conducting its
divestiture program. From 1984 to 1992, Mr. Ardrey was an investment banker with
Paine Webber Incorporated, serving as Managing Director from 1990 to 1992. Prior
to joining Paine Webber Incorporated, Mr. Ardrey was a consultant with Booz,
Allen & Hamilton. Mr. Ardrey currently serves as a Director of Van de Kamp's.
59
<PAGE>
RAY CHUNG, Executive Vice President and Director of the Company since
December 1996. Mr. Chung is a Partner in Dartford. Mr. Chung has previously
served as a Director, Executive Vice President and Chief Financial Officer of
Windmill from 1989 to 1995 and as a Director, Executive Vice President and Chief
Financial Officer of Wyndham from 1985 to 1990. From May 1984 to September 1985,
Mr. Chung served as Vice President--Finance for the Kendall Company, a
subsidiary of the Colgate-Palmolive Company. Between 1981 and 1984, Mr. Chung
served as Vice President--Finance for Riviana Foods, Inc. Mr. Chung currently
serves as a Director of Windy Hill and VDK Holdings, Inc.
C. GARY WILLETT, Executive Vice President of the Company since December
1996. Prior to joining the Company, Mr. Willett served as Executive Vice
President/General Manager of Campfire, Inc. from August 1995 to September 1996,
which recently merged into International Home Foods, Inc. Prior to Campfire,
Inc., Mr. Willett spent 12 years with Borden, Inc. from June 1983 to August 1995
in a series of marketing and general management positions, most recently as a
Vice President/G.M. of Elmer's. Before joining Borden, Inc., Mr. Willett spent
six years with The Kellogg Company from September 1977 to May 1983 in various
marketing and sales positions.
ALAN MINTZ, Vice President, Sales of the Company since January 1997. Prior
to joining the Company in January 1997, Mr. Mintz spent twelve years with
Borden, Inc. from July 1985 to January 1997, as General Manager of the BAMA
foods division and as the Area Vice President of the Signature Flavors division.
Prior to joining Borden, Inc., Mr. Mintz held various sales positions at General
Foods Corp. from August 1967 to June 1985.
M. LAURIE CUMMINGS, Vice President and Secretary of the Company since
December 1996. Ms. Cummings is a partner in Dartford. Ms. Cummings was Vice
President, Controller and Treasurer of Windmill from 1989 to 1995. Between 1987
and 1990, Ms. Cummings was the Controller and Assistant Treasurer of Wyndham.
Ms. Cummings currently serves as Vice President of Windy Hill and Van de Kamp's.
DAVID E. DE LEEUW, Director of the Company since December 1996. Mr. De Leeuw
is a managing general partner of MDC Management Company III, L.P., which is the
general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. III
(Europe), L.P., a managing general partner of MDC Management Company IIIA, L.P.,
which is the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a
member of Gamma Fund, LLC. Prior to founding McCown De Leeuw & Co. with George
E. McCown in 1984 and beginning in 1978, Mr. De Leeuw was Manager of the
Leveraged Acquisition Unit and Vice President in the Capital Markets Group at
Citibank, N.A. Mr. De Leeuw also worked with W.R. Grace & Co. where he was
Assistant Treasurer and Manager of Corporate Finance from 1974 until 1978. Mr.
De Leeuw began his career as an investment banker with Paine Webber Incorporated
in 1969. He currently serves as a director of Vans, Inc., DEC International
Inc., Nimbus CD International, Inc., Pelican Companies, Inc., Tiara Motorcoach
Corporation, Papa Gino's Inc. and Outsourcing Solutions Inc.
CHARLES AYRES, Director of the Company since December 1996. Mr. Ayres is a
general partner of MDC Management Company III, L.P., which is the general
partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. III
(Europe), L.P., a general partner of MDC Management Company IIIA, L.P., which is
the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a member of
Gamma Fund, LLC. Mr. Ayres has been associated with McCown De Leeuw & Co. since
1991. From 1987 until 1991 Mr. Ayres was a partner of HMA Investments, Inc., a
private investment firm focused on middle market management buyouts. Mr. Ayres
began his career as an investment banker with Lazard Freres & Co. in 1982 where
he remained until 1985. He currently serves as a director of Nimbus CD
International, Inc., ASC Network Corp., Tiara Motorcoach Corporation and Papa
Gino's, Inc.
TYLER T. ZACHEM, Director of the Company since December 1996. Mr. Zachem is
a principal of MDC Management Company III, L.P., which is the general partner of
McCown De Leeuw & Co. III, L.P., and McCown De Leeuw & Co. III (Europe), L.P.,
and a principal of MDC Management Company IIIA, L.P., which is the general
partner of McCown De Leeuw & Co. III (Asia), L.P. Mr. Zachem has been associated
60
<PAGE>
with McCown De Leeuw & Co. since July 1993. Mr. Zachem worked as a consultant
with McKinsey & Co. in 1993 and as an investment banker with McDonald & Company
from 1989 through 1991. He currently serves as a director of Outsourcing
Solutions Inc.
PETER LAMM, Director of the Company since December 1996. Mr. Lamm is
President of Fenway Partners, Inc., the management company for Fenway, a New
York based direct investment firm for institutional investors with a primary
objective of acquiring controlling positions in leading middle-market companies.
From February 1982 to April 1994, Mr. Lamm was employed by Butler Capital
Corporation, most recently as Senior Direct Investment Officer and a Managing
Director. Until April 1994, Mr. Lamm was also a general partner of the five
limited partnerships managed by Butler Capital Corporation. Mr. Lamm currently
serves as a director of Van de Kamp's, MW Manufacturers Inc., National School
Supply Company, Inc., Brown Moulding Company, Inc., Valley Recreation Products
Inc., Teters Floral Products, Inc. and Bear Archery, Inc.
RICHARD C. DRESDALE, Director of the Company since December 1996. Mr.
Dresdale is a Managing Director of Fenway Partners, Inc. Prior to founding
Fenway with Mr. Lamm and Andrea Geisser, Mr. Dresdale was a principal at
Clayton, Dubilier and Rice, Inc. ("CD&R") from June 1985 to March 1994. Mr.
Dresdale also served as a limited partner of the general partner of three of the
investment partnerships managed by CD&R. From January 1981 to March 1984, Mr.
Dresdale worked as an Investment Officer with Manufacturers Hanover Venture
Capital Corporation. Mr. Dresdale currently serves as a director of MW
Manufacturers Inc., Brown Moulding Company, Inc., Teters Floral Products, Inc.,
Bear Archery, Inc., Nu-kote Holdings, Inc. and Remington Arms Company.
EXECUTIVE COMPENSATION
As described below, the Company entered into employment agreements with
Thomas J. Ferraro, C. Gary Willett, Alan Mintz and Dirk C. Grizzle. The Company
employed no other executive officers on the date hereof.
Pursuant to the Employment Agreement between the Company and Thomas J.
Ferraro dated as of December 31, 1996 (the "Ferraro Employment Agreement"), Mr.
Ferraro shall serve as President of the Company and a director of the Company.
Mr. Ferraro shall receive a base salary of $175,000 per year and is eligible to
receive a bonus of up to 70% of his base salary depending upon the Company's
earnings. Additionally, Mr. Ferraro received 30 Class D Units in MBW LLC (which
are non-voting) on December 31, 1996. The Ferraro Employment Agreement provides
for a two-year term, commencing on the MBW Acquisition Closing Date; however, on
each anniversary of the MBW Acquisition Closing Date the term will automatically
be extended for one additional year so that the term ends two years after the
latest anniversary of the MBW Acquisition Closing Date. If the Company
terminates Mr. Ferraro's employment without cause, the Company is required to
pay him an amount equal to the base salary he would have been entitled to
receive through the end of the current term of the Ferraro Employment Agreement.
The Ferraro Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Ferraro may not compete with or solicit employees from the
Company.
Pursuant to the Employment Agreement between the Company and C. Gary Willett
dated as of December 31, 1996 (the "Willett Employment Agreement"), Mr. Willett
shall serve as Executive Vice President of the Company. Mr. Willett shall
receive a base salary of $140,000 per year and is eligible to receive a bonus of
up to 60% of his base salary depending upon the Company's earnings. The Willett
Employment Agreement provides for a two-year term, commencing on the MBW
Acquisition Closing Date; however, on each anniversary of the MBW Acquisition
Closing Date the term will be automatically extended for one additional year so
that the term ends two years after the latest anniversary of the MBW Acquisition
Closing Date. If the Company terminates Mr. Willett's employment without cause,
the Company is required to pay him an amount equal to the base salary he would
have been entitled to receive
61
<PAGE>
through the end of the current term of the Willett Employment Agreement. The
Willett Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Willett will not compete with or solicit employees from the
Company.
Pursuant to the Employment Agreement between the Company and Alan Mintz
dated as of January 20, 1997 (the "Mintz Employment Agreement"), Mr. Mintz
serves as Vice President of Sales of the Company. Mr. Mintz receives a base
salary of $120,000 per year and is eligible to receive a bonus of up to 60% of
his base salary based upon the Company's earnings. The Mintz Employment
Agreement provides for a one-year term, commencing on January 20, 1997. On July
20, 1997 and each day thereafter, the term will automatically be extended for an
additional day so that the term remaining under the Mintz Employment Agreement
will always be six months. If the Company terminates Mr. Mintz's employment
without cause, the Company is required to pay him an amount equal to the base
salary he would have been entitled to receive through the end of the current
term of the Mintz Employment Agreement. The Mintz Employment Agreement also
provides that until the later of the first anniversary of his termination and
the end of the current term of the employment agreement, Mr. Mintz may not
compete with or solicit employees from the Company.
Pursuant to the Employment Agreement between the Company and Dirk C. Grizzle
dated as of June 16, 1997 (the "Grizzle Employment Agreement"), Mr. Grizzle
serve as Chief Financial Officer of the Company. Mr. Grizzle receives a base
salary of $120,000 per year and is eligible to receive a bonus of up to 60% of
his base salary based upon the Company's earnings. Additionally, Mr. Grizzle
received 8 Class D Units in MBW LLC (which are non-voting) on June 30, 1997. The
Grizzle Employment Agreement provides for a one-year term, commencing on June
30, 1997. On June 30, 1998, the term will be automatically extended for an
additional six-month period on each day thereafter, the remaining term will
automatically be extended for an additional day so that the term remaining under
the Grizzle Employment Agreement will always be six months. If the Company
terminates Mr. Grizzle's employment without cause, the Company is required to
pay him an amount equal to the base salary he would have been entitled to
receive through the end of the current term of the Grizzle Employment Agreement.
The Grizzle Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Grizzle may not complete with or solicit employees from the
Company.
DIRECTOR COMPENSATION
Directors who are officers, employees or otherwise affiliates of the Company
do not receive compensation for their services as directors. Directors of the
Company are entitled to reimbursement of their reasonable out-of-pocket expenses
in connection with their travel to and attendance at meetings of the board of
directors or committees thereof. The Company does not intend to pay annual fees
or board attendance fees to directors of the Company who are not also officers,
employees or otherwise affiliates of the Company.
OWNERSHIP AND MANAGEMENT
The Company, a wholly-owned subsidiary of Holdings, which in turn is a
wholly-owned subsidiary of MBW LLC, was organized in November 1996 by Dartford,
majority owner MDC and Fenway to acquire the MRS. BUTTERWORTH'S syrup and
pancake mix business from Conopco. The Company is organized into three
operational groups which report to the President: the product management group,
the financial/ administrative group and the sales group. Dartford provides
day-to-day operational oversight to the Company including corporate and
financial planning, oversight of operations, production of business plans and
identification of possible acquisitions and advice with the financing thereof.
MDC provides strategic advice to the Company, particularly in connection with
the Company's financing needs and capital structure, including the financing of
future acquisitions, and identifies potential acquisition
62
<PAGE>
targets. Fenway also provides strategic advice to the Company and identifies
potential acquisition targets, however it is not required to provide any
services to the Company to receive its fee. There is some overlap in the
services provided by Dartford, MDC and Fenway, especially in connection with
strategic advice, including the Company's financing needs, capital structure and
the identification of potential acquisition targets. See "Certain Related
Transactions."
Dartford was formed by Managing Partner Ian R. Wilson, former Vice Chairman
of The Coca-Cola Company and former Chairman and Chief Executive Officer of
Castle & Cooke, Inc. (Dole Food Company, Inc.), to make investments in the
consumer food and beverage categories. Dartford's five partners have extensive
experience in building and managing leveraged investments in the food and
beverage industries. Over the past ten years, Dartford has successfully built
and managed a number of food companies including Wyndham Foods Inc. ("Wyndham"),
which Dartford grew to become the fourth largest cookie company in the United
States, Windmill Holding Corp. ("Windmill"), a branded baking products company,
Windy Hill Pet Food Company, Inc. ("Windy Hill"), a national supplier of branded
and private label pet food products, and Van de Kamp's, a leading frozen
convenience food company.
In September 1995, Dartford and Fenway organized Van de Kamp's to acquire
the VAN DE KAMP'S frozen seafood product line from The Pillsbury Company and to
serve as the foundation upon which to build a branded frozen convenience food
company. In May 1996, Van de Kamp's acquired MRS. PAUL'S frozen seafood business
from Campbell Soup Company and in July 1996 acquired the AUNT JEMIMA frozen
breakfast (waffles, pancakes and french toast) and CELESTE frozen pizza
businesses from The Quaker Oats Company. Van de Kamp's, under the direction of
Dartford, has assembled a 100 person sales, marketing and administrative
organization, moved and consolidated manufacturing facilities and reinvigorated
its brands with new product introductions and increased marketing support. Under
Dartford's management, Van de Kamp's has grown into a diversified branded frozen
convenience food company, with annual revenues increasing from approximately
$150 million at September 30, 1995 to approximately $400 million at December 31,
1996.
MDC is a private equity investment firm organized in 1984 to buy middle
market companies in partnership with management and build them through strategic
acquisition and internal growth. MDC currently manages three generations of
funds totaling approximately $500 million of contributed and committed capital.
MDC has developed, and committed itself to, an investment process that
identifies and then backs top managers in industries that are undergoing
consolidation or rapid internal growth. Over the past 13 years, MDC has made 30
separate acquisitions, of which 21 have been acquisition-oriented "buy and
builds" similar to the strategy contemplated by the Company, including DIMAC
Corporation, Eastman, Inc. and Outsourcing Solutions Inc.
Fenway is a second generation direct investment firm formed by Peter Lamm,
Richard Dresdale and Andrea Geisser. Together, the firm's principals have 50
years of experience building and managing direct investment portfolios. The
partners of Fenway have acquired and overseen investments in several food
processing and food distribution businesses, most recently as the majority owner
of Van de Kamp's in partnership with Dartford. Fenway focuses its investment
activities on acquiring interests in middle market companies with revenues
between $50 million and $500 million which offer leading market shares, strong
franchises, multiple profit centers and underlying growth.
Mr. Ferraro has over 23 years of grocery products experience, and Mr.
Willett has over 19 years of grocery products experience. Prior to joining MRS.
BUTTERWORTH'S, Messrs. Ferraro and Willett managed Heritage Brands, leading the
leveraged buyout and build-up of Campfire, Inc. Prior to joining Heritage
Brands, Mr. Ferraro spent 11 years with Borden, Inc., most recently as Vice
President of Sales for the Niche Grocery division. His experience with niche
grocery products extends back to his early career with RJR Nabisco Inc. and
Drackett Products, where he held a variety of marketing and sales positions.
Prior to joining Heritage Brands, Mr. Willett held a variety of senior
management positions at Borden, Inc. and The Kellogg Company.
63
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's securities by each person who beneficially owns more
than 5% of such securities, by directors and certain executive officers of the
Company, individually and by directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES
OF THE COMPANY'S OF THE COMPANY'S
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- --------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
5% STOCKHOLDERS:
Aurora Foods Holdings Inc.................................................. 1,000 100.0%
Community Corporate Center
445 Hutchinson Avenue
Columbus, Ohio 43235
All directors and executive officers as a group............................ 0 0.0%
</TABLE>
All of the outstanding capital stock of Holdings is held by MBW LLC. The
Class A and Class B common limited liability company interests ("MBW Common LLC
Securities") are the only classes of MBW LLC's limited liability company
interests that currently possess voting rights. As of August , 1997, there were
65,155 membership units of MBW Common LLC Securities. The following table sets
forth certain information regarding the beneficial ownership of MBW Common LLC
Securities by each person who beneficially owns more than 5% of such securities,
by directors and certain executive officers of the Company, individually, and by
the directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MBW COMMON MBW COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER LLC SECURITIES(1) LLC SECURITIES(1)
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
5% STOCKHOLDERS:
McCown De Leeuw & Co. III, L.P.(2)......................................... 43,250 66.4%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, California 94025
McCown De Leeuw & Co. III (Europe), L.P.(2)................................ 43,250 66.4%
c/o McCown De Leeuw & Co.
McCown De Leeuw & Co. III (Asia), L.P.(2).................................. 43,250 66.4%
c/o McCown De Leeuw & Co.
Gamma Fund, LLC(2)......................................................... 43,250 66.4%
c/o McCown De Leeuw & Co.
Fenway Partners Capital Fund, L.P.(3)...................................... 16,250 24.9%
152 West 57th Street
New York, New York 10019
California Public Employees Retirement System(4)........................... 10,000 15.3%
Lincoln Plaza
400 P Street
Sacremento, California 95814
Dartford Partnership L.L.C.(5)............................................. 3,750 5.8%
456 Montgomery Street, Suite 2200
San Francisco, California 94104
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MBW COMMON MBW COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER LLC SECURITIES(1) LLC SECURITIES(1)
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
OFFICERS AND DIRECTORS OF THE COMPANY:
Ian R. Wilson(5)........................................................... 3,750 5.8%
James B. Ardrey(5)......................................................... 3,750 5.8%
Ray Chung(5)............................................................... 3,750 5.8%
M. Laurie Cummings(5)...................................................... 3,750 5.8%
David E. De Leeuw(2)....................................................... 43,250 66.4%
Charles Ayres(2)........................................................... 43,250 66.4%
Tyler T. Zachem(2)......................................................... 43,250 66.4%
Peter Lamm(3).............................................................. 16,250 24.9%
Richard C. Dresdale(3)..................................................... 16,250 24.9%
Thomas J. Ferraro.......................................................... 200 0.3%
Dirk C. Grizzle............................................................ 150 0.2%
Alan Mintz................................................................. 100 0.2%
C. Gary Willett............................................................ 100 0.2%
All directors and executive officers as a group............................ 63,800 97.9
</TABLE>
- ------------------------
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition, of a security.
(2) Includes 29,974.9 membership units owned by McCown De Leeuw & Co. III, L.P.,
an investment partnership whose general partner is MDC Management Company
III, L.P. ("MDC III"), 2,128.0 membership units held by McCown De Leeuw &
Co. III (Europe), L.P., an investment partnership whose general partner is
MDC Management Company IIIA, L.P. ("MDC IIIA"), 498.7 membership units held
by McCown De Leeuw & Co. III (Asia), L.P., an investment partnership whose
general partner is MDC IIIA, and 648.4 membership units owned by Gamma Fund,
LLC, a California limited liability company. In addition, under an
irrevocable proxy, McCown De Leeuw & Co. III, L.P. has the power to vote all
of the LLC securities held by California Public Employees Retirement System.
The voting members of Gamma Fund, LLC are George E. McCown, David E. De
Leeuw, David E. King, Robert B. Hellman, Jr., Charles Ayres and Steven A.
Zuckerman, who are also the only general partners of MDC III and MDC IIIA.
Voting and dispositive decisions regarding the MBW Common LLC Securities are
made by Mr. McCown and Mr. De Leeuw, as Managing General partners of each of
MDC III and MDC IIIA, who together have more than the required
two-thirds-in-interest vote of the Managing General Partners necessary to
effect such decision on behalf of any such entity. Voting and dispositive
decisions regarding the MBW Common LLC Securities owned by Gamma Fund, LLC
are made by a vote or consent of a majority in number of the voting members
of Gamma Fund, LLC. Messrs. McCown, De Leeuw, King, Hellman, Ayres and
Zuckerman have no direct ownership of any shares of MBW Common LLC
Securities and disclaim beneficial ownership of any shares of MBW Common LLC
Securities except, in the case of Gamma Fund LLC, to the extent of their
proportionate partnership interests or membership interests.
(3) The general partner of Fenway is Fenway Partners, L.P., a Delaware limited
partnership, whose general partner is Fenway Partners Management Inc., a
Delaware corporation. Peter Lamm and Richard Dresdale are directors and
officers of Fenway Partners Management Inc., and as such may be deemed to
have the power to vote or dispose of MBW Common LLC Securities held by
Fenway. Each of Messrs. Lamm and Dresdale have no direct ownership of any
shares of MBW Common LLC Securities and disclaim beneficial ownership of any
shares of MBW Common LLC Securities except to the extent of their indirect
partnership intererests in Fenway.
(4) Under an irrevocable proxy, California Public Employees Retirement System
has granted McCown De Leeuw & Co. III, L.P. the right to vote all of the LLC
Securities it holds.
(5) Mr. Ian Wilson is the managing partner and Ms. M. Laurie Cummings and
Messrs. James B. Ardrey and Ray Chung are partners of Dartford, and as such
they may be deemed to have the power to vote or dispose of MBW Common LLC
Securities held by Dartford. Each of Ms. Cummings, Messrs. Wilson, Ardrey
and Chung disclaims the existence of a group and disclaims beneficial
ownership of MBW Common LLC Securities held by Dartford.
65
<PAGE>
CERTAIN RELATED TRANSACTIONS
DARTFORD MANAGEMENT SERVICES AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into a Management Services Agreement (the "Dartford Management Services
Agreement") with Dartford pursuant to which Dartford provides day-to-day
management oversight to the Company. Management services provided by Dartford
include, but are not limited to, corporate and financial planning, oversight of
operations including the production, distribution and sale of the Company's
products, production of business plans, identification of possible acquisitions
and advice with the financing thereof and definition and development of business
opportunities. The services provided by Dartford with relation to identification
of acquisition targets and financing overlap with some of the services provided
by MDC Management and Fenway. The annual management fee for these services will
be an amount based upon a percentage of consolidated annual net sales of MBW LLC
and its subsidiaries, provided that the fee shall be not less than $600,000 per
year. The net sales of MBW LLC are the same as those of the Company in that MBW
LLC's sole asset is its ownership of all of the outstanding common stock of
Holdings of the Company. In the event MBW LLC were to acquire additional assets
outside the Company, the basis for this management fee would be reevaluated;
however, the Dartford Management Services Agreement does not currently have any
provisions regarding any such change to the fee structure. The annual management
fee will be equal to 0.5% of net sales up to $250 million, an additional amount
equal to 0.375% of net sales above $250 million but less than $500 million and
an additional 0.25% of net sales above $500 million. The annual management fee
is subject to reduction (to an amount not less than $600,000) (i) upon the
Company, Holdings or MBW LLC hiring or appointing a Chief Executive Officer or
other senior executive with responsibility and authority for providing to the
Company the management services provided by Dartford under the Dartford
Management Services Agreement, (ii) upon the sale to the public by the Company,
Holdings or MBW LLC for its own account of shares of capital stock or limited
liability company interests pursuant to a registration statement filed with the
Commission or (iii) during the three months prior to termination of the Dartford
Management Services Agreement after a sale of substantially all of the equity
securities or assets of the Company, Holdings or MBW LLC. Dartford will also
receive a transaction fee for subsequent Acquisitions by the Company equal to
1.25% of the Acquisition Price ($2,750,000 for the LC Acquisition). Pursuant to
the Dartford Management Services Agreement, from the date thereof until the
earlier of June 30, 1998 and the termination of the Dartford Management Services
Agreement, Dartford will not organize and participate in a new investment group
formed for the purpose of effecting acquisitions unless (i) certain changes of
control have occurred in one of Dartford's three investment groups in existence
as of the date of the Dartford Management Services Agreement (a "Current
Investment Group") or (ii) the management services agreement between Dartford
and a member of a Current Investment Group is terminated. In addition, from the
date of the Dartford Management Services Agreement until June 30, 1998, Dartford
may not effect acquisitions through more than four investment groups. From and
after July 1, 1998 until the termination of the Dartford Management Services
Agreement, Dartford may organize and participate in a newly formed investment
group in the event of (i) certain changes of control in one of Dartford's
Current Investment Groups; (ii) the termination of one of the management
services agreements between Dartford and a member of a Current Investment Group;
and (iii) a new member joining Dartford and participating in a material respect
in one of Dartford's Current Investment Groups. The Dartford Management Services
Agreement expires on the earlier of the date six months following a sale of
substantially all of the equity securities or assets of the Company, Holdings or
MBW LLC and the fifth anniversary of the MBW Acquisition Closing Date and is
renewable annually thereafter unless terminated by either party. The Dartford
Management Services Agreement can also be terminated by either party prior to
the expiration of the term upon the occurrence of certain events. In the event
that the Dartford Management Services Agreement is terminated by the Company
(other than in the case of theft, wilful neglect and other limited circumstances
specified therein) Dartford shall be entitled to receive a severence payment
that can be no greater than 200% of the management fee in effect as of such
date. The Company believes that the terms of and fees paid for the management
services rendered are at least as favorable
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to the Company as those which could be negotiated with an unaffiliated third
party. In addition, for services rendered in connection with the MBW
Acquisition, including identification of the acquisition and negotiation of the
terms of the acquisition and the related services agreements, Dartford received
a fee of $250,000 upon the closing of the MBW Acquisition, was reimbursed
$32,655 for out-of-pocket expenses incurred in connection with the MBW
Acquisition and was issued 1,000 membership units of MBW Common LLC Securities.
MDC ADVISORY SERVICES AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into an Advisory Services Agreement (the "MDC Advisory Services
Agreement") with MDC Management Company III, L.P. ("MDC Management"), an
affiliate. Under the MDC Advisory Services Agreement, MDC Management provides
certain advisory functions primarily relating to the structuring of the
Company's bank financing and the capital structure of the Company,
identification and financing of future acquisitions, and general management
advice relating to the overall strategy and positioning of the Company. These
services overlap with some of the services provided by Dartford and Fenway. MDC
Management will receive an annual monitoring fee for providing these services
based upon a percentage of consolidated annual net sales of MBW LLC and its
subsidiaries, provided that the fee shall be not less than $250,000 per year.
The net sales of MBW LLC are the same as those of the Company in that MBW LLC's
sole asset is its ownership of all of the outstanding common stock of Holdings
of the Company. In the event MBW LLC were to acquire additional assets, the
basis for this management fee would be reevaluated. The annual monitoring fee
will be equal to $250,000 for net sales up to $120 million, an additional amount
equal to 0.12821% of net sales above $120 million but less than $250 million, an
additional amount equal to 0.125% of net sales above $250 million but less than
$500 million and an additional 0.083% of net sales above $500 million. MDC
Management will also receive a transaction fee for subsequent Acquisitions by
the Company equal to 0.65625% of the Acquisition Price ($1,444,000 for the LC
Acquisition). The MDC Advisory Services Agreement expires on the earlier of the
date six months following a sale of substantially all of the equity securities
or assets of the Company, Holdings or MBW LLC and the fifth anniversary of the
MBW Acquisition Closing Date and is renewable annually thereafter unless
terminated by the Company. The Company believes that the terms of and fees paid
for the professional services rendered are at least as favorable to the Company
as those which could be negotiated with an unaffiliated third party. In
addition, upon the closing of the MBW Acquisition, MDC Management received a
one-time fee of $1,250,000 for financial advisory services provided to the
Company in connection therewith, including negotiation and structuring of the
Company's bank financing and advising on the capital structure of the Company
(including the issuance of the Notes).
FENWAY AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into an agreement (the "Fenway Agreement") with Fenway, an affiliate. As
an incentive to bring acquisition candidates to the Company, under the Fenway
Agreement, Fenway will receive a transaction fee for subsequent Acquisitions
($481,000 for the LC Acquisition) by the Company equal to 0.21875% of the
Acquisition Price. However, Fenway is not required to introduce such acquisition
candidates nor provide any services to the Company to receive the transaction
fee. The Company believes that the terms of and fees paid thereunder are at
least as favorable to the Company as those which could be negotiated with an
unaffiliated third party.
MBW AGREEMENTS
Concurrently with the consummation of the MBW Acquisition, the Company
entered into agreements with Thomas J. Ferraro, President of the Company, and C.
Gary Willett, Executive Vice President of the Company, whereby the officers
executed promissory notes in favor of the Company in exchange for monies
borrowed to assist in the capitalization of their limited liability interests
held with investors.
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The promissory notes mature December 31, 1999 with required annual payments.
Interest is due and payable quarterly at the rate of 8.00% per annum. The
balance currently outstanding on the Mr. Ferraro's and Mr. Willett's promissory
notes are $60,000 and $50,000, respectively. The Company believes that the terms
of these notes and the interest paid thereunder are at least as favorable to the
Company as those which these persons could have negotiated with an unaffiliated
third party.
LOG CABIN AGREEMENTS
Concurrently with the consummation of the LOG CABIN Acquisition, the Company
entered into agreements with Alan Mintz, Vice President of Sales, and Dirk
Grizzle, Chief Financial Officer, whereby the officers executed promissory notes
in favor of the Company in exchange for monies borrowed to assist in the
capitalization of the limited liability interests held with investors. The
promissory notes mature July 1, 2000 with required annual payments. Interest is
due and payable quarterly at the rate of 8.00% per annum. The balances currently
outstanding on the promissory notes are $50,000 for Alan Mintz and $75,000 for
Dirk Grizzle. The Company believes that the terms of these notes and the
interest paid thereunder are at least as favorable to the Company as those which
these persons could have negotiated with an unaffiliated third party.
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DESCRIPTION OF SENIOR CREDIT FACILITIES
The description set forth below is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Company's Senior Credit Facilities, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
In connection with the MBW Acquisition, the Company entered into a Credit
Agreement with Chase Manhattan and various lenders providing for senior secured
credit facilities. In connection with such financing, Chase Manhattan acts as
Administrative Agent and CSI acted as Arranging Agent. In connection with the LC
Acquisition, the Senior Credit Facilities were amended to provide as follows:
The Senior Credit Facilities consist of (i) a senior secured Term Facility
in a principal amount of $40.0 million and (ii) a senior secured Revolving
Facility providing for revolving loans to the Company and the issuance of
letters of credit for the account of the Company, in an aggregate principal and
stated amount at any time not to exceed $60.0 million (of which not more than
$5.0 million may be represented by letters of credit).
Loans and letters of credit under the Revolving Facility will be available
at any time through the final maturity date on December 31, 2003. The Term
Facility will have a final maturity date of December 31, 2003, and will amortize
in quarterly payments of $1.125 million through December 31, 1999 with such
quarterly payments increasing annually in the amount of $250,000 per payment for
each year thereafter until the final maturity date.
The Company is required to make mandatory prepayments on the Senior Credit
Facilities under certain circumstances, including upon certain asset sales,
issuance of debt securities or issuance of equity securities to persons other
than the Equity Investors. The Company will also be required to make prepayments
on the Senior Credit Facilities and permanently reduce commitments under the
Revolving Facility in an amount equal to 50% of the Company's annual trailing
Consolidated Excess Cash Flow commencing with the fiscal year ending in December
1998 and thereafter and upon receipt of cash proceeds from property and casualty
insurance or condemnation awards. At the Company's option, subject to certain
requirements, loans may be prepaid, and revolving credit commitments or letters
of credit may be permanently reduced, in whole or in part at any time without
premium or penalty.
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed by Holdings and any future domestic
subsidiaries of the Company (collectively, the "Guarantors"). In addition, the
Senior Credit Facilities are secured by first priority or equivalent security
interests in all capital stock of the Company (including all the capital stock
of, or other equity interest in, future domestic subsidiaries of the Company)
and the tangible and intangible assets of the Company and the Guarantors.
At the Company's option the interest rate per annum applicable to the
Revolving Facility will be either the rate (grossed-up for maximum statutory
reserve requirements for eurocurrency liabilities) at which eurodollar deposits
for one, two, three or six months (as selected by the Company) are offered to
Chase Manhattan in the interbank eurodollar market in the approximate amount of
Chase Manhattan's share of the relevant Loan (the "Adjusted Eurodollar Rate")
plus a margin of 2.25% (the "Applicable Eurodollar Rate Margin") or the Base
Rate plus a margin of 1.25%. The margin is based upon the Company's ratio of
consolidated total debt to consolidated EBITDA. The Base Rate is the higher of
(i) the rate of interest publicly announced by Chase Manhattan as its prime rate
in effect at its principal office in New York City and (ii) the federal funds
effective rate plus 0.5%.
At the Company's option, the interest rate per annum applicable to loans
under the Term Facility will be either the Adjusted Eurodollar Rate plus a
margin of 2.25% or the Base Rate plus a margin of 1.25%. The Base Rate is the
higher of (i) the rate of interest publicly announced by Chase Manhattan as its
prime
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rate in effect at its principal office in New York City, (ii) the federal funds
effective rate plus 0.5%, and (iii) the secondary market rate for certificates
of deposit (grossed-up for maximum statutory reserve requirements) plus 1%.
The Company pays a per annum fee equal to 0.5% on the undrawn portion of the
commitments in respect of the Revolving Facility and a per annum fee on the face
amount of all outstanding letters of credit equal to the Applicable Eurodollar
Rate Margin then in effect with respect to loans under the Revolving Facility
bearing interest based upon the Eurodollar Rate. The per annum fee is also based
upon the Company's ratio of consolidated total debt to consolidated EBITDA.
The Senior Credit Facilities contain a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into leases,
guarantees, investments or acquisitions, engage in mergers or consolidations,
make capital expenditures, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. In addition, under
the Senior Credit Facilities, the Company is required to comply with specified
ratios and tests, including minimum interest coverage, minimum fixed charge
coverage and maximum leverage ratios and a limitation on capital expenditures.
An event of default under the Senior Credit Facilities will occur (i) if the
Company fails to make payments under the Senior Credit Facilities or, in certain
circumstances, under other outstanding indebtedness; (ii) if the Company
breaches the financial covenants contained in the Senior Credit Facilities;
(iii) if the Company breaches the warranties contained in the Senior Credit
Facilities; (iv) in the event of the bankruptcy, insolvency or reorganization of
the Company; (v) if any judgment or attachment involving, in an individual case
an amount in excess of $1,000,000 or, in the aggregate in excess $2,000,000,
shall be entered against Holdings or the Company and shall remain undischarged
on unstayed for a period of 60 days; (vi) if any judgment or decree of
dissolution entered against the Company; (vii) if there occurs certain specified
ERISA events; (viii) if the Company undergoes a "change in control" as described
below; (ix) if the MBW Co-Pack Agreement, the Log Cabin Co-Pack Agreement, the
Red Wing Co-Pack Agreement or the Flavor Supply Agreement are terminated, and
the Company fails to make alternate arrangements satisfactory to the Lenders;
(x) a failure to comply with the subordination provisions contained in the
Senior Credit Facilities; or (xi) under certain other circumstances customary
for a transaction of this type. An Event of Default under the Indentures will
occur if any of the above occur and an amount in excess of $5 million is
accelerated under the terms of the Senior Credit Facilities and such default is
not cured or rescinded within a 10 day period. See "Description of Notes--Events
of Default." As noted above, an event of default under the Senior Credit
Facilities will occur if there is a change in control in the Company.
A change in control will be deemed to have occurred if (i) prior to the
consummation of any initial public offering of the common stock of Holdings, (x)
MBW LLC ceases to own directly 100% of the outstanding capital stock of Holdings
not including those shares of common stock of Holdings, distributed pursuant to
employee stock plans, (y) MDC, Fenway and Dartford cease to beneficially own in
the aggregate at least 51% of the voting securities of the Company or (z) any
person (other than MDC, Fenway or Dartford), including a "group" within the
meaning of Sections 13(d) and 14(d) (2) of the Exchange Act which includes such
person, acquires beneficial ownership of more than 30% of the voting securities
of the Company; (ii) Holdings shall at any time cease to own 100% of the
outstanding capital stock of the Company; or (iii) after the consummation of any
initial public offering of the common stock of Holdings, (x) MDC, Fenway and
Dartford beneficially own in the aggregate a lesser percentage of the voting
securities of the Company than any other person, including a "group" within the
meaning of Sections 13(d) and 14(d) (2) of the Exchange Act which includes such
person, (y) there is a change in composition of a majority of the Board of
Directors of the Company, (z) any person (other than MDC, Fenway or Dartford),
including a "group" within the meaning of Sections 13(d) and 14(d) (2) of the
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Exchange Act which includes such person, acquires beneficial ownership of more
than 25% of the voting securities of the Company. The change of control
provisions contained in the Indenture differ from those contained in the Senior
Credit Facilities with respect to those changes in percentage ownership and the
composition of the Board of Directors that trigger such provisions. See
"Description of Notes--Change of Control."
The Senior Credit Facilities also contain provisions that prohibit any
modification of the Indentures in any manner adverse to the banks, financial
institutions and other entities under the Senior Credit Facilities (the
"Lenders") and that limit the Company's ability to refinance the Notes without
the consent of such Lenders
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DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued, and the Old Notes were issued under an
indenture dated as of February 10, 1997 (the "Indenture") between the Company
and Wilmington Trust Company, as Trustee (the "Trustee"). The Old Notes and the
New Notes shall be collectively referred to as the "Notes." The terms and
conditions of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 as in
effect on the date of the Indenture. The following statements are summaries of
the provisions of the Notes and the Indenture and do not purport to be complete.
Such summaries make use of certain terms defined in the Indenture and are
qualified in their entirety by express reference to the Indenture. The
definitions of certain capitalized terms used in the following summary are set
forth below under "-- Certain Definitions." A copy of the Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, except that, at the
option of the Company, payment of interest may be made by check mailed to the
address of the holders as such address appears in the Note register. Any Old
Notes that remain outstanding after the completion of the Exchange Offer,
together with the New Notes issued in connection with the Exchange Offer, will
be treated as a single class of securities under the Indenture. See "The
Exchange Offer" and "Old Notes Exchange and Registration Rights Agreement."
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $100.0 million aggregate principal amount, and will mature on
February 15, 2007. Each Note will bear interest at the rate per annum shown on
the front cover of this Prospectus from the date of issuance, or from the most
recent date to which interest has been paid or provided for, payable
semi-annually on February 15 and August 15 of each year commencing February 15,
1998 to holders of record at the close of business on the February 1 or August 1
immediately preceding the interest payment date.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable at the option of the
Company prior to February 15, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
the registered address of each holder of Notes to be redeemed, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12 month period commencing on February 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------- ------------------
<S> <C>
2002.............................. 104.9375%
2003.............................. 103.2917%
2004.............................. 101.6458%
2005 and thereafter............... 100.0000%
</TABLE>
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In addition, at any time and from time to time prior to February 15, 2000,
the Company may redeem up to $35.0 million of the aggregate principal amount of
Notes with the cash proceeds of one or more Equity Offerings received by, or
invested in, the Company at a redemption price (expressed as a percentage of
principal amount) of 109.875%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least $65.0 million of the aggregate principal amount
of the Notes remain outstanding after each such redemption.
At any time on or prior to February 15, 2002, the Notes may also be redeemed
as a whole at the option of the Company upon the occurrence of a Change of
Control, upon not less than 30 nor more than 60 days prior notice (but in no
event more than 90 days after the occurrence of such Change of Control) mailed
by first-class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at February 15, 2002 (such redemption price being described under "--Optional
Redemption") plus (2) all required interest payments due on such Note through
February 15, 2002, computed using a discount rate equal to the Treasury Rate
plus 50 basis points over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to February 15, 2002; provided, however, that if
the period from the Redemption Date to February 15, 2002 is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note.
RANKING
The payment of Indebtedness evidenced by, and all other obligations in
respect of, the Notes is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash or Cash Equivalents when due of
all Senior Indebtedness of the Company. However, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "Defeasance" below is not subordinate to any Senior Indebtedness or
subject to the restrictions described herein. At June 28, 1997, on a pro forma
basis after giving effect to the LC Acquisition, the Company would have had
$87.0 million of Senior Indebtedness outstanding (excluding unused revolving
credit commitments of $13.0 million under the Senior Credit Agreement). Although
the Indenture contains limitations on the amount of additional Indebtedness that
the Company may Incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness."
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"Senior Indebtedness" means the principal of, premium (if any), and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, the Bank Indebtedness and all other Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter issued, unless,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness will not include (i) any obligation of the
Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (iii) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations or (v) any Capital Stock.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company, including the Other Notes. The Company has agreed
in the Indenture that it will not incur, directly or indirectly, any
indebtedness that is subordinate or junior in ranking in any respect to Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinate or junior to Secured
Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any), or interest on, or
liquidated damages with respect to, or make any payment on account of any other
obligations with respect to, the Notes or make any deposit pursuant to the
provisions described under "Defeasance" below and may not otherwise purchase or
retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness
is not paid when due in cash or Cash Equivalents or (ii) any other default on
Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash or Cash Equivalents. However, the
Company may pay any such amounts without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay any
amounts in respect of the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Company may resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360 day period,
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irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents of the Senior Indebtedness before the holders of the Notes are
entitled to receive any payment, and until the Senior Indebtedness is paid in
full in cash or Cash Equivalents, any payment or distribution to which holders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of the Senior Indebtedness as their interests may appear. If a
distribution is made to holders of the Notes that, due to the subordination
provisions, should not have been made to them, such holders are required to hold
it in trust for the holders of Senior Indebtedness and pay it over to them as
their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Senior
Subordinated Indebtedness.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of the Notes will have the right to require the Company
to repurchase all or any part of such holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date):
(i) prior to the first public offering of Voting Stock of the Company,
Holdings or MBW LLC, as the case may be, the Permitted Holders cease to be
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of majority voting power of the
Voting Stock of the Company, whether as a result of issuance of securities
of the Company, Holdings or MBW LLC, as the case may be, any merger,
consolidation, liquidation or dissolution of the Company, Holdings or MBW
LLC, as the case may be, any direct or indirect transfer of securities by
any Permitted Holder or otherwise (for purposes of this clause (i) and
clause (ii) below, the Permitted Holders will be deemed to beneficially own
any Voting Stock of a Person (the "specified corporation") held by any other
Person (the "parent corporation") so long as the Permitted Holders
beneficially own, directly or indirectly, a majority of the voting power of
the Voting Stock of the parent corporation);
(ii) following the first public offering of Voting Stock of the Company,
Holdings or MBW LLC, as the case may be, any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company, Holdings or MBW LLC, as the case may be;
provided that the
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Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company, Holdings or MBW LLC, as the
case may be, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company, Holdings or MBW LLC, as
the case may be, (for purposes of this clause (ii), such other person shall
be deemed to beneficially own any Voting Stock of a specified corporation
held by a parent corporation, if such other person "beneficially owns" (as
defined in this clause (ii)), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation); or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder of record of the Notes with a copy to the Trustee stating: (i) that a
Change of Control has occurred and that such holder has the right to require the
Company to purchase such holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on a record
date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts and financial information concerning such
Change of Control; (iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (iv) the
procedures determined by the Company, consistent with the Indenture, that a
holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Agreement. The change
of control provisions contained in the Senior Credit Facilities differ from
those contained in the Indenture with respect to those changes in percentage
ownership and the composition of the Board of Directors that will trigger an
event of default under such provisions. See "Description of Senior Credit
Facilities." Future Senior Indebtedness of the Company and its Subsidiaries may
contain prohibitions of certain events that would constitute a Change of Control
or require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the Senior Credit Agreement
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generally prohibit the Company's prepayment of the Notes prior to their
scheduled maturity. Consequently, if the Company is not able to prepay the Bank
Indebtedness and any other Senior Indebtedness containing similar restrictions
or obtain requisite consents or waivers, as described above, the Company will be
unable to fulfill its repurchase obligations if holders of Notes exercise their
repurchase rights following a Change of Control, thereby resulting in a default
under the Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any of its Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company and any of its Subsidiaries may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Subsidiaries may Incur the following Indebtedness: (i) Bank Indebtedness
provided that the aggregate principal amount of Indebtedness Incurred pursuant
to this clause (i) does not exceed an amount outstanding at any time equal to
$60.0 million less the aggregate amount of permanent reductions of commitments
to extend credit thereunder and repayments of principal thereof (without
duplication of repayments required as a result of such reductions of
commitments); (ii) Indebtedness (A) of the Company to any Wholly-Owned
Subsidiary and (B) of any Subsidiary to the Company or any Wholly-Owned
Subsidiary; (iii) Indebtedness represented by the Notes, any Indebtedness (other
than the Indebtedness described in clauses (i)-(ii) above) outstanding on the
date of the Indenture and any Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iii) or this paragraph (b); (iv)
Indebtedness represented by the Note Guarantees and Guarantees of Indebtedness
Incurred pursuant to clause (i) above; (v) Indebtedness under Currency
Agreements and Interest Rate Agreements which are entered into for bona fide
hedging purposes of the Company or its Subsidiaries (as determined in good faith
by the Board of Directors or senior management of the Company) and correspond in
terms of notional amount, duration, currencies and interest rates, as
applicable, to Indebtedness of the Company or its Subsidiaries Incurred without
violation of the Indentures or to business transactions of the Company or its
Subsidiaries on customary terms entered into in the ordinary course of business;
(vi) Indebtedness of the Company attributable to Capitalized Lease Obligations,
or Incurred to finance the acquisition, construction or improvement of fixed or
capital assets, or constituting Attributable Indebtedness in respect of
Sale/Leaseback Transactions, in an aggregate principal amount at any one time
outstanding not in excess of $5.0 million; and (vii) Indebtedness of the Company
or any of its Subsidiaries (which may comprise Bank Indebtedness) in an
aggregate principal amount at any time outstanding not in excess of $10.0
million.
(c) Notwithstanding any other provision of this covenant, the Company shall
not Incur any Indebtedness (i) pursuant to paragraph (b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem, defease,
retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations or (ii) pursuant to paragraph (a) or (b) if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
(d) The Company shall not Incur any Secured Indebtedness which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such Secured Indebtedness for so long
as such Secured Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (A) dividends or distributions payable in its Capital Stock
(other than Disqualified
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Stock) and (B) dividends or distributions payable to the Company or another
Subsidiary (and, if such Subsidiary is not a Wholly-Owned Subsidiary, to its
other stockholders on a PRO RATA basis), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company or any Subsidiary
held by Persons other than the Company or another Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment"), if
at the time the Company or such Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company could not Incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) or made subsequent to
the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the Issue Date
to the end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment as to which financial results are available (but in no event
more than 135 days prior to the date of such Restricted Payment) (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other cash
contributions to its capital subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries); (C)
aggregate Net Cash Proceeds from the issue or sale of its Capital Stock to an
employee stock ownership plan or similar trust, provided, however, that if such
plan or trust Incurs any Indebtedness to or Guaranteed by the Company to finance
the acquisition of such Capital Stock, such aggregate amount shall be limited to
any increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; and (D) the amount
by which Indebtedness of the Company or its Subsidiaries is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or
its Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or other
property, distributed by the Company or any Subsidiary upon such conversion or
exchange).
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries); provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale shall be excluded from clause (3)(B) of paragraph (a); (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under "Limitation on Sales of Assets and
Subsidiary Stock" below; provided, however, that such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments; (iv)
dividends paid within 60 days after the date of declaration if at such date of
declaration
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such dividend would have complied with this provision; provided, however, that
such dividend shall be included in the calculation of the amount of Restricted
Payments; (v) payment of dividends or other distributions by the Company for the
purposes set forth in clauses (A) through (C) below; provided, however, that any
such dividend or distribution described in clauses (A) and (B) will be excluded
in the calculation of the amount of Restricted Payments and any such dividend or
distribution described in clause (C) will be included in the calculation of the
amount of Restricted Payments: (A) in amounts equal to the amounts required for
Holdings and MBW LLC to pay franchise taxes and other fees required to maintain
its legal existence and provide for audit, accounting, legal and other operating
costs of up to $500,000 per fiscal year; (B) in amounts equal to amounts
required for Holdings and MBW LLC to pay Federal, state and local income taxes
to the extent such income taxes are attributable to the income of the Company
and its Subsidiaries; and (C) in amounts equal to amounts expended by the
Company, Holdings or MBW LLC to repurchase Capital Stock of the Company,
Holdings or MBW LLC owned by employees (including former employees) of the
Company or its Subsidiaries or their assigns, estates and heirs; provided that
the aggregate amount paid, loaned or advanced pursuant to this clause (C) shall
not, in the aggregate, exceed the sum of $3.0 million plus any amounts
contributed by MBW LLC or Holdings to the Company as a result of resales of such
repurchased shares of Capital Stock; or (vi) any repurchase of equity interest
deemed to occur upon exercise of stock options if such equity interests
represent a portion of the exercise price of such options.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Company
shall not, and shall not permit any of its Subsidiaries to, create or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligation
owed to the Company, (ii) make any loans or advances to the Company or (iii)
transfer any of its property or assets to the Company; except: (A) any
encumbrance or restriction pursuant to an agreement in effect on the Issue Date,
including those arising under the Senior Credit Documents; (B) any encumbrance
or restriction with respect to a Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by a Subsidiary prior to the date on which such
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary was acquired by the Company); (C)
any encumbrance or restriction with respect to a Subsidiary pursuant to an
agreement effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clauses (A) or (B) or this clause (C) or contained in
any amendment, supplement or modification (including an amendment and
restatement) to an agreement referred to in clauses (A) or (B) or this clause
(C); provided, however, that the encumbrances and restrictions contained in any
such refinancing agreement or amendment taken as a whole are no less favorable
to the holders of the Notes in any material respect than encumbrances and
restrictions contained in such agreements; (D) in the case of clause (iii), any
encumbrance or restriction (1) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is subject to a
lease, license, or similar contract, (2) by virtue of any transfer of, agreement
to transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Subsidiary not otherwise prohibited by the Indentures, or
(3) contained in security agreements securing Indebtedness of a Subsidiary to
the extent such encumbrance or restrictions restrict the transfer of the
property subject to such security agreements; (E) any such restriction imposed
by applicable law; (F) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition; and (G) purchase obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired.
LIMITATION ON SALES OF ASSETS. (a) The Company shall not, and shall not
permit any Subsidiary to, make any Asset Disposition unless (i) the Company or
such Subsidiary receives consideration (including by way of relief from, or by
any other Person assuming sole responsibility for, any liabilities,
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contingent or otherwise) at the time of such Asset Disposition at least equal to
the fair market value of the shares and assets subject to such Asset
Disposition, (ii) at least 85% of the consideration thereof received by the
Company or such Subsidiary is in the form of cash and (iii) an amount equal to
100% of the Net Available Cash from such Asset Disposition is applied by the
Company (or such Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one year
after the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Subsidiary elects, to reinvest in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary with Net Available Cash
received by the Company or another Subsidiary) within one year after the later
of the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to purchase
Notes pursuant and subject to the conditions of the Indenture to the Noteholders
at a purchase price of 100% of the principal amount thereof plus accrued and
unpaid interest to the purchase date; and (D) fourth, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C), to (x) acquire Additional Assets (other than Indebtedness and
Capital Stock) or (y) prepay, repay or purchase Indebtedness of the Company
(other than Indebtedness owed to an Affiliate of the Company and other than
Disqualified Stock of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
described in this clause (D) within one year from the receipt of such Net
Available Cash or, if the Company has made an Offer pursuant to clause (C), six
months from the date such Offer is consummated; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions, the Company and
its Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
covenant at any time exceed $1.0 million. The Company shall not be required to
make an offer for Notes pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clauses (A)
and (B)) is less than $10.0 million for any particular Asset Disposition (which
lesser amounts shall be carried forward for purposes of determining whether an
offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness (other than Disqualified Stock) of the
Company or any Subsidiary and the release of the Company or such Subsidiary from
all liability on such Indebtedness in connection with such Asset Disposition and
(y) securities received by the Company or any Subsidiary of the Company from the
transferee that are promptly converted by the Company or such Subsidiary into
cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes at a purchase price
of 100% of their principal amount plus accrued interest to the purchase date in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price of
the Notes tendered pursuant to the offer is less than the Net Available Cash
allotted to the purchase of the Notes, the Company will apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) above.
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(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will
not permit any Subsidiary to, directly or indirectly, enter into or conduct any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $5.0 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Subsidiary, as the case may be, from
a financial point of view.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments" (and in the case of Permitted Investments,
only those described in clauses (v), (vi) and (ix) of the definition of
Permitted Investments), (ii) the performance of the Company's or Subsidiary's
obligations under any employment contract, collective bargaining agreement,
employee benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the ordinary course of business, (iii)
payment of compensation to, and indemnity provided on behalf of, employees,
officers, directors or consultants (excluding the Management Services Agreement)
in the ordinary course of business, (iv) maintenance in the ordinary course of
business of benefit programs or arrangements for employees, officers or
directors, including vacation plans, health and life insurance plans, deferred
compensation plans, and retirement or savings plans and similar plans, (v) any
transaction between the Company and a Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries or (vi) the payment of certain fees under the
Management Services Agreement as in effect on the Issue Date.
LIMITATION ON SALE OF SUBSIDIARY CAPITAL STOCK. The Company (i) will not,
and will not permit any Subsidiary to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Subsidiary to any Person (other
than to the Company or a Wholly-Owned Subsidiary) and (ii) will not permit any
Subsidiary to issue any of its Capital Stock (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly-Owned Subsidiary; provided, however, that
the foregoing shall not prohibit such conveyance, sale, lease or other
disposition of all the Capital Stock of a Subsidiary if the net cash proceeds
from such transfer, conveyance, sale, lease, other disposition or issuance are
applied in accordance with the covenant described above under "-- Limitation on
Sales of Assets."
SEC REPORTS. Notwithstanding that the Company may not be required to be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the Commission, and within 15 days after such
reports are filed, provide the Trustee and the holders (at their addresses as
set forth in the register of Notes) with the annual reports and the information,
documents and other reports which are otherwise required pursuant to Section 13
and 15(d) of the Exchange Act. Such requirements may also be satisfied, prior to
April 11, 1997, with the filing with the Commission of a
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registration statement under the Securities Act that contains the foregoing
information (including financial statements) and by providing copies thereof to
the Trustee and the holders. In addition, following the registration of the
common stock of the Company pursuant to Section 12(b) or 12(g) of the Exchange
Act, the Company shall furnish to the Trustee and the holders, promptly upon
their becoming available, copies of the Company's annual report to stockholders
and any other information provided by the Company to its public stockholders
generally.
FUTURE NOTE GUARANTORS. The Company will cause each Subsidiary which Incurs
Indebtedness or which is a guarantor of Indebtedness Incurred pursuant to clause
(b)(i) of the covenant described under "--Limitation on Indebtedness" to execute
and deliver to the Trustee a Note Guarantee pursuant to which such Subsidiary
will Guarantee, jointly and severally, to the holders and the Trustee, subject
to subordination provisions substantially the same as those described above, the
full and prompt payment of the Notes in the Indenture. Each Note Guarantee will
be limited in amount to an amount not to exceed the maximum amount that can be
Guaranteed by that Subsidiary without rendering the Note Guarantee, as it
relates to such Subsidiary, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, engage in any business, other than the food business and such
other business activities which are incidental or related thereto.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indentures;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been Incurred by the Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur at least an additional $1.00 of Indebtedness pursuant to
paragraph (a) of "--Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company will have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (1) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company or another Wholly-Owned
Subsidiary of the Company and (2) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
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EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Merger
and Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes which shall
constitute an Event of Default under clause (ii) above), other than "--Merger
and Consolidation", (v) the failure by the Company to comply for 60 days after
notice with its other agreements contained in the Indentures, (vi) Indebtedness
of the Company or any Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated exceeds
$5.0 million and such default shall not have been cured or such acceleration
rescinded within a 10-day period (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $5.0 million (to the extent not
covered by insurance) is rendered against the Company or a Significant
Subsidiary and such judgment or decree shall remain undischarged or unstayed for
a period of 60 days after such judgment becomes final and non- appealable (the
"judgment default provision") or (ix) the failure of any Note Guarantee to be in
full force and effect (except as contemplated by the terms thereof) or the
denial or disaffirmation by any Note Guarantor of its obligations under the
Indenture or any Note Guarantee if such default continues for 10 days. However,
a default under clauses (iv) and (v) will not constitute an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and accrued
and unpaid interest shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60 day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee,
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however, may refuse to follow any direction that conflicts with law or the
Indentures or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indentures, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption or repurchase of any Note or change the time at which any Note may be
redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of the Notes, (vii) impair the right of any holder to receive payment
of principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes or (viii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f) (2) (B) of
the Code), to add Guarantees with respect to the Notes, to secure the Notes, to
add to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indentures Act. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
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The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Subsidiaries and the judgment default provision described under
"Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "Certain Covenants--Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Subsidiaries), or (viii) or (ix) under "Events of Default" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
Wilmington Trust Company is to be the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Subsidiary in a
Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary
as a result of the acquisition of such Capital Stock by the Company or another
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Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Subsidiary; provided, however, that, in the case
of clauses (ii) and (iii), such Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who is a director or
officer (a) of such Person, (b) of any Subsidiary of such Person or (c) of any
Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock", "-- Limitation on Restricted Payments"
and "--Limitation on Affiliate Transactions" only, "Affiliate" shall also mean
any beneficial owner of shares representing 5% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or a Wholly-Owned Subsidiary or by the Company or a
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) the sale of other
assets so long as the fair market value of the assets disposed of pursuant to
this clause (iv) does not exceed $1.0 million in the aggregate in any fiscal
year and $5.0 million in the aggregate prior to February 15, 2007, (v) for the
purposes of the covenant described under "Certain Covenants--Limitation on Sales
of Assets" only, a disposition subject to the covenant described under "--
Limitation on Restricted Payments" and (vi) the disposition of all or
substantially all of the assets of the Company in the manner permitted pursuant
to the provisions described under the caption "--Merger and Consolidation" or
any disposition that constitutes a Change of Control pursuant to the Indenture.
"Attributable Indebtedness" in respect of a Sale/ Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to Preferred Stock multiplied by the
amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Documents and any Indebtedness that is incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) Indebtedness under such Senior Credit Documents
including Indebtedness that refinances such Indebtedness, as amended from time
to time, including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for postfiling
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interest is allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof (including, without limitation, cash collateralization of letters of
credit).
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard &
Poor's Ratings Group, or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500.0 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above; (v)
commercial paper rated at the time of acquisition thereof at least "A-2" or the
equivalent thereof by Standard & Poor's Ratings Group or "P-2" or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Certificated Securities" means registered Notes issued in certificated
form.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Aurora Foods Inc., a Delaware corporation (formerly MBW
Foods Inc.).
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, to the extent deducted in calculating such Consolidated
Net Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense, in each case for such period,
(v) other non-cash charges reducing Consolidated Net Income (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period or amortization of a prepaid cash expense that
was paid in a prior period), and (vi) for the period ending on the first
anniversary of the Issue Date only, non-recurring relocation and start-up
expenses not in excess of $3 million, in each case for such period, and minus,
to the extent not already deducted in
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calculating Consolidated Net Income, (i) the aggregate amount of "earnout"
payments paid in cash during such period in connection with acquisitions
previously made by the Company and (ii) non-cash items increasing Consolidated
Net Income for such period.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any of its Subsidiaries
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period the Company or any of its Subsidiaries shall have made any Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
attributable to any Indebtedness of the Company or any of its Subsidiaries
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Indebtedness after
such sale), (3) if since the beginning of such period the Company or any of its
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Subsidiary of the Company (or any Person which becomes a Subsidiary of the
Company) or an acquisition of assets, including any Investment in a Subsidiary
of the Company or any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Indebtedness and
including the pro forma expenses and cost reductions calculated on a basis
consistent with Regulation S-X of the Securities Act) as if such Investment or
acquisition occurred on the first day of such period and (4) if since the
beginning of such period any Person (that subsequently became a Subsidiary of
the Company or was merged with or into the Company or any Subsidiary of the
Company since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (2) or (3) above if made by the Company or a
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Subsidiaries, plus, to the extent not included in
such interest expense, (i) interest expense
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attributable to Capitalized Lease Obligations and imputed interest with respect
to Attributable Indebtedness, (ii) amortization of debt discount and debt
issuance cost (other than those debt discounts and debt issuance costs incurred
on the MBW Acquisition Closing Date and the Issue Date), (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Currency Agreements and Interest Rate Agreements
(including amortization of fees), (viii) the product of (A) all Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary multiplied by (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined Federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Subsidiary, except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income;(ii) any net income (loss)
of any person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Subsidiary during such period to the Company
or another Subsidiary as a dividend (subject, in the case of a dividend that
could have been made to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) any extraordinary gain
or loss; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"CSI" means Chase Securities Inc.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
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"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $5.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indentures.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to 123 days after the Stated
Maturity of the Notes.
"Equity Investors" means Dartford Partnership L.L.C, Fenway Partners Capital
Fund, L.P., McCown DeLeeuw & Co. III, L.P., a California limited partnership,
McCown DeLeeuw & Co. III (Europe), a Bermuda limited partnership, L.P., McCown
DeLeeuw III (Asia), L.P., a Bermuda limited partnership, Gamma Fund, LLC, a
California limited liability Company, Bain Securities, Inc., Squam Lake
Investors II, L.P., Thomas J. Ferraro and C. Gary Willett.
"Equity Offering" means any public or private sales of equity securities
(excluding Disqualified Stock) of the Company, Holdings or MBW LLC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the Prospectus and the accompanying Letter of
Transmittal.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP as in effect on the Issue Date.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of any other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holdings" means Aurora Holdings Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a
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Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (other than contingent or "earn-out" payment obligations
and Trade Payables and accrued expenses incurred in the ordinary course of
business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons, (vii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, (viii) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends) and (ix) to the extent not otherwise included
in this definition, obligations of such Person under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above as such amount would be reflected on a balance sheet in
accordance with GAAP and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person.
"Issue Date" means the date on which the Old Notes were originally issued.
"Letter of Transmittal" means the Letter of Transmittal accompanying this
Prospectus.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Services Agreement" means (i) the Management Services Agreement
dated as of December 31, 1996 between the Company and Dartford Partnership
L.L.C. (and its permitted successors and assigns thereunder), (ii) the Advisory
Services Agreement dated as of December 31, 1996 between the Company and MDC
Management Company III, L.P. (and its permitted successors and
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assigns thereunder) and (iii) the Services Agreement dated as of December 31,
1996 between the Company and Fenway Partners Capital Fund, L.P. (and its
permitted successors and assigns thereunder), in each case without giving effect
to any amendment or other modification thereto.
"MBW Acquisition Closing Date" means December 31, 1996.
"MBW LLC" means MBW Investors LLC, a Delaware limited liability company.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets subject
to sale or minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition, (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Subsidiary of the Company after such Asset
Disposition and (v) any portion of the purchase price from an Asset Disposition
placed in escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition) provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock
or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"New Notes" means the Company's 9 7/8% Series B Senior Subordinated Notes
due 2007.
"Note Guarantee" means any guarantee which may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the provisions of the
covenant described under "Certain Covenants --Future Note Guarantors." Each such
Note Guarantee will have subordination provisions equivalent to those contained
in the Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Noteholder" means the Person in whose name a Note is registered in the Note
register.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Old Notes" means the Company's Senior Subordinated Notes due 2007.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means the Equity Investors and their respective
Affiliates.
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"Permitted Investment" means (i) any Investment in a Subsidiary of the
Company or a Person which will, upon making such Investment, become a
Subsidiary; provided, however, that the primary business of such Subsidiary is a
Related Business; (ii) any Investment in another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Subsidiary of the Company; provided, however, that such Person's primary
business is a Related Business; (iii) any Investment in Temporary Cash
Investments; (iv) receivables owing to the Company or any of its Subsidiaries,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business of the Company or such Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries
or in satisfaction of judgments or claims; (viii) Investments the payment for
which consists exclusively of equity securities (exclusive of Disqualified
Stock) of the Company; (ix) loans or advances to employees and directors to
purchase equity securities of the Company, Holdings or MBW LLC; provided that
the aggregate amount of such loans and advances shall not exceed $2.0 million at
any time outstanding; (x) any Investment in another Person to the extent such
Investment is received by the Company or any Subsidiary as consideration for
Asset Disposition effected in compliance with the covenant under "Limitations on
Sales of Assets"; (xi) prepayment and other credits to suppliers made in the
ordinary course of business consistent with the past practices of the Company
and its Subsidiaries; (xii) Investments in connection with pledges, deposits,
payments or performance bonds made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations; and
(xiii) any Investment in another Person not to exceed in the aggregate $2.0
million at any one time outstanding (measured as of the date made and without
giving effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Prospectus" means this Prospectus.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Subsidiary and Indebtedness of any
Subsidiary that refinances Indebtedness of another Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness, provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of
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any premium required to be paid in connection therewith and plus reasonable fees
and expenses in connection therewith); provided further that Refinancing
Indebtedness shall not include Indebtedness of a Subsidiary which refinances
Indebtedness of the Company.
"Related Business" means the food business and such other business
activities which are incidental or related thereto.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a Person and the Company or a Subsidiary leases it from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreement" means the Credit Agreement dated as of July 1,
1997, among the Company, Holdings, the lenders parties thereto, and The Chase
Manhattan Bank, as administrative agent and CSI, as arranging agent.
"Senior Credit Documents" means the collective reference to the Senior
Credit Agreement, the notes issued pursuant thereto and the Holdings Guaranty,
the Subsidiary Guaranty, the Security Agreement, the Pledge Agreement, the
Collateral Account Agreement and the Patent and Trademark Security Agreement
(each as defined in the Senior Credit Agreement) and each of the mortgages and
other security agreements, guarantees and other instruments and documents
executed and delivered pursuant to any of the foregoing or the Senior Credit
Agreement, in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amounts of available borrowing thereunder provided that such increase in
borrowing is permitted by the covenant described under the caption "--Limitation
on Indebtedness" or adding Subsidiaries of the Company as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement whether by the same or any
other agent, lender or group of lenders.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Series A Notes" means the Company's outstanding 9 7/8% Senior Subordinated
Notes due 2007.
"Series C Notes" means the Company's outstanding 9 7/8% Series C Senior
Subordinated Notes due 2007.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
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"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trust Indenture Act" means the Trust Indenture Act of 1939.
"Unsecured Indebtedness" means any Indebtedness of the Company not secured
by a Lien.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of such Person
then outstanding and normally entitled to vote in the election of directors or
managers.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, all of the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or another Wholly-Owned Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will be represented by one
permanent global certificate in definitive, fully registered form (the "Global
Note"). The Global Note will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
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participating organizations (collectively, the "Participants") and facilitates
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes to the accounts of its Participants,
thereby eliminating the need for physical transfer and delivery of certificates.
DTC's Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Holders who are not Participants may
beneficially own securities held by or on behalf of the Depository only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants
designated by the Exchange Agent with an interest in the Global Note and (ii)
ownership of the Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that a security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes or to
pledge the Notes as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in the
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Securities, and will not be considered the owners or
Holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in Notes
represented by the Global Note to pledge or transfer such interest to persons or
entities that do not participate in DTC's system or to otherwise take action
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in the Global Note
must rely on the procedures of DTC and, if such holder is not a Participant or
an Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Notes under the
Indenture or the Global Note. The Company understands that under existing
industry practice, in the event the Company requests any action of holders of
Notes or a holder that is an owner of a beneficial interest in the Global Note
desires to take any action that DTC, as the holder of such Global Note, is
entitled to take, DTC would authorize the Participants to take such action and
the Participant would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Notes represented by the Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal
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amount of beneficial interest in the Global Note as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of interests in the Global Note will be governed by standing instructions
and customary practice and will be the responsibility of the Participants or the
Indirect Participants and DTC.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the request of DTC or the
Trustee upon the occurrence and continuation of an Event of Default, then, upon
surrender by DTC of its Global Note, Certificated Securities will be issued to
each person that DTC identifies as the beneficial owner of the Notes represented
by the Global Note. Upon any such issuance, the Trustee is required to register
such Certificated Securities in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
DESCRIPTION OF OTHER NOTES
The Other Notes were issued to pay a portion of the purchase price for the
acquisition of the Log Cabin syrup business and related expenses. The terms and
conditions of the Other Notes include those stated in the Series C Indenture.
Such terms (including interest rate, maturity, redemption provisions, covenants
and defaults) are substantially similar to the terms of the Notes offered hereby
except that the Series C Indenture provides that in the event of an Asset Sale
(as defined) by the Company, the proceeds of the Asset Sale will be applied to
repurchase the Notes pursuant to the Indenture prior to any repurchase of the
Other Notes. See "Description of Notes--Certain Covenants--Limitation on Asset
Sales."
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of White & Case, special tax
counsel to the Company, as to the material U.S. federal income tax consequences
relating to the purchase, ownership and disposition of the Notes. This
discussion is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Regulations promulgated thereunder and
judicial and administrative interpretations thereof, all as in effect as of the
date hereof and all of which are subject to change (possibly on a retroactive
basis) or different interpretation. The opinion of White & Case, is not binding
on the Internal Revenue Service (the "Service") and there can be no assurance
that the Service will not challenge one or more of the tax consequences
described herein, and the Company has not obtained, nor does it intend to
obtain, a ruling from the Service with respect to the U.S. federal income tax
consequences of the Offering. This discussion does not purport to address all
aspects of U.S. federal income taxation that may be relevant to particular
holders in light of their personal circumstances, the U.S. federal income tax
consequences to certain types of holders subject to special treatment under the
Code (for example, life insurance companies, tax exempt organizations, financial
institutions, dealers in securities or currencies, holders subject to the
alternative minimum tax, holders holding Notes as a part of a "hedging" or
"conversion" or "integrated" transaction or a "straddle", or holders with a
"functional currency" other than the U.S. dollar) or the effect of any
applicable U.S. federal estate and gift tax laws or state, local or foreign tax
laws. Finally, this discussion assumes that all Notes will be held as "capital
assets" within the meaning of Section 1221 of the Code. INVESTORS CONSIDERING
THE PURCHASE OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISOR TO DETERMINE
THEIR PARTICULAR TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE NOTES UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND OTHER TAX LAWS.
PAYMENT OF INTEREST
The stated interest on the Notes will be includable in a U.S. Holder's gross
income as ordinary income for U.S. federal income tax purposes at the time it is
paid or accrued in accordance with the U.S. Holder's method of tax accounting.
The Notes will not have original issue discount. As used herein, a "U.S. Holder"
of a Note means a beneficial owner of Notes that is (i) a citizen or resident of
the United States or any political subdivision thereof, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of its source or
(iv) a trust if (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) a U.S. fiduciary has
the authority to control all substantial decisions of the trust.
CONTINGENT PAYMENTS
As more fully described below in "Old Exchange and Registration Rights
Agreement," in the event of a Registration Default, the Company will be required
to pay additional amounts to a U.S. Holder of the Notes as liquidated damages
(the "Contingent Payments"). Under the Treasury Regulations regarding contingent
payment debt instruments, any payment subject to a remote or incidental
contingency, as of the issue date, (i.e., there is a remote likelihood that the
payment will be required or the potential amount of the payment is insignificant
relative to the remaining payments on the debt instrument) is not considered a
contingent payment and is ignored for purposes of computing original issue
discount accruals. The Company intends to take the position that the Contingent
Payments are subject to either a remote or incidental contingency. Provided that
the Contingent Payments are subject to a remote or incidental contingency, a
U.S. Holder of a Note will be required to report any Contingent Payments as
interest income for U.S. federal income tax purposes only at the time of any
such payment.
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EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a material modification of the terms of the Notes. Since
such a determination is factual in nature, no opinion can be rendered on this
issue. Provided that the exchange pursuant to the Exchange Offer does not
constitute a material modification of the terms of the Notes, such exchange will
not constitute an exchange for U.S. federal income tax purposes, such exchange
will have no U.S. federal income tax consequences to U.S. Holders of Notes, the
holding period of the New Notes will include the holding period of the Notes,
and the basis of the New Notes will be the same as the basis of the Notes
immediately before the exchange.
PURCHASES OF NOTES AT OTHER THAN ORIGINAL ISSUE PRICE
The foregoing does not discuss special rules which may affect the treatment
of a U.S. Holder that acquires Notes other than at par, including those
provisions of the Code relating to the treatment of "market discount," and
"amortizable bond premium." Any such purchaser should consult its tax advisor as
to the consequences to him of the acquisition, ownership, and disposition of
Notes.
SALE OR REDEMPTION
A U.S. Holder of a Note who disposes of such Note in a taxable sale,
exchange, redemption or other disposition will recognize gain or loss equal to
the difference between (i) the amount of cash plus the fair market value of any
property received for such Note (other than cash or property received in payment
of accrued and unpaid interest) and (ii) the U.S. Holder's adjusted tax basis in
such Note. Such gain or loss will be capital gain or loss and will be long-term
if the Note has been held for more than eighteen months at the time of sale,
exchange, redemption or other disposition. Any portion of the amount realized on
the sale or other disposition of a Note that represents accrued but unpaid
interest will be treated as a payment of such interest. Under current law, net
long-term capital gains of individuals are taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING
Under the Code, a U.S. Holder of Notes may be subject to "backup
withholding" at a 31% rate with respect to interest payments or gross proceeds
from the disposition of Notes. This withholding applies if the U.S. Holder (i)
fails to furnish to the payor the U.S. Holder's social security or other
taxpayer identification number ("TIN") within a reasonable time after the
request thereof, (ii) furnishes an incorrect TIN, (iii) is notified by the
Service that it has failed to properly report payments of interest or dividends,
or (iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct number and
that it is not subject to backup withholding. Any amount withheld from a payment
to a U.S. Holder under the backup withholding rules is allowable as a credit
against such U.S. Holder's federal income tax liability, provided that the
required information is furnished to the Service, and if backup withholding
results in an overpayment of taxes, a refund may be obtained from the Service.
Corporations and certain other entities described in the Code and Treasury
Regulations are exempt from such withholding if their exempt status is properly
established. U.S. Holders of Notes should consult their tax advisors as to their
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
These backup withholding tax and information reporting rules currently are
under review by the U.S. Treasury Department and proposed U.S. Treasury
Regulations issued on April 15, 1996 would modify certain of such rules
generally with respect to payments made after December 31, 1997. Accordingly,
the application of such rules to the Notes could be changed.
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OLD NOTES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Pursuant to the Exchange and Registration Rights Agreement, the Company
agreed to (i) file with the Commission on or prior to 60 days after the Issue
Date a registration statement on an appropriate form under the Securities Act
(the "Exchange Offer Registration Statement") relating to a registered exchange
offer (the "Exchange Offer") for the New Notes under the Securities Act and (ii)
use its best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 150 days after the Issue
Date. As soon as practicable after the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the holders of the Old Notes
who are not prohibited by any law or policy of the Commission from participating
in the Exchange Offer the opportunity to exchange their Notes for an issue of a
new series of notes, identical in all material respects to the Old Notes (except
that the New Notes will not contain terms with respect to transfer restrictions,
registration rights and liquidated damages) that would be registered under the
Securities Act. The Company will keep the Exchange Offer open for not less than
30 days (or longer, if required by law) after the date notice of the Exchange
Offer is mailed to the holders of the Old Notes. If (i) applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer as contemplated thereby or (ii) for any other reason
the Exchange Offer is not consummated within 180 days after the Issue Date or
(iii) any holder either (A) is not eligible to participate in the Exchange Offer
or (B) participates in the Exchange Offer and does not receive freely
transferrable New Notes in exchange for tendered Old Notes, the Company will
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") to cover resales of Transfer Restricted Securities by such holders
who satisfy certain conditions relating to, among other things, the provision of
information in connection with the Shelf Registration Statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each Old Note until (i)
the date on which such Note has been exchanged for a freely transferable New
Note in the Exchange Offer, (ii) the date on which such Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.
The Company will use its best efforts to have the Exchange Offer
Registration Statement and, if applicable, a Shelf Registration Statement (each
an "Exchange Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its best efforts to consummate the Exchange
Offer as promptly as practicable, but in any event prior to 180 days after the
Issue Date. If applicable, the Company will use its best efforts to keep the
Shelf Registration Statement effective for a period of three years after the
Issue Date, subject to certain exceptions, including suspending the
effectiveness thereof for certain valid business reasons. If (i) the applicable
Exchange Registration Statement is not filed with the Commission on or prior to
60 days after the Issue Date, (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
within 150 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 45 days after
publication of the change in law or interpretation), (iii) the Exchange Offer is
not consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 150 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 45 days after publication of the change in
law or interpretation), but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 60 days by an additional Exchange Registration Statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), the Company will generally be obligated to pay
liquidated
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damages to each holder of Transfer Restricted Securities, during the period of
such Exchange Registration Default, in an amount equal to $0.192 per week per
$1,000 principal amount of the Notes constituting Transfer Restricted Securities
held by such holder until the applicable Exchange Registration Statement is
filed or declared effective, the Exchange Offer is consummated or the Shelf
Registration Statement again becomes effective, as the case may be; provided,
however, no liquidated damages shall be payable for a Registration Default under
clause (iii) above if a Shelf Registration Statement covering resales of the
Transfer Restricted Securities for which the Exchange Offer was intended shall
have been declared effective. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Notes on semi-annual
payment dates which correspond to interest payment dates for the Notes.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 90 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such New
Notes and (ii) shall pay all expenses incident to the Exchange Offer (including
the expenses of one counsel to the holders of the Notes) and will indemnify
certain holders of the Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Old Notes that wishes to exchange such Notes for New Notes in
the Exchange Offer will be required to make certain representations, including
representations that (i) any New Notes to be received by it will be acquired in
the ordinary course of its business, (ii) it has no arrangement with any person
to participate in the distribution of the New Notes and (iii) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company or
Holdings or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If a holder is not a broker-dealer, it will be required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the New
Notes. If a holder is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market
making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
Holders of the Old Notes will be required to make certain representations to
the Company (as described above) in order to participate in the Exchange Offer,
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth in the preceding paragraphs. A holder who sells Old Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Exchange and Registration Rights Agreement which
are applicable to such a holder (including certain indemnification obligations).
For so long as the Notes are outstanding, the Company will continue to
provide to holders of the Old Notes and to prospective purchasers of the Old
Notes the information required by paragraph (d)(4) of Rule 144A under the
Securities Act ("Rule 144A"). The Company will provide a copy of the Exchange
and Registration Rights Agreement to prospective purchasers of Old Notes
identified to the Company by the Initial Purchaser upon request.
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only and is qualified in its entirety by reference to all
provisions of the Exchange and Registration Rights Agreement.
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PLAN OF DISTRIBUTION
Based on interpretations by the Commission set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business, and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such New Notes; provided that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such New Notes. To date, the
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Old Notes to
the Initial Purchaser) with the Prospectus, contained in the Exchange Offer
Registration Statement. Pursuant to the Exchange and Registration Rights
Agreement, the Company has agreed to permit Participating Broker-Dealers to use
this Prospectus in connection with the resale of such New Notes. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus, and any amendment or supplement to this Prospectus, available
to any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer--Purpose and Effect of the
Exchange Offer." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Exchange and Registration Rights Agreement.
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LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by White & Case, New York, New York.
EXPERTS
The balance sheet of MBW Foods Inc. as of December 31, 1996 included in this
Prospectus has been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statement of assets to be acquired of Mrs. Butterworth's Business as of
December 31, 1995 and 1996 and the statements of operations of Mrs.
Butterworth's Business for each of the three years in the period ended December
31, 1996 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The statement of assets to be acquired of the Log Cabin Syrup Business (the
"Business"), a component of Kraft Foods, Inc. as of December 28, 1996 and
December 30, 1995, and the statements of operations of the Business for the
years ended December 28, 1996, December 30, 1995 and December 31, 1994, included
in this Prospectus, have been so included in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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GLOSSARY
<TABLE>
<S> <C>
Additional Assets........................ Description of Notes--Certain Definitions
Adjusted Eurodollar Rate................. Description of Senior Credit Facilities
Affiliate................................ Description of Notes--Certain Definitions
Affiliate Transaction.................... Description of Notes--Certain Covenants
Agent's Message.......................... The Exchange Offer--Procedures for Tendering
Applicable Eurodollar Rate Margin........ Description of Senior Credit Facilities
Applicable Premium....................... Description of Notes--Optional Redemption
Asset Disposition........................ Description of Notes--Certain Definitions
ATOP..................................... Prospectus Summary--The Exchange Offer
Attributable Indebtedness................ Description of Notes--Certain Definitions
Average Life............................. Description of Notes--Certain Definitions
Bank Indebtedness........................ Description of Notes--Certain Definitions
bankruptcy provisions.................... Description of Notes--Events of Default
Base Rate................................ Description of Senior Credit Facilities
beneficial ownership..................... Security Ownership
Blockage Notice.......................... Description of Notes--Ranking
Board of Directors....................... Description of Notes--Certain Definitions
Book-Entry Confirmation.................. The Exchange Offer--Procedures for Tendering
Book-Entry Transfer Facility............. The Exchange Offer--Procedures for Tendering
Business................................. Plan of Distribution--Experts
Business Day............................. Description of Notes--Certain Definitions
Capital Stock............................ Description of Notes--Certain Definitions
Capitalized Lease Obligations............ Description of Notes--Certain Definitions
Cash Equivalents......................... Description of Notes--Certain Definitions
CD&R..................................... Management--Directors and Executive Officers
Change of Control........................ Description of Notes--Change of Control
Chase Manhattan.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Code..................................... Description of Notes--Certain Definitions
Collateral Account Agreement............. Collateral Account Agreement means the
Collateral Account Agreement executed and
delivered by Company and The Chase Manhattan
Bank, as administrative agent, on December 31,
1996, substantially in the form of EXHIBIT XVIII
annexed to the Senior Credit Agreement, pursuant
to which Company may pledge cash to The Chase
Manhattan Bank, as administrative agent, to
secure the obligations of Company to reimburse
issuing lenders under the Senior Credit
Agreement for payments made under one or more
letters of credit under the Senior Credit
Agreement as such Collateral Account Agreement
may hereafter be amended, restated, supplemented
or otherwise modified from time to time.
Commission............................... Cover
Company.................................. Cover
Conopco.................................. Prospectus Summary
Consolidated Cash Flow................... Description of Notes--Certain Definitions
Consolidated Coverage Ratio.............. Description of Notes--Certain Definitions
</TABLE>
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<TABLE>
<S> <C>
Consolidated Excess Cash Flow............ Consolidated Excess Cash Flow means, for any
period, an amount (if positive) equal to (i) the
sum, without duplication, of the amounts for
such period of (a) consolidated EBITDA under the
Senior Credit Agreement, (b) to the extent
deducted from consolidated EBITDA under the
Senior Credit Agreement by virtue of clause
(ii)(b) of the definition thereof, extraordinary
and unusual cash gains, and (c) the consolidated
working capital adjustment under the Senior
Credit Agreement MINUS (ii) the sum, without
duplication, of the amounts for such period of
(a) voluntary and scheduled cash repayments of
consolidated total debt under the Senior Credit
Agreement (excluding repayments of revolving
loans under the Senior Credit Agreement except
to the extent the revolving loan commitments
under the Senior Credit Agreement are
permanently reduced in connection with such
repayments), (b) consolidated capital
expenditures under the Senior Credit Agreement
(net of any proceeds of any related financing
with respect to such expenditures), (c)
expenditures made in connection with any
permitted acquisition under the Senior Credit
Agreement pursuant to subsection 7.7(vii) of the
Senior Credit Agreement (net of any proceeds of
any related financing with respect to such
acquisitions), including without limitation
transaction fees paid in cash to the MDC
Entities and/or Dartford and/or Fenway in
connection with such acquisitions, so long as
such transaction fees are paid in accordance
with the terms of the MDC Advisory Services
Agreement, the Dartford Management Services
Agreement and the Fenway Agreement, (d)
consolidated interest expense, under the Senior
Credit Agreement, (e) to the extent added back
to consolidated EBITDA under the Senior Credit
Agreement by virtue of clause (i)(b)(9) of the
definition thereof, extraordinary and unusual
cash losses, (f) to the extent added back to
consolidated EBITDA under the Senior Credit
Agreement by virtue of clause (i)(b)(7) of the
definition thereof, non-recurring charges paid
in cash incurred prior to June 30, 1998, and (g)
the provision for current taxes based on income
of Holdings and its subsidiaries and payable in
cash with respect to such period.
Consolidated Interest Expense............ Description of Notes--Certain Definitions
Consolidated Net Income.................. Description of Notes--Certain Definitions
Consolidated Net Worth................... Description of Notes--Certain Definitions
Contingent Payments...................... Certain United States Federal Income Tax
Considerations -Contingent Payments
covenant defeasance...................... Description of Notes--Defeasance
cross acceleration provision............. Description of Notes--Events of Default
</TABLE>
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<TABLE>
<S> <C>
CSI...................................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Currency Agreement....................... Description of Notes--Certain Definitions
Dartford................................. Prospectus Summary--The Company
Dartford Acquisition..................... Dartford Acquisition means any transaction in
which the Company, MBW Holdings Inc. (the
Company's parent) or MBW LLC (the parent of
Holdings) or any direct or indirect subsidiary
of MBW LLC consummates an acquisition of the
stock or assets of another entity (including,
without limitation, by way of merger or
consolidation), enters into a joint venture with
another entity, or effects any similar
investment or business combination during the
term under the Dartford Management Services
Agreement.
Dartford Acquisition Price............... Dartford Acquisition Price means the sum of (A)
the cash purchase price (including any
installment payments), (B) the value of any
equity securities issued to the seller in
connection with the acquisition under the
Dartford Management Services Agreement, (C) the
face value of any promissory note or other debt
instrument issued to the seller in connection
with such acquisition under the Dartford
Management Services Agreement, (D) the amount of
any liabilities assumed by the MBW LLC group in
connection with such acquisition (under the
Dartford Management Services Agreement (other
than ordinary course of business trade
payables).
Dartford Management Services Agreement... Certain Related Transactions--Dartford
Management Services Agreement
Default.................................. Description of Notes--Certain Definitions
defeasance trust......................... Description of Notes--Defeasance
Designated Senior Indebtedness........... Description of Notes--Certain Definitions
disposition.............................. Description of Notes--Certain Definitions
Disqualified Stock....................... Description of Notes--Certain Definitions
DTC...................................... The Exchange Offer--Procedures for Tendering
EBITDA................................... EBITDA means net income before interest, taxes,
depreciation and amortization and is presented
because the Company believes it is a useful
measurement and it is commonly used by certain
investors and analysts to analyze and compare,
on the basis of operating performance, and to
determine a company's ability to service and
incur debt. EBITDA should not be considered in
isolation from or as a substitute for net
income, cash flows from operating activities or
other consolidated income or cash flow statement
data prepared in accordance with generally
accepted accounting principles or as a measure
of profitability or liquidity. EBITDA presented
for the Company may not be comparable to
similarly titled measures reported by other
companies.
EDGAR.................................... Available Information
</TABLE>
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<TABLE>
<S> <C>
Eligible Institution..................... The Exchange Offer--Procedures for Tendering
Equity Investors......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Equity Offering.......................... Description of Notes--Certain Definitions
Event of Default (Indenture)............. Description of Notes--Event of Default
Exchange Act............................. Available Information
Exchange and Registration Rights......... Cover
Agreements
Exchange Offer........................... Cover
Exchange Offer Registration Statement.... Old Notes Exchange and Registration Rights
Agreements
Exchange Registration Statement.......... Old Notes Exchange and Registration Rights
Agreements
Excluded Products........................ The Acquisitions, Financing and Related
Transactions
Expiration Date.......................... Cover
Expiration Date.......................... The Exchange Offer--Expiration Date; Extensions;
Amendments
FDA...................................... Business--Certain Legal and Regulatory Matters--
Public Health
Fenway................................... Prospectus Summary--The Company
Fenway Agreement......................... Certain Related Transactions--Fenway Agreement
Fenway Acquisition....................... Fenway Acquisition means any transaction in
which during the term under the Fenway Agreement
the Company, Holdings or MBW LLC either (i)
consummates an acquisition of the stock or
assets of another entity (including, without
limitation, by way of merger or consolidation),
enters into a joint venture with another entity,
or effects any similar investment or business
combination
Fenway Acquisition Price................. Fenway Acquisition Price means the sum of (A)
the cash purchase price (including any
installment payments), (B) the value of any
equity securities issued to the seller in
connection with the acquisition under the Fenway
Agreement, (C) the face value of any promissory
note or other debt instrument issued to the
seller in connection with such acquisition under
the Fenway Agreement, (D) the amount of any
liabilities assumed by the MBW LLC group in
connection with such acquisition under the
Fenway Agreement (other than ordinary course of
business trade payables).
Ferraro Employment Agreement............. Management--Executive Compensation
Flavor Supply Agreement.................. The Acquisitions--The MBW Acquisition
GAAP..................................... Description of Notes--Certain Definitions
Global Note.............................. Description of Notes--Book-Entry; Delivery and
Form
Governmental Authority................... Description of Notes--Certain Definitions
Guarantee................................ Description of Notes--Certain Definitions
Guarantors............................... Description of Senior Credit Facilities
Holdings................................. Cover
Holdings Guaranty........................ Holdings Guaranty means the Holdings Guaranty
executed and delivered by Holdings on December
31, 1996 , substantially in the form of EXHIBIT
VIII to the
</TABLE>
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<TABLE>
<S> <C>
Senior Credit Agreement, as such Holdings
Guaranty may thereafter be amended, restated,
supplemented or otherwise modified from time to
time.
Incur.................................... Description of Notes--Certain Definitions
Indebtedness............................. Description of Notes--Certain Definitions
Indentures............................... The Series A Indenture and the Series C
Indenture, collectively.
Indirect Participants.................... Description of Notes--Book-Entry; Delivery and
Form
Initial Purchasers....................... Cover
Interest Rate Agreement.................. Description of Notes--Certain Definitions
Investment............................... Description of Notes--Certain Definitions
Issue Date............................... Description of Notes--Certain Definitions
judgement default provision.............. Description of Notes--Events of Default
Kraft.................................... Prospectus Summary
LC Acquisition........................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Acquisition Closing Date.............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Asset Purchase Agreement.............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Business.............................. Prospectus Summary
LC Co-Pack Agreement..................... The Acquisitions--The LC Acquisition
LC Excluded Products Co-Pack Agreement... The Acquisitions--The LC Acquisition
LC Transition Services Agreement......... The Acquisitions--The LC Acquisition
legal defeasance......................... Description of Notes--Defeasance
Lenders.................................. Description of Senior Credit Facilities
Letter of Transmittal.................... Cover
Lien..................................... Description of Notes--Certain Definitions
Management Services Agreement............ Description of Notes--Certain Definitions
MBW Acquisition.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MBW Acquisition Closing Date............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MBW Asset Purchase Agreement............. The Acquisitions--The MBW Acquisition
MBW Co-Pack Agreement.................... The Acquisitions--The MBW Acquisition
MBW Predecessor.......................... Prospectus Summary
MBW Transitions Services Agreement....... The Acquisitions--The MBW Acquisition
MBW Common LLC Securities................ Security Ownership
MBW LLC.................................. Cover
MBW Refinancing.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MDC...................................... Prospectus Summary--The Company
MDC Acquisition.......................... MDC Acquisition means any transaction in which
the Company, Holdings (the Company's parent) or
MBW LLC (the parent of Holdings) or any direct
or indirect subsidiary of MBW LLC consummates an
acquisition of the stock or assets of another
entity (including, without limitation, by way of
merger or consolidation), enters into a joint
venture with another entity, or effects any
similar investment or business combination
during the term under the MDC Advisory Services
Agreement
</TABLE>
108
<PAGE>
<TABLE>
<S> <C>
MDC Entities............................. McCown De Leeuw & Co. III, L.P., a California
limited partnership, McCown De Leeuw & Co. III
(Europe), L.P., a Bermuda limited partnership,
McCown De Leeuw & Co. III (Asia), L.P., a
Bermuda limited partnership and Gamma Fund LLC,
a California limited liability company,
collectively.
MDC Acquisition Price.................... MDC Acquisition Price means the sum of (A) the
cash purchase price (including any installment
payments), (B) the value of any equity
securities issued to the seller in connection
with the acquisition under the MDC Advisory
Services Agreement, (C) the face value of any
promissory note or other debt instrument issued
to the seller in connection with such
acquisition under the MDC Advisory Services
Agreement, (D) the amount of any liabilities
assumed by the MBW LLC group in connection with
such acquisition under the MDC Advisory Services
Agreement (other than ordinary course of
business trade payables).
MDC Advisory Services Agreement.......... Certain Related Transactions--MDC Advisory
Services Agreement
MDC Management........................... Certain Related Transactions--MDC Advisory
Services Agreement
MDC III.................................. Security Ownership
MDC IIIA................................. Security Ownership
Mintz Employment Agreement............... Management--Executive Compensation
Net Available Cash....................... Description of Notes--Certain Definitions
Net Cash Proceeds........................ Description of Notes--Certain Definitions
New Note Issue Date...................... Prospectus Summary--The Exchange Offer
New Notes................................ Cover
Note Guarantee........................... Description of Notes--Certain Definitions
Note Guarantor........................... Description of Notes--Certain Definitions
Notes.................................... Cover
Officer.................................. Description of Notes--Certain Definitions
Officers' Certificate.................... Description of Notes--Certain Definitions
Old Notes................................ Cover
Opinion of Counsel.......................
Other Notes.............................. Cover
parent corporation....................... Description of Notes--Change of Control
Participants............................. Description of Notes--Book-Entry; Delivery and
Form
Participating Broker-Dealers............. Plan of Distribution
Patent and Trademark Security Patent and Trademark Security Agreement means
Agreement.............................. the Patent and Trademark Security Agreement
entered into by and among Company, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of the date of
the Senior Credit Agreement, substantially in
the form of EXHIBIT XI annexed to the Senior
Credit Agreement, as such Patent and Trademark
Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified
from time to time.
</TABLE>
109
<PAGE>
<TABLE>
<S> <C>
pay the Notes............................ Description of Notes--Ranking
Payment Blockage Period.................. Description of Notes--Ranking
Permitted Holders........................ Description of Notes--Certain Definitions
Permitted Investment..................... Description of Notes--Certain Definitions
Person................................... Description of Notes--Certain Definitions
Pledge Agreement......................... Pledge Agreement means that certain Pledge
Agreement by and among Company, Holdings, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of the date of
the Senior Credit Agreement and substantially in
the form of EXHIBIT IX annexed to the Senior
Credit Agreement, as such Pledge Agreement may
be amended, restated, supplemented or otherwise
modified from time to time.
Preferred Stock.......................... Description of Notes--Certain Definitions
principal................................ Description of Notes--Certain Definitions
Pro Forma Financial Statements........... Pro Forma Financial Information
Prospectus............................... Cover
Quest.................................... The Acquisitions--The MBW Acquisition
Red Wing................................. Prospectus Summary--The Company
Red Wing Co-Pack Agreement............... Prospectus Summary--The Company
Redemption Date.......................... Description of Notes--Optional Redemption
refinanced............................... Description of Notes--Certain Definitions
refinances............................... Description of Notes--Certain Definitions
Refinancing Indebtedness................. Description of Notes--Certain Definitions
Registration Default..................... Old Notes Exchange and Registration Rights
Agreements
Registration Statement................... Available Information
Related Business......................... Description of Notes--Certain Definitions
Representative........................... Description of Notes--Certain Definitions
Restricted Payment....................... Description of Notes--Certain Covenants
Revolving Facility....................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Rule 144A................................ Old Notes Exchange and Registration Rights
Agreements
Sale/Leaseback Transaction............... Description of Notes--Certain Definitions
SEC...................................... Description of Notes--Certain Definitions
Secured Indebtedness..................... Description of Notes--Certain Definitions
Securities Act........................... Cover
Security Agreement....................... Security Agreement means the Security Agreement
entered into by and among Company, Holdings, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of December 31,
1996 and substantially in the form of EXHIBIT X
annexed to the Senior Credit Agreement, as such
Security Agreement may be amended, restated,
supplemented or otherwise modified from time to
time.
Senior Credit Agreement.................. Description of Notes--Certain Definitions
Senior Credit Documents.................. Description of Notes--Certain Definitions
</TABLE>
110
<PAGE>
<TABLE>
<S> <C>
Senior Credit Facilities................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Senior Indebtedness...................... Description of Notes--Ranking
Senior Subordinated Indebtedness......... Description of Notes--Certain Definitions
Series A Notes........................... Cover
Series A Exchange and Registration Rights
Agreement.............................. Cover
Series A Indenture....................... Description of Notes--General
Series A Notes Initial Purchaser......... Cover
Series A Notes Offering.................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Series C Exchange and Registration Rights
Agreement.............................. Cover
Series C Indenture....................... Description of Notes--General
Series C Notes Initial Purchasers........ Cover
Series C Notes Offering.................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Service.................................. Certain United States Federal Income Tax
Considerations
Shelf Registration Statement............. The Exchange Offer--Purpose and Effect of the
Exchange Offer
Shelf Registration Statement............. Old Notes Exchange and Registration Rights
Agreements
Significant Subsidiary................... Description of Notes--Certain Definitions
SKU...................................... Business--Products and Markets
specified corporation.................... Description of Notes--Change of Control
Stated Maturity.......................... Description of Notes--Certain Definitions
Subordinated Obligation.................. Description of Notes--Certain Definitions
Subsidiary............................... Description of Notes--Certain Definitions
Subsidiary Guaranty...................... Subsidiary Guaranty means the Subsidiary
Guaranty, substantially in the form of EXHIBIT
VII annexed to the Senior Credit Agreement,
executed and delivered by each subsidiary
guarantor from time to time after December 31,
1996 pursuant to subsection 6.9 of the Senior
Credit Agreement, as such Subsidiary Guaranty
may be amended, restated, supplemented or
otherwise modified from time to time.
Successor Company........................ Description of Notes--Certain Covenants
Temporary Cash Investments............... Description of Notes--Certain Definitions
Term Facility............................ Prospectus Summary--The Acquisitions, Financings
and Related Transactions
TIA...................................... The Exchange Offer--Certain Conditions to the
Exchange Offer
TIN...................................... Certain United States Federal Income Tax
Considerations--Backup Withholding
Trade Payables........................... Description of Notes--Certain Definitions
Transactions............................. Prospectus Summary--Summary Pro Forma Financial
Data
Transfer Restricted Securities........... Old Notes Exchange and Registration Rights
Agreements
Treasury Rate............................ Description of Notes--Optional Redemption
</TABLE>
111
<PAGE>
<TABLE>
<S> <C>
Trustee.................................. Description of Notes--General
Unilever................................. Prospectus Summary
U.S. Government Obligations.............. Description of Notes--Certain Definitions
U.S. Holder.............................. Certain United States Federal Income Tax
Considerations--Payment of Interest
Van de Kamp's............................ Prospectus Summary--The Company
VDB...................................... The Acquisition--Co-Pack Agreement
Voting Stock............................. Description of Notes--Certain Definitions
Wholly-Owned Subsidiary.................. Description of Notes--Certain Definitions
Willett Employment Agreement............. Management--Executive Compensation
Windmill................................. Management--Ownership and Management
Windy Hill............................... Management--Ownership and Management
Wyndham.................................. Management--Ownership and Management
</TABLE>
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
MBW FOODS INC.
Report of Independent Accountants........................................................................ F-2
Balance Sheet as of December 31, 1996 and as of June 28, 1997 (unaudited)................................ F-3
Statement of Operations for the six months ended June 28, 1997 (unaudited)............................... F-4
Statement of Cash Flows for the six months ended June 28, 1997 (unaudited)............................... F-5
Notes to Financial Statements............................................................................ F-6
MRS. BUTTERWORTH'S BUSINESS, A COMPONENT OF CONOPCO, INC.
Report of Independent Accountants........................................................................ F-10
Statement of Assets to be Acquired as of December 31, 1995 and 1996...................................... F-11
Statement of Operations for the years ended December 31, 1994, 1995 and 1996 and for the six months ended
June 30, 1996 (unaudited).............................................................................. F-12
Notes to Financial Statements............................................................................ F-13
LOG CABIN BUSINESS, A COMPONENT OF KRAFT FOODS, INC.
Report of Independent Accountants........................................................................ F-17
Statements of Assets to be Acquired as of December 30, 1995 and December 28, 1996........................ F-18
Statement of Operations for the years ended December 31, 1994, December 30, 1995 and December 28, 1996... F-19
Notes to Financial Statements............................................................................ F-20
Statement of Operations for the six months ended June 29, 1996 (unaudited) and June 28, 1997
(unaudited)............................................................................................ F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MBW Foods, Inc.
In our opinion, the accompanying balance sheet of MBW Foods, Inc. (a
wholly-owned subsidiary of MBW Investors LLC) presents fairly, in all material
respects, the financial position of the Company at December 31, 1996, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Company's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit of this statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Francisco, California
March 28, 1997
F-2
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
-------------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Cash................................................................................ $ 8,666 $ 12,642
Accounts receivable, net of allowance of $42 at June 28, 1997....................... 480 5,716
Accounts receivable--other.......................................................... -- 1,722
Inventories (Note 3)................................................................ 1,182 1,698
Prepaid expenses.................................................................... 9 142
-------------- -----------
Total current assets.......................................................... 10,337 21,920
Machinery and equipment, net........................................................ 5,206 5,448
Goodwill and other intangible assets, net (Note 4).................................. 111,358 109,807
Other assets........................................................................ 3,995 6,888
-------------- -----------
Total assets.................................................................. $ 130,896 $ 144,063
-------------- -----------
-------------- -----------
LIABILITIES:
Accrued expenses.................................................................... $ 2,736 $ 10,523
Non-current deferred tax liabilitiy................................................. -- 35
-------------- -----------
Total current liabilities..................................................... 2,736 10,558
Long-term debt (Note 5)............................................................. 95,000 --
Senior subordinated notes........................................................... -- 100,000
-------------- -----------
Total liabilities............................................................. 97,736 110,558
Stockholder's equity:
Common stock, no par value, 3,000 shares authorized, 1,000 shares issued and
outstanding..................................................................... 33,270 33,270
Promissory notes (Note 6)......................................................... (110) (110)
Retained earnings................................................................. -- 345
-------------- -----------
Total stockholder's equity.................................................... 33,160 33,505
-------------- -----------
Total liabilities and stockholder's equity.................................... $ 130,896 $ 144,063
-------------- -----------
-------------- -----------
</TABLE>
See Notes to the balance sheet.
F-3
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 28, 1997
---------------------
<S> <C>
Net sales.................................................................................. $ 42,891
Cost of products sold...................................................................... 14,271
--------
Gross profit............................................................................. 28,620
Brokerage, distribution and market expenses:
Brokerage and distribution............................................................... 4,699
Trade promotions......................................................................... 7,074
Consumer marketing....................................................................... 4,367
--------
Total brokerage, distribution and marketing expenses..................................... 16,140
Selling, general and administrative expenses............................................... 2,328
Transition costs........................................................................... 324
Amortization of goodwill and other intangibles............................................. 1,658
--------
Operating profit......................................................................... 8,170
Amortization of deferred financing fees.................................................... 2,502
Interest expense, net...................................................................... 5,093
--------
Income before income taxes............................................................... 575
Provision for income taxes................................................................. 230
--------
Net income............................................................................... $ 345
--------
--------
</TABLE>
F-4
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 28, 1997
---------------------
<S> <C>
Cash flows from operating activities:
Net income............................................................................... $ 345
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization.......................................................... 4,419
Deferred income taxes.................................................................. (515)
Change in assets and liabilities:
Increase in accounts receivable...................................................... (6,959)
Increase in inventories.............................................................. (516)
Increase in prepaid expenses......................................................... (133)
Increase in accrued expenses......................................................... 7,787
Increase in net current deferred tax liability....................................... 550
----------
Net cash used in operating activities...................................................... 4,978
Cash flows from investing activities:
Additions to property, plant and equipment............................................... (524)
Additions to other assets................................................................ (420)
Increase in intangibles acquired......................................................... (107)
----------
Net cash used in investing activities...................................................... (1,051)
----------
Cash flows from financing activities:
Proceeds from long term borrowings....................................................... 100,000
Payment of borrowings.................................................................... (95,000)
Debt issuance costs...................................................................... (4,951)
----------
Net cash provided by financing activities.................................................. 49
----------
Decrease in cash and cash equivalents...................................................... 3,976
Cash and cash equivalents, beginning of period............................................. 8,666
----------
Cash cash equivalents, end of period....................................................... $ 12,642
----------
----------
</TABLE>
F-5
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1--THE COMPANY
ORGANIZATION
MBW Foods Inc. (the "Company"), a newly formed Delaware corporation, is a
privately held food company. The Company commenced operations on December 31,
1996, when it acquired the Mrs. Butterworth's syrup and pancake business from
Conopco, Inc., a subsidiary of Unilever United States, Inc. ("Conopco"). The
Company is a wholly-owned subsidiary of MBW Holdings Inc. ("Holdings"), also a
Delaware corporation. Holdings is wholly-owned by MBW Investors LLC ("MBW LLC"),
a Delaware limited liability company. The Company was initially capitalized with
a capital infusion from Holdings, which was contributed by MBW LLC, and senior
secured debt and senior subordinated debt (Note 5).
After the close of business on December 31, 1996, the Company acquired
substantially all the assets of Mrs. Butterworth's syrup and pancake business
(the "Business") from Conopco. The Company acquired the inventories,
manufacturing equipment and intangible assets of the Business for a purchase
price of $114.1 million. In due course, the Company will relocate the
manufacturing equipment from Conopco's facility.
The acquisition was accounted for by the purchase method of accounting. The
allocation of the purchase price has not been finalized; however, any changes
are not expected to be material. The purchase agreement contains customary
representations, warranties and covenants by Conopco and the Company. The
acquisition was financed by (i) an equity capital contribution from Holdings of
approximately $33.2 million, (ii) $45 million of loans borrowed under a senior
secured credit facility (Note 5), and (iii) $50 million of loans borrowed under
a senior subordinated credit facility (Note 5).
The cost to acquire the Business has been allocated to tangible and
intangible aspects acquired as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash paid to acquire Business................................................. $ 114,100
Other acquisition costs....................................................... 3,646
--------------
117,746
Costs assigned to tangible assets............................................. (6,388)
--------------
Costs attributable to intangible assets....................................... $ 111,358
--------------
--------------
</TABLE>
OPERATIONS
The Company produces and markets syrup and pancake mix products that are
sold across the United States. The products are manufactured under co-packing
agreements with Conopco and a third party. The principal trademark under which
products are sold is Mrs. Butterworth's-Registered Trademark-.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statement conform to generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities.
Actual amounts could differ from these estimates and assumptions. The Company
uses the accrual basis of accounting in the preparation of its financial
statements.
F-6
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in December. The balance
sheet at December 31, 1996 reflects the acquisition of the Business as of 11:59
p.m. on that date.
CASH
The Company considers all highly liquid financial instruments with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method. Inventories include the
cost of raw materials, packaging and supplies, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and consists of machinery
and equipment. Depreciation is computed using the straight-line method over the
estimated useful lives of the individual assets of ten years. As of December 31,
1996, there was no accumulated depreciation.
INTANGIBLE ASSETS
Intangible assets include goodwill, the Mrs.
Butterworth's-Registered Trademark- trademark and various other identifiable
intangible assets purchased by the Company. Goodwill and the trademark are
amortized over forty years using the straight-line method. Other intangible
assets are amortized using the straight-line method over periods ranging from
five to twenty years. As of December 31, 1996, there was no accumulated
amortization.
OTHER ASSETS
Other assets consist primarily of deferred loan acquisition costs. Deferred
loan costs will be amortized using the straight-line method over the terms of
the related debt. As of December 31, 1996, there was no accumulated
amortization.
ADVERTISING (UNAUDITED)
Advertising costs are expensed as incurred. Advertising expense for the six
months ended June 28, 1997 was $513,431.
INTERIM FINANCIAL DATA (UNAUDITED)
The interim financial data as of June 30, 1997 and for the six months ended
June 30, 1997 is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim period.
F-7
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- INVENTORIES
Inventories consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Raw materials, packaging and supplies............................................... $ 523
Finished goods...................................................................... 659
---------
$ 1,182
---------
---------
</TABLE>
NOTE 4 -- GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangible assets consist of the following at December
31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Goodwill......................................................................... $ 64,518
Trademarks....................................................................... 44,500
Other intangibles................................................................ 2,340
-----------
$ 111,358
-----------
-----------
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Senior Secured Debt
Senior secured revolving debt; interest rate of 9.50% at December 31, 1996;
principal due in quarterly installments through December 15, 2001; floating
interest rate at the prime rate plus 1.25% or alternatively, the one, three or
six month Eurodollar rate plus 2.50% payable quarterly or at the termination of
the Eurodollar contract interest period.......................................... $ 30,000
Senior secured term debt; interest rate of 10.00% at December 31, 1996; principal
due in quarterly installments through December 15, 2002; floating interest rate
at the prime rate plus 1.75% or alternatively, the one, three or six month
Eurodollar rate plus 3.00% payable quarterly or at the termination of the
Eurodollar contract interest period.............................................. 15,000
Senior Subordinated Note
Senior subordinated note; interest rate of 12.75% at December 31, 1996; floating
interest rate at the prime rate plus (i) 4.50% through June 29, 1997, (ii) 5.50%
for the period June 30, 1997 through September 29, 1997, and (iii) 6.00% for the
period September 30, 1997 through maturity....................................... 50,000
---------
Total long-term debt......................................................... $ 95,000
---------
---------
</TABLE>
F-8
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT (CONTINUED)
SENIOR SECURED DEBT
On December 31, 1996, the Company and Holdings entered into a Credit
Agreement (the "Agreement") with several banks for $15 million of senior secured
term debt and a $45 million revolving credit facility. At December 31, 1996, the
Company had an outstanding balance of $30 million under the revolver. The
proceeds from the senior secured term debt, a $30 million draw down of the
revolving credit facility along with a senior subordinated note and contributed
equity capital were used to acquire the Business from Conopco, pay fees and
expenses and fund working capital. The debt is guaranteed by Holdings.
The unused borrowing availability was $15 million at December 31, 1996. The
Agreement requires a commitment fee of 0.50% per annum payable quarterly on the
unused portion of the revolving credit facility. The borrowing availability
increased to $60 million upon payment of the $15 million senior secured term
debt.
The Agreement includes restrictive covenants which limit additional
borrowing, cash dividends, and capital expenditures, while also requiring the
Company to maintain certain financial ratios. The Agreement contains optional
prepayment provisions with no premium. Substantially all the assets of the
Company are pledged as collateral for the debt.
SENIOR SUBORDINATED NOTE
On December 31, 1996, the Company issued a $50 million senior subordinated
note (the "Note") to a bank. The Company can prepay portions of the outstanding
balance of the Note without incurring a premium. The Note includes restrictive
covenants which limit cash dividends, loans and investments and capital
expenditures while also requiring the Company to maintain certain financial
ratios.
See subsequent event discussion at Note 7.
NOTE 6--RELATED PARTY TRANSACTIONS
The Company paid certain members of MBW LLC fees totaling $1.5 million as of
December 31, 1996. The fees were paid for services provided in identifying,
negotiating and consummating the Company's acquisition. The fees are included in
the costs of the acquisition.
On December 31, 1996, Mr. Thomas J. Ferraro, the President of the Company
and Mr. C. Gary Willett, the Executive Vice President of the Company, executed
promissory notes in favor of the Company in exchange for monies borrowed to
assist in the capitalization of their limited liability company interests held
with Investors. The promissory notes mature December 31, 1999 with required
annual payments. Interest is due and payable quarterly at the rate of 8.00% per
annum. The aggregate balance outstanding on the promissory notes as of December
31, 1996 was $110,000. This amount has been recorded as a reduction to common
stock.
NOTE 7--SUBSEQUENT EVENTS
SUBORDINATED DEBT OFFERING
On February 10, 1997, the Company completed a private offering of 9 7/8%
Senior Subordinated Notes due in 2007, with proceeds to the Company totaling
approximately $97 million. These proceeds
F-9
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--SUBSEQUENT EVENTS (CONTINUED)
were primarily used to retire the $45 million of senior secured debt and the $50
million senior subordinated note. The repayment of the debt did not result in
any gain or loss as the Company's revolving credit facility remains available.
ACQUISITION (UNAUDITED)
On July 1, 1997, the Company acquired substantially all of the assets of the
Log Cabin syrup business from Kraft Foods, Inc. for a cash purchase price of
$220 million and $8.8 million of fees and expenses. Financing for the
acquisition consisted of (a) $28.3 million of additional equity capital provided
by investors; (b) $40.0 million of term loans and $46.0 million of revolving
loans borrowed under an Amended and Restated Credit Agreement (the "Amended
Agreement"), dated July 1, 1997; (c) $102.5 million in proceeds received from a
private offering of 9 7/8% Senior Subordinated Notes due in 2007; and (d) $12.0
million of cash on hand at the Company.
The Amended Agreement provides for a secured Term Facility in a principal
amount of $40.0 million and a secured Revolving Facility providing for revolving
loans and letters of credit not to exceed $60.0 million (collectively, the
"Credit Facilities"). The letters of credit may not exceed $5.0 million of the
outstanding principal on the Revolving Facility. The Term Facility will have a
final maturity of December 31, 2003, and will be amortized in quarterly payments
of $1.125 million through December 31, 1999 with such quarterly payments
increasing annually in the amount of $250,000 per payment for each year
thereafter until the final maturity date. The Revolving Facility will be
available at any time through the final maturity date on December 31, 2003.
At the Company's option the interest rate for the Credit Facilities will be
either the Eurodollar Rate plus a margin of 2.25% or a Base Rate plus a margin
of 1.25%. The Base Rate is the higher of the Federal Funds Effective Rate plus a
margin of .5% or the Prime Rate for the Revolving Facility, and the higher of
the Federal Funds Effective Rate plus a margin of .5%, the Prime Rate or the
secondary market rate for certificates of deposit plus a margin of 1% for the
Term Facility. In addition, the Company must pay an annual fee equal to .5% on
the undrawn portion of the Revolving Facility and an annual fee equal to the
Eurodollar Rate on the face amount of all outstanding letters of credit.
The Credit Facilities contain a number of covenants that, among other
things, restrict the ability of the Company to incur additional indebtedness,
pay dividends, and enter into leases. In addition, the Company is required to
comply with specified ratios. The Credit Facilities are secured by first
priority equity interests in all capital stock of the Company and the tangible
and intangible assets of the Company.
COMPANY NAME CHANGE (UNAUDITED)
On June 11, 1997, the Company changed its name to Aurora Foods Inc.
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
CONOPCO, Inc.
We have audited the accompanying statement of assets to be acquired as of
December 31, 1995 and 1996 and the statement of operations for the years ended
December 31, 1994, 1995 and 1996 of Mrs. Butterworth's Business, a component of
CONOPCO, Inc. (the "Business"). These financial statements are the
responsibility of CONOPCO, Inc.'s management. Our responsibility is to express
an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the assets to
be acquired and the results of operations of the Business pursuant to the
purchase agreement between CONOPCO, Inc. and MBW Acquisition Corp. (the "Buyer")
as described in Note 1 and are not intended to be a complete presentation of the
Business's financial position and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be acquired of the Business as of
December 31, 1996 and the results of its operations for the years ended December
31, 1994, 1995 and 1996, pursuant to the purchase agreement referred to in Note
1, in conformity with generally accepted accounting principles.
Price Waterhouse LLP
San Francisco, California
March 14, 1997
F-11
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENT OF ASSETS TO BE ACQUIRED
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Inventories.................................................................................. $ 1,445 $ 829
Machinery and equipment, net of accumulated depreciation
of $1,553 and $1,791........................................................................ 2,619 2,774
--------- ---------
Total assets............................................................................. $ 4,064 $ 3,603
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- --------- SIX MONTHS
ENDED
JUNE 30, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales..................................................... $ 96,729 $ 91,302 $ 89,541 $ 44,507
Costs and expenses:
Cost of products sold....................................... 29,930 27,743 28,955 13,793
Brokerage and distribution.................................. 8,662 7,583 8,140 4,776
Trade promotions............................................ 21,911 19,380 17,672 8,697
Consumer marketing.......................................... 15,297 13,291 10,835 6,140
Selling, general and administrative......................... 6,829 6,120 6,753 3,376
--------- --------- --------- --------------
Total costs and expenses................................ 82,629 74,117 72,355 36,782
--------- --------- --------- --------------
Net sales less direct and allocated expenses before
taxes................................................. 14,100 17,185 17,186 7,725
Provision for income taxes.................................... 5,429 6,616 6,616 2,974
--------- --------- --------- --------------
Net sales less direct and allocated expenses............ $ 8,671 $ 10,569 $ 10,570 $ 4,751
--------- --------- --------- --------------
--------- --------- --------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
In December 1996, CONOPCO, Inc. ("CONOPCO" or the "Company"), a subsidiary
of Unilever United States, Inc., entered into an Asset Purchase Agreement (the
"Agreement") with MBW Acquisition Corp., the predecessor of MBW Foods Inc. (the
"Buyer"). The Agreement provides for the sale of certain assets of CONOPCO
pertaining to its Mrs. Butterworth's Business (the "Business") and the
assumption of certain liabilities relating to future commitments, as defined
(see Note 8). The Business was operated as part of Van den Bergh Foods Company
("Van den Bergh"), a division of the Company. The Business's products, which are
distributed on a national basis, consist of syrup and pancake mix. A significant
portion of the Business's net sales are with major retailers.
The sale was consummated on December 31, 1996, after the close of business
but before the end of the business day. Under the terms of the Agreement,
CONOPCO, Inc. sold to the Buyer certain assets exclusively used in the Business,
as defined in the Agreement, and retains the manufacturing plants, employees and
the retained liabilities, as defined in the Agreement, of the Business.
Throughout the periods covered by the financial statements, the Business's
operations were conducted and accounted for as part of the Company. These
financial statements have been carved out from the Company's historical
accounting records.
Under the Company's centralized cash management system, cash requirements of
the Business were generally provided directly by the Company and cash generated
by the Business was generally remitted directly to the Company. Transaction
systems (e.g., payroll, employee benefits, accounts payable) used to record and
account for cash disbursements were provided by centralized company
organizations outside the defined scope of the Business. Most of these corporate
systems are not designed to track assets/liabilities and receipts/payments on a
business specific basis. Given these constraints and the fact that only certain
assets of the Business were sold, statements of financial position and cash
flows could not be prepared.
The manufacturing and distribution operations of the Business are conducted
at sites where other Company manufacturing and distribution operations not
included in the Business are present. In addition, certain non-manufacturing
operations of the Business share facilities and space with other Company
operations. At these shared sites, only the assets of the Business (inventories
and machinery and equipment) are included in the statement of assets to be
acquired. The Statement of Assets to be Acquired is as of the close of business
on December 31, 1996, immediately prior to the sale.
Net sales in the accompanying statement of operations represent net sales
directly attributable to the Business. Costs and expenses in the accompanying
statement of operations represent direct and allocated costs and expenses
related to the Business. Costs for certain functions and services performed by
centralized Company organizations outside the defined scope of the Business have
been allocated to the Business based on usage or sales of the Business, as
appropriate, compared to total Van Den Bergh usage or sales. The results of
operations include expense allocations for (1) costs for administrative
functions and services performed on behalf of the Business by centralized staff
groups within the Company, (2) research and development expense and (3)
CONOPCO's general corporate expenses including pension and certain other
postretirement benefits costs (see Notes 2, 3 and 5 for a
F-14
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS (CONTINUED)
description of the allocation methodologies employed). CONOPCO maintains all
debt and notes payable on a consolidated basis to fund and manage all of its
operations. Debt and related interest expense were not allocated to the
Business.
All of the allocations and estimates in the statements of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or future results of the Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME RECOGNITION. Sales and related cost of products sold are included in
income and expense, respectively, when products are shipped to the customer.
INVENTORIES. Inventories are priced at the lower of cost or market with cost
determined by the last-in, first-out (LIFO) method.
MACHINERY AND EQUIPMENT (M&E). M&E is stated at historical cost. Alterations
and major overhauls which extend the lives or increase the capacity of M&E are
capitalized. The amounts for property disposals are removed from M&E and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
DEPRECIATION. Van den Bergh calculates depreciation using the straight-line
method over the useful lives of its property and M&E. Depreciation provided in
costs and expenses is allocated to the Business based on sales of the Business
compared to total Van den Bergh sales.
COST OF PRODUCTS SOLD. Cost of products sold includes direct costs of
materials, labor, and overhead and allocated costs for facilities, functions and
services used by the Business at shared sites. Overhead allocations are based on
estimated time spent by employees, relative use of facilities, estimated
consumption of common supplies, and sales of the Business compared to total Van
den Bergh sales.
BROKERAGE AND DISTRIBUTION. Brokerage and distribution includes costs of the
outside brokerage network and outbound freight.
TRADE PROMOTIONS. Trade promotions represents promotional incentives offered
to retailers.
CONSUMER MARKETING. Consumer marketing is comprised of all costs associated
with advertising coupons. Advertising expense is accrued as incurred. Production
costs are expensed on the initial use of the advertisement.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
consists solely of allocated selling, administrative and research and
development expenses. The Business is allocated these expenses based on sales of
the Business compared to total Van den Bergh sales.
INCOME TAXES. The taxable income of the Business was included in the tax
returns of CONOPCO. As such, separate income tax returns were not prepared or
filed for the Business. The provision for income
F-15
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
taxes included in the accompanying statement of operations has been determined
based upon statutory rates applied to pre-tax income.
PENSIONS. The Company has noncontributory defined benefit plans covering
substantially all U.S. employees, including the employees of the Business. The
benefits for these plans are based primarily on employees' years of service and
employees' compensation during the last years of employment. It is the Company's
policy to fund at least the minimum amounts required by the Employee Retirement
Income Security Act of 1974. The Company maintains profit-sharing and savings
plans for full-time employees who meet certain eligibility requirements. The
costs allocated to the Business relative to the aforementioned plans are based
on sales of the Business.
OTHER POST RETIREMENT BENEFITS. The Company provides certain health care and
life insurance benefits (post retirement benefits) to substantially all eligible
retired U.S. employees and their dependents. These benefits are accounted for as
they are earned by active employees. The post retirement costs allocated to the
Business are based on sales of the Business.
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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Also, as
discussed in Note 1, these financial statements include allocations and
estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity or
future results of the Business.
INTERIM FINANCIAL DATA (UNAUDITED). The interim financial data for the six
months ended June 30, 1996 is unaudited; however, in the opinion of the Company,
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
period.
3. RELATED PARTY TRANSACTIONS
The statement of operations include significant allocations from other
Company organizations involving functions and services (such as finance and
accounting, management informations systems, research and development, legal,
human resources and purchasing) that were provided to the Business by
centralized CONOPCO organizations outside the defined scope of the Business. The
costs of these functions and services have been allocated to the Business using
methods that CONOPCO's management believes are reasonable. Such allocations are
not necessarily indicative of the costs that would have been incurred if the
Business had been a separate entity. Total cost of products sold includes
$2,656, $3,026 and $2,990 in allocated costs for the years ended December 31,
1996, 1995 and 1994, respectively. Selling, general and administrative expenses
include $6,753, $6,120 and $6,829 of allocated costs for the years ended
December 31, 1996, 1995 and 1994, respectively.
F-16
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
4. PROVISION FOR INCOME TAXES
Taxes computed at the U.S. statutory rates are summarized below:
<TABLE>
<CAPTION>
AMOUNT % AMOUNT % AMOUNT %
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996
-------------------- -------------------- --------------------
Federal.......................................... $ 4,794 34.0 $ 5,843 34.0 $ 5,843 34.0
State (net of federal tax benefit)............... 635 4.5 773 4.5 773 4.5
--------- --- --------- --- --------- ---
Provision for income taxes....................... $ 5,429 38.5 $ 6,616 38.5 $ 6,616 38.5
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
5. INVENTORIES
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Raw materials, packaging and supplies............................ $ 269 $ 301
Finished products................................................ 1,317 631
--------- ---------
1,586 932
Adjustment to LIFO basis......................................... (141) (103)
--------- ---------
$ 1,445 $ 829
--------- ---------
--------- ---------
</TABLE>
The Company's application of LIFO is not attributable to individual business
units. Accordingly, the results of applying LIFO have been allocated to the
Business based on relative inventory values. Management believes such
allocations are reasonable, but may not necessarily reflect the cost that would
have been incurred if LIFO had been applied on a business specific basis.
6. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to certain lawsuits and claims with
respect to matters such as product liability and other actions arising in the
normal course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of CONOPCO.
In the normal course of its operations, the Business has informal agreements
with two suppliers to provide the Business with its glass bottle requirements.
These informal agreements contain no specified duration and are subject to price
adjustments. If these agreements were to terminate, the Company expects that the
Business would acquire any on-hand inventory of the suppliers.
7. CASH FLOW INFORMATION
The Company's cash flow information for the years ended December 31, 1994,
1995 and 1996 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Capital expenditures................................................ $ 21 $ 64 $ 470
Depreciation........................................................ 215 311 277
Change in inventory................................................. 935 (634) 654
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Kraft Foods, Inc.
We have audited the accompanying statements of assets to be acquired of the
Log Cabin Syrup Business (the "Business"), a component of Kraft Foods, Inc. as
of December 28, 1996 and December 30, 1995, and the statements of operations of
the Business for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994. These financial statements are the responsibility of Kraft
Foods, Inc.'s management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those statements require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements were prepared to present assets to be
acquired and the results of operations of the Business pursuant to the asset
purchase agreement between Kraft Foods, Inc. and MBW Foods, Inc. as described in
Note 1 and are not intended to be a complete presentation of the Business's
financial position and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be acquired of the Business as of
December 28, 1996 and December 30, 1995 and the results of its operations for
the years ended December 28, 1996, December 30, 1995 and December 31, 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
August 20, 1997
F-18
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENTS OF ASSETS TO BE ACQUIRED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Inventories.................................................................. $ 6,661 $ 6,717
Machinery and equipment, net of accumulated depreciation of $2,415 and
$2,099, respectively....................................................... 8,976 8,238
-------- --------
Total assets........................................................... $ 15,637 $ 14,955
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales......................................................... $ 115,894 $ 106,330 $ 104,466
Costs and expenses:
Cost of products sold........................................... 35,254 35,804 36,237
Freight and distribution........................................ 7,553 7,620 7,099
Trade promotions................................................ 20,898 23,239 21,355
Consumer marketing.............................................. 7,940 5,478 3,994
Selling, general and administrative............................. 7,863 7,738 7,388
Amortization of goodwill........................................ 1,350 1,350 1,350
-------------- -------------- --------------
Total costs and expenses.................................... 80,858 81,229 77,423
-------------- -------------- --------------
Net sales less direct and allocated expenses
before taxes.................................................... 35,036 25,101 27,043
Provision for income taxes........................................ 14,391 10,461 11,229
-------------- -------------- --------------
Net sales less direct and allocated expenses................ $ 20,645 $ 14,640 $ 15,814
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
On May 7, 1997, Kraft Foods, Inc. ("Kraft" or the "Company"), entered into
an Asset Purchase Agreement (the "Agreement") with MBW Foods Inc. (the "Buyer").
The Agreement provides for the sale of certain assets of Kraft pertaining to its
Log Cabin Syrup Business (the "Business"). Under the terms of the Agreement,
Kraft Foods, Inc. will sell to the Buyer certain assets (inventory and machinery
and equipment) used in the Business, as defined in the Agreement, and retains
the manufacturing plants, employees and certain liabilities, as defined in the
Agreement, of the Business. The sale was consummated on July 1, 1997.
The Business's products, which are distributed on an international basis,
consist of retail and foodservice syrup products. A significant portion of the
Business's net sales are with major retailers. The accompanying financial
statements represent the results of operations and assets to be acquired of the
Business in the United States and Canada, including export sales, but
specifically excluding the Business in Mexico and the manufacture and sale of
syrups under the Kraft brand name pursuant to a distribution agreement with
Alliant Foodservice, a former indirect wholly-owned subsidiary of Kraft.
Throughout the periods covered by the financial statements, the Business's
operations were conducted and accounted for as part of the Company. These
financial statements have been carved out from the Company's historical
accounting records.
The manufacturing and distribution operations of the Business are conducted
at sites where other Company manufacturing and distribution operations not
included in the Business are present. In addition, certain nonmanufacturing
operations of the Business share facilities and space with other Company
operations. At these shared sites, only the assets of the Business (inventories
and machinery and equipment) are included in the statements of assets to be
acquired.
Under the Company's centralized cash management system, cash requirements of
the Business were generally provided directly by the Company and cash generated
by the Business was generally remitted directly to the Company. Transaction
systems (e.g., payroll, employee benefits, accounts payable) used to record and
account for cash disbursements were provided by centralized Kraft organizations
outside the defined scope of the Business. Most of these corporate systems are
not designed to track assets/liabilities and receipts/payments on a business
specific basis. Given these constraints and since only certain assets of the
Business were sold, statements of financial position and cash flows could not be
prepared.
Net sales in the accompanying statements of operations represent net sales
directly attributable to the Business. Costs and expenses in the accompanying
statements of operations represent direct and allocated costs and expenses
related to the Business. Costs for certain functions and services performed by
centralized Company organizations outside the defined scope of the Business have
been allocated to the Business based on usage or sales of the Business, as
appropriate, compared to total usage or sales. The results of operations include
expense allocations for (1) selling costs for sales and customer service
functions and services performed on behalf of the Business by the centralized
sales group within the Company, (2) fixed manufacturing and distribution costs
of the facilities that produce and store the products of the Business, (3)
research and development expense, (4) administrative costs of the marketing
division responsible for the Business, including finance and accounting, and (5)
certain Kraft marketing and corporate expenses attributable to the Business,
including human resources,
F-21
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS (CONTINUED)
systems, legal, and risk management (see Notes 2 and 4 for a description of the
allocation methodologies employed). Kraft maintains all debt and notes payable
on a consolidated basis to fund and manage all of its operations. Debt and
related interest expense were not allocated to the Business.
The statements of operations of the Business exclude allocations of certain
expenses, primarily related to certain Kraft general corporate expenses.
Expenses not allocated include, but are not limited to, general overhead costs
related to corporate accounting, human resources, legal, systems, and risk
management.
Total cost of products sold includes $2,398, $2,401, and $2,091 in allocated
costs for the years ended December 28, 1996, December 30, 1995 and December 31,
1994, respectively. Freight and distribution expenses include $2,369, $2,597 and
$2,801 of allocated costs for the years ended December 28, 1996, December 30,
1995 and December 31, 1994, respectively. Selling, general and administrative
expenses include $7,388, $7,738 and $7,863 of allocated costs for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994, respectively.
All of the allocations and estimates in the statements of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or the future operating results of the
Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL PERIODS
The Business's fiscal year consists of 52 or 53 weeks, ending on the last
Saturday in December. The year ending December 31, 1994 consisted of 53 weeks.
Each of the years ended December 30, 1995 and December 28, 1996 consisted of 52
weeks.
INCOME RECOGNITION
Sales and related cost of products sold are included in income and expense,
respectively, when products are shipped to the customer.
INVENTORIES
Finished goods inventories are directly attributable to the Business. Raw
materials, packaging and supplies have been allocated to the Business on the
basis of usage during the preceding year. Inventories are priced at the lower of
cost or market with cost determined on a last-in, first-out (LIFO) basis.
Certain distribution and fixed costs have been included in inventory in
accordance with the Uniform Capitalization Rules under the Tax Reform Act of
1986 ("UNICAP") rules.
F-22
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MACHINERY AND EQUIPMENT
Machinery and equipment in the accompanying statements of assets to be
acquired (the "M&E") is stated at historical cost, net of accumulated
depreciation directly related to that machinery and equipment. Alterations and
major overhauls which extend the lives or increase the capacity of the M&E are
capitalized. The amounts for property disposals are removed from the M&E and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
Depreciation is calculated using the straight-line method over the useful
lives of the M&E. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the M&E is directly attributable to
the Business. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the shared facilities is allocated to
the Business based on usage or occupancy of the Business compared to total usage
or occupancy.
COST OF PRODUCTS SOLD
Cost of products sold includes direct costs of materials, labor and overhead
and allocated costs for facilities, functions and services used by the Business
at shared sites. Overhead allocations are based on estimated time spent by
employees, relative use of facilities, estimated consumption of common supplies,
and sales of the Business compared to total Kraft sales.
FREIGHT AND DISTRIBUTION
Freight and distribution expenses include direct outbound freight and direct
and allocated costs related to the warehousing of products of the Business and
are included in cost of products sold.
TRADE PROMOTIONS
Trade promotions are directly attributable to the Business and represent
promotional incentives offered to retailers, including both performance and
non-performance trade deals.
CONSUMER MARKETING
Consumer marketing is directly attributable to the Business and consists
primarily of advertising and coupons. Advertising and promotional costs are
generally expensed as incurred. Production costs are expensed on the initial use
of the advertisement or the initial drop of the coupons. Advertising expense was
$361, $23 and $1,594 for the years ended December 28, 1996, December 30, 1995
and December 31, 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative consists solely of allocated selling,
administrative and research and development expenses. The Business has allocated
these expenses based on various measures relevant to the expense being
allocated.
F-23
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION OF GOODWILL
Goodwill consists of an estimate of goodwill allocable to the Business
arising from Philip Morris's acquisition of General Foods, Inc. in 1985.
Goodwill is amortized over 40 years using the straight-line method.
INCOME TAXES
The taxable income of the Business was included in the tax returns of Philip
Morris. As such, separate income tax returns were not prepared or filed for the
Business. The provisions for income taxes included in the accompanying
statements of operations have been determined on a separate company basis. No
deferred income taxes have been attributed to the Business.
PENSIONS
The Company has noncontributory defined benefit plans covering substantially
all U.S. employees, including the employees of the Business. The benefits for
these plans are based primarily on employees' years of service and employees'
compensation during the last years of employment. It is the Company's policy to
fund at least the minimum amounts required by the Employee Retirement Income
Security Act of 1974. The Company maintains profit-sharing and savings plans for
full-time employees who meet certain eligibility requirements. The service and
interest costs allocated to the Business relative to the aforementioned plans
are based on pensionable earnings of employees directly attributable or
allocated to the Business.
OTHER POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits
(postretirement benefits) to substantially all eligible retired U.S. employees
and their dependents. These benefits are accounted for as they are earned by
active employees. The postretirement costs allocated to the Business are based
on headcount of employees directly attributable or allocated to the Business.
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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Also, as
discussed in Note 1, these financial statements include allocations and
estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity or
the future results of the Business.
F-24
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
3. PROVISION FOR INCOME TAXES
The provisions for income taxes for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal.................................................... $ 9,242 $ 8,610 $ 11,844
State...................................................... 1,987 1,851 2,547
--------- --------- ---------
Provision for income taxes................................. $ 11,229 $ 10,461 $ 14,391
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Business's effective income tax rate differed from the U.S. federal
statutory rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal.................................................... 35.0% 35.0% 35.0%
State (net of federal tax benefit)......................... 4.8 4.8 4.7
Goodwill amortization...................................... 1.7 1.9 1.4
--------- --------- ---------
Provision for income taxes................................. 41.5% 41.7% 41.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Raw materials, packaging and supplies.................................... $ 2,846 $ 2,455
Finished products........................................................ 4,186 5,223
--------- ---------
7,032 7,678
Adjustment to LIFO basis................................................. (315) 1,017
--------- ---------
$ 6,717 $ 6,661
--------- ---------
--------- ---------
</TABLE>
The Company's application of LIFO is not attributable to individual product
lines. Accordingly, the results of applying LIFO have been allocated to the
Business based on sales of the Business compared to total sales. Management
believes such allocations are reasonable, but may not necessarily reflect the
cost that would have been incurred if LIFO had been applied on a business
specific basis.
5. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to certain lawsuits and claims with
respect to matters such as product liability and other actions arising in the
normal course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of Kraft.
6. CASH FLOW INFORMATION
The Business had capital expenditures of $500, $1,200 and $800 for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994.
F-25
<PAGE>
LOG CABIN SYRUP BUSINESS
(PART OF KRAFT FOODS, INC.)
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND JUNE 28, 1997
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
SIX MONTHS ENDED
--------------------
<CAPTION>
JUNE 29, JUNE 28,
1996 1997
--------- ---------
<S> <C> <C>
Net Sales.................................................................................. $ 51,509 $ 51,222
Costs and Expenses
Cost of products sold.................................................................... 16,269 18,067
Brokerage and distribution............................................................... 3,589 3,239
Trade promotions......................................................................... 10,452 9,457
Consumer marketing....................................................................... 3,789 597
Selling, general and administrative...................................................... 3,802 3,637
Amortization of goodwill................................................................. 675 675
--------- ---------
Total costs and expenses................................................................... 38,576 35,672
--------- ---------
Net sales less direct and allocated expenses before taxes.................................. 12,933 15,550
Provision for income taxes................................................................. 5,303 6,376
--------- ---------
Net sales less direct and allocated expenses............................................... $ 7,630 $ 9,174
--------- ---------
--------- ---------
</TABLE>
F-26
<PAGE>
NO PERSON HAS BEEN AUTHORIZED HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Available Information................. iii
<S> <C>
Capitalized Terms..................... iii
Prospectus Summary.................... 1
Risk Factors.......................... 13
The Acquisitions...................... 19
Use of Proceeds of the New Notes...... 22
Capitalization........................ 22
The Exchange Offer.................... 23
Selected Historical Financial
Data--The Company and MBW
Predeccessor........................ 31
Selected Historical Financial Data--LC
Business............................ 32
Pro Forma Financial Information....... 33
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 43
Business.............................. 50
Management............................ 59
Security Ownership.................... 64
Certain Related Transactions.......... 66
Description of Senior Credit
Facilities.......................... 69
Description of Notes.................. 72
Description of Other Notes............ 97
Certain United States Federal Income
Tax Considerations.................. 98
Old Notes Exchange and Registration
Rights Agreement.................... 100
Plan of Distribution.................. 102
Legal Matters......................... 103
Experts............................... 103
Glossary.............................. 104
Index to Financial Statements......... F-1
</TABLE>
AURORA FOODS INC.
OFFER TO EXCHANGE
9 7/8% SERIES B SENIOR
SUBORDINATED NOTES
DUE 2007
FOR ALL OUTSTANDING
9 7/8% SENIOR SUBORDINATED NOTES
DUE 2007
---------------------
PROSPECTUS
---------------------
, 1997
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 21, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
AURORA FOODS INC.
OFFER TO EXCHANGE
9 7/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING 9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
-----------------------------------------------------------------
Aurora Foods Inc., a Delaware corporation (formerly MBW Foods Inc.) (the
"Company"), a wholly-owned subsidiary of Aurora Foods Holdings Inc. (formerly
MBW Holdings Inc.) ("Holdings"), which in turn is a wholly-owned subsidiary of
MBW Investors LLC ("MBW LLC") hereby offers, upon the terms and subject to
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal"; together with the
Prospectus, the "Exchange Offer"), to exchange up to an aggregate principal
amount of $100,000,000 of its 9 7/8% Series D Senior Subordinated Notes due 2007
(the "New Notes") for up to an aggregate principal amount of $100,000,000 of its
outstanding 9 7/8% Series C Senior Subordinated Notes due 2007 (the "Series C
Notes" or the "Old Notes"). The proceeds from the issuance of the Series C Notes
were used by the Company to pay a portion of the purchase price for the LOG
CABIN syrup business and to pay related fees and expenses. The terms of the New
Notes are identical in all material respects to those of the Old Notes, except
for certain transfer restrictions, registration rights and liquidated damages
relating to the Old Notes. The New Notes will be issued pursuant to, and
entitled to the benefits of, the Indenture governing the Old Notes. The New
Notes and the Old Notes are sometimes referred to collectively as the "Notes."
On February 10, 1997, the Company issued $100,000,000 of its 9 7/8% Senior
Subordinated Notes due 2007 (the "Series A Notes"), the proceeds of which were
used to refinance certain bank indebtedness and to pay related fees and expenses
arising from the purchase of the MRS. BUTTERWORTH'S syrup and pancake mix
business on December 31, 1996. Pursuant to a separate prospectus dated the date
of this Prospectus, the Company will be offering to exchange, upon the terms and
subject to the conditions set forth in such separate prospectus and the
accompanying letter of transmittal, its 9 7/8% Series B Senior Subordinated
Notes due 2007 (the "Series B Notes") for up to an aggregate principal amount of
$100,000,000 of its outstanding Series A Notes. The terms of the Series B Notes
will be identical in all material respects to those of the Series A Notes,
except for certain transfer restrictions, registration rights and liquidated
damages relating to the Series A Notes. The Series B Notes will be issued
pursuant to, and be entitled to the benefits of, the indenture governing the
Series A Notes. The Series B Notes and the Series A Notes are sometimes referred
to collectively as the "Other Notes".
Interest on the New Notes is payable semi-annually on February 15 and August 15
of each year, commencing on February 15, 1998. The New Notes will mature on
February 15, 2007. Except as described below, the Company may not redeem the New
Notes prior to February 15, 2002. On or after such date, the Company may redeem
the New Notes, in whole or in part, at any time at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time to time on or prior to
February 15, 2000, the Company may, subject to certain requirements, redeem up
to $35.0 million of the aggregate principal amount of Notes with the cash
proceeds received from one or more Equity Offerings at a redemption price equal
to 109.875% of the principal amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption, provided that at least $65.0
million of the aggregate principal amount of Notes remain outstanding
immediately after each such redemption. The New Notes will not be subject to any
sinking fund requirement. Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time on or prior to February 15, 2002, to
redeem the New Notes in whole but not in part at a redemption price equal to
100% of the principal amount thereof plus the Applicable Premium plus accrued
and unpaid interest to the date of redemption, and (ii) if the Company does not
so redeem the New Notes or if such Change of Control occurs after February 15,
2002, the Company will be required to make an offer to repurchase the New Notes
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of repurchase. See "Description of
Notes -- Optional Redemption."
The New Notes will be unsecured and will be subordinated to all existing and
future Senior Indebtedness of the Company and will be effectively subordinated
to all obligations of any subsidiaries of the Company as may exist from time to
time. On the date of issuance of the New Notes, the Company will not have any
subsidiaries; however the Indenture will not restrict the ability of the Company
to create, acquire or capitalize subsidiaries in the future. The New Notes will
rank PARI PASSU with the Other Notes and any future Senior Subordinated
Indebtedness of the Company and will rank senior to all other subordinated
indebtedness of the Company. As of June 28, 1997 on a pro forma basis giving
effect to the LC Acquisitions, the Company had $87.0 million of Senior
Indebtedness outstanding (excluding unused commitments of $13.0 million under
the Revolving Facility) and the Company had no Senior Subordinated Indebtedness
outstanding other than the Notes and the Other Notes. See "Description of Notes
- -- Ranking."
(CONTINUED ON NEXT PAGE)
- --------------------------------------------------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(CONTINUED FROM COVER)
The Old Notes were originally issued and sold on July 1, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Rule 144A under
the Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available.
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than , 1997. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated as of July 1, 1997 (the "Exchange and Registration Rights
Agreement") by and between the Company and Chase Securities Inc. and Credit
Suisse First Boston, as the initial purchasers (the "Initial Purchasers"), with
respect to the initial sale of the Old Notes. Based on interpretations by the
staff of the Securities and Exchange Commission (the "Commission") rendered to
third parties in similar transactions, the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by respective holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the New Notes are acquired in
the ordinary course of such holder's business and such holder has no arrangement
with any person to participate in the distribution of such New Notes and is not
engaged in and does not intend to engage in a distribution of the New Notes.
Only broker-dealers who acquired the Old Notes as a result of market-making
activities or other trading activities may participate in the Exchange Offer.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of the New Notes received in
exchange for Old Notes if such New Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. To the extent
that an active market for the New Notes does develop, the market value of the
New Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition,
and other factors. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Absence of Public Market."
ii
<PAGE>
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
------------------------
Until , 1997 (90 days after commencement of this offering), all
dealers effecting transactions in the New Notes, whether or not participating in
this offering, may be required to deliver a Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
New Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Items of information omitted from this Prospectus but contained in
the Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following regional offices of
the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. Electronic filings filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR")
are publicly available through the Commission's home page on the Internet at
http://www.sec.gov.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed to file with the Commission and provide to the
Trustee and the holders of Notes annual reports and the information, documents
and other reports otherwise required pursuant to Sections 13 and 15(d) of the
Exchange Act. See "Description of Notes -- Certain Covenants -- SEC Reports."
CAPITALIZED TERMS
Capitalized Terms used herein shall have the respective meanings set forth
in the Glossary which begins at page 104.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE STATED IN THIS PROSPECTUS, REFERENCES TO (I) THE
"COMPANY" SHALL MEAN AURORA FOODS INC. (FORMERLY MBW FOODS INC.), A DELAWARE
CORPORATION; (II) "HOLDINGS" SHALL MEAN AURORA HOLDINGS INC. (FORMERLY MBW
HOLDINGS INC.), A DELAWARE CORPORATION; (III) "MBW LLC" SHALL MEAN MBW INVESTORS
LLC, A DELAWARE LIMITED LIABILITY COMPANY; AND (IV) THE "MBW PREDECESSOR" SHALL
MEAN THE MRS. BUTTERWORTH'S SYRUP AND PANCAKE MIX BUSINESS WHICH THE COMPANY
ACQUIRED FROM CONOPCO, INC. ("CONOPCO") A SUBSIDIARY OF UNILEVER UNITED STATES,
INC. ("UNILEVER") ON DECEMBER 31, 1996; AND (V) THE "LC BUSINESS" SHALL MEAN THE
LOG CABIN SYRUP BUSINESS WHICH THE COMPANY ACQUIRED FROM KRAFT FOODS, INC.
("KRAFT") ON JULY 1, 1997. EXCEPT AS OTHERWISE INDICATED, (I) ALL REFERENCES TO
MARKET, CATEGORY AND SEGMENT SALES AND TO MARKET SHARE PERCENTAGES AND MARKET
POSITIONS REFLECT THE 52-WEEK PERIOD ENDED MAY 17,1997 AS GATHERED BY A.C.
NIELSEN FOR U.S. RETAIL GROCERY SALES; (II) ALL REFERENCES TO THE COMPANY'S
SALES REFER TO NET SALES AS REPORTED IN THE HISTORICAL FINANCIAL STATEMENTS OF
THE COMPANY, THE MBW PREDECESSOR AND THE LC BUSINESS, AS APPLICABLE; (III) ALL
REFERENCES TO "REGULAR SYRUP" REFER TO FULL-CALORIE TABLE SYRUP; AND (IV) ALL
REFERENCES TO "SYRUP" REFER TO REGULAR SYRUP, LITE SYRUP AND PURE MAPLE/
SPECIALTY SYRUPS. Mrs. Butterworth's-Registered Trademark-, Log
Cabin-Registered Trademark-, Country Kitchen-Registered Trademark-, AND
Wigwam-Registered Trademark- ARE REGISTERED TRADEMARKS OF THE COMPANY. THIS
PROSPECTUS ALSO INCLUDES TRADEMARKS OF COMPANIES OTHER THAN THE COMPANY.
THE COMPANY
OVERVIEW
The Company, a wholly-owned subsidiary of Holdings, which in turn is a
wholly-owned subsidiary of MBW LLC, was organized in November 1996 by Dartford
Partnership L.L.C. ("Dartford"), majority owner McCown De Leeuw & Co. ("MDC")
and Fenway Partners Capital Fund, L.P. ("Fenway"). Dartford provides day-to-day
operational oversight to the Company. On December 31, 1996, the Company acquired
the MRS. BUTTERWORTH'S syrup and pancake mix business from Conopco for
approximately $114.1 million. On July 1, 1997, the Company acquired the LOG
CABIN syrup business from Kraft for approximately $222.0 million.
The Company markets and sells MRS. BUTTERWORTH'S, the number one brand of
regular syrup in the United States. Originally introduced in 1960, MRS.
BUTTERWORTH'S syrup is well known for its unique buttery flavor and distinctive
grandmother-shaped bottle and enjoys 100% aided brand awareness among syrup
consumers. In addition to its strong national presence, MRS. BUTTERWORTH'S is
the number one brand of syrup in the Central and Mid-Central United States, the
two regions of the country with the highest per capita syrup consumption. MRS.
BUTTERWORTH'S strong market position in syrup is complemented by its pancake mix
products, in which it is the fourth leading brand. MRS. BUTTERWORTH'S leading
market positions and strong brand recognition have enabled it to realize a long
history of high operating margins, stable sales and growth in operating profit.
On July 1, 1997, the Company acquired substantially all of the assets of the
LOG CABIN syrup business from Kraft. The LOG CABIN syrup business consists of
the retail syrup business marketed under the LOG CABIN and COUNTRY KITCHEN
brands and the foodservice syrup business marketed under the LOG CABIN and
WIGWAM brands. The LOG CABIN trademark dates back to 1888 and, the Company
believes it is one of the oldest and most widely recognized trademarks in the
United States. LOG CABIN syrup products have the number one market share overall
in the United States. LOG CABIN'S premium maple heritage, together with its
geographic strength on the east and west coasts, complements MRS. BUTTERWORTH'S
buttery flavor and strength in the central United States. Further extending the
Company's customer base is the addition of the COUNTRY KITCHEN and WIGWAM
trademarks. Introduced in 1954, COUNTRY KITCHEN is an economy-priced syrup
targeted towards the price conscious consumer and has the leading market share
in that segment. Collectively, LOG CABIN, MRS. BUTTERWORTH'S and AUNT
1
<PAGE>
JEMIMA account for approximately 53% of total syrup sales in the United States,
with the remaining 47% accounted for by other national, regional and private
label brands.
The Company plans to combine the manufacture and distribution of LOG CABIN
syrup products with its MRS. BUTTERWORTH'S products and as a result expects to
realize approximately $3.0 million in annual cost savings. LOG CABIN products
will be sold by the Company's independent food brokers and will be marketed and
administered by the Company, which will expand its corporate organization from
22 to 34 persons. For the twelve months ended June 28, 1997, the Company's
combined pro forma sales, EBITDA and income before income taxes were $194.1
million, $49.1 million and $10.3 million, respectively (which amounts do not
reflect the expected manufacturing and distribution annual cost savings of $3.0
million discussed above). MRS. BUTTERWORTH'S and LOG CABIN products represented
46% and 54%, respectively, of the Company's pro forma sales for the same period.
In order to effect the transition to an independent operating company, the
Company established a corporate infrastructure which is organized in three
operational groups--the product development group, the financial administrative
group and the sales group. In addition, in connection with the Red Wing Co-Pack
Agreement, the Company is in the process of transferring the production of MRS.
BUTTERWORTH'S syrup and the related equipment from Conopco's facilities to Red
Wing's facilities. The total cost of this transition is expected to be
approximately $5.8 million.
In connection with the LC Acquisition, the Company has expanded its
corporate organization from 22 to 34 persons. The Company is also negotiating
with Red Wing and other third-parties for the contract manufacture of its LOG
CABIN syrup products. The Company estimates that the transition costs related to
the LOG CABIN syrup business will be approximately $5.1 million.
The syrup and pancake mix categories in the United States are stable and are
characterized by broad household penetration and steady growth. Sales of syrup
products are driven by the consumption of host foods, including frozen waffles
and pancake mix, product innovation and consumers' desire for traditional "home
style" meals. From 1993 to 1996, the syrup and pancake mix categories grew at
compound annual rates of approximately 1.4% and 3.5%, respectively. The
Company's products are sold nationally through an independent broker network to
retail grocery stores, mass merchandisers, military exchanges and foodservice
distributors. The Company's syrups and pancake mixes are sold in nearly 100% and
63%, respectively, of all retail grocery stores in the United States. For the
twelve months ended June 28, 1997, the Company's syrup and pancake mix sales
represented approximately 95% and 5% of pro forma sales, respectively.
The Company believes that its brands provide an attractive platform upon
which to build a focused, branded dry grocery products company. Dartford, Fenway
and the other related parties are investors in certain other entities, however
these entities do not compete with the Company. The Company markets branded, dry
grocery products, including dry pancake mixes to which consumers add ingredients
as part of home preparation, while Van de Kamps, Inc. ("Van de Kamps"), in which
Dartford and Fenway are investors, focuses on frozen, prepared products which
include convenience frozen pancakes, waffles and french toast sold under the
AUNT JEMIMA-Registered Trademark- brand name. Dartford's other activities are in
other industries, such as pet food products. In addition, Dartford is required,
under the terms of the Dartford Management Services Agreement, to bring any
potential acquisitions of dry grocery products companies to the Company and is
restricted from establishing competing entities. See "Certain Related
Transactions--Dartford Management Services Agreement."
The Company believes that the performance of certain dry grocery categories
and brands has suffered in recent years as a result of declining levels of
marketing support and little or no new product innovation by the major food
companies. Consequently, the Company believes that many of these undermanaged
brands are likely candidates for divestiture from their corporate parents. While
these categories and brands tend to be mature, there are expanding segments
within the categories and growth opportunities that have not been realized. As a
result, the Company believes that an attractive opportunity exists for building
a branded dry grocery products company through strategic acquisitions
2
<PAGE>
of established, well-recognized national and regional brands that have been
undermanaged in recent years. The Company's objective is to renew the growth of
the brands it acquires by providing them the focus, strategic direction,
marketing resources and dedicated sales and marketing organizations that they
have lacked.
MRS. BUTTERWORTH'S GROWTH STRATEGY
The Company believes that MRS. BUTTERWORTH'S has significant growth
potential which has not been realized due to a lack of corporate support and
marketing resources from Unilever in recent years. The Company plans to improve
MRS. BUTTERWORTH'S performance by increasing management attention to the brand
and by devoting the marketing resources necessary to exploit opportunities in
the syrup and pancake mix categories. The Company intends to implement its
strategy through the following initiatives:
- POSITION BRAND AS BEST VALUE. The Company plans to position MRS.
BUTTERWORTH'S as the best value among the three leading national syrup brands by
continuing to provide its distinctive, premium quality product at prices which
are moderately below those of the other national brands. In May 1996, MRS.
BUTTERWORTH'S lowered the everyday prices of its syrup products. To offset the
cost of lowering everyday prices, MRS. BUTTERWORTH'S also reduced its costly and
relatively ineffective buy-one-get-one-free promotions. The Company believes
that full implementation of MRS. BUTTERWORTH'S value pricing strategy will
result in continued increases in sales and market share.
- REFORMULATE LITE PRODUCT. MRS. BUTTERWORTH'S LITE has not been
reformulated or improved since its introduction in 1985. Over the last five
years, competitors have focused their research and development efforts on the
lite syrup segment, taking advantage of newly developed ingredients and
formulations. While MRS. BUTTERWORTH'S is the leading brand in the regular syrup
segment, MRS. BUTTERWORTH'S share of the lite syrup segment is 15.0% and is
significantly below AUNT JEMIMA'S leading 32.6% share of the segment. The
Company plans to reformulate and improve the taste of MRS. BUTTERWORTH'S LITE.
Management believes that this reformulation, coupled with MRS. BUTTERWORTH'S
leading position in the regular syrup segment and increased marketing support,
can expand the Company's share of the lite segment and further strengthen the
Company's overall syrup market share.
- ROLL OUT PRODUCT LINE EXTENSIONS. Management believes MRS. BUTTERWORTH'S
strong brand equity and leading market shares in the syrup category present
considerable opportunities for product line extensions. For example, an
opportunity exists to develop a product which is directed at children and
packaged in plastic, as compared to the current glass packaging. Opportunities
also exist for MRS. BUTTERWORTH'S in the flavored syrup segment, as none of the
major national brands currently offer these specialty products. In addition,
management believes that opportunities exist for growth in the Company's pancake
mix business with increased marketing and sales support for its recently
redesigned and updated packaging.
- ADOPT CONSUMER BASED MARKETING STRATEGY. Over the next two years, the
Company plans to reduce its reliance on costly and relatively inefficient trade
spending and periodic price discounting and increase its advertising and
consumer promotional events. The Company plans to reduce or eliminate
buy-one-get-one-free promotions and its heavy reliance on coupons in free
standing inserts. The Company will reallocate those marketing dollars to
advertising and more focused consumer promotions such as cross-promotions with
host foods. In addition, the Company will direct its advertising expenditures to
support the introduction of new or improved products and reinforce MRS.
BUTTERWORTH'S unique brand equity and positioning as the best value among the
national brands.
LOG CABIN GROWTH STRATEGY
LOG CABIN'S overall share of the retail syrup category has decreased from
35% in 1972 to 19%. The Company attributes the decrease to declining levels of
corporate support and marketing resources over this period of time. The Company
plans to undertake the following initiatives to revitalize the LOG CABIN brand
and profitably grow the business:
3
<PAGE>
- RESTORE LOG CABIN'S PREMIUM IMAGE. The Company believes that
historically, the LOG CABIN brand has been perceived by the consumer as a
premium, real maple syrup. In recent years, LOG CABIN'S premium image has
eroded due to a lack of marketing support. For example, packaging of LOG
CABIN syrup products has been downgraded from glass to clear plastic to
opaque plastic. Advertising support for the brand was eliminated in 1994.
The Company plans to restore LOG CABIN'S premium image by upgrading LOG
CABIN'S packaging and renewing advertising support for the brand that
promotes its premium, real maple heritage and warm, homespun image.
- RETURN TO CONSUMER BASED MARKETING STRATEGY. Over the last four years,
LOG CABIN'S marketing program has consisted almost entirely of trade
spending and price discounting. Little or no money was spent promoting LOG
CABIN products to the consumer through coupons or advertising. In order to
bring consumers back to the LOG CABIN brand, the Company plans to increase
advertising support for the brand and implement focused consumer
promotional activities such as point-of-sale coupons and cross-promotions
with host foods. The Company expects to fund these programs in part
through the elimination of certain inefficient trade programs.
- BENEFIT FROM GROWTH IN HOST FOODS. Sales of syrup products are related to
sales of host foods, which include pancakes, waffles and french toast.
Over the last five months, following little or no growth over the last
three years, sales of frozen breakfast products have grown at
approximately a 10% annual rate as a result of increased marketing
activity by host food manufacturers. The Company believes that sales of
syrup products will benefit from renewed growth in host foods.
- EXPAND DISTRIBUTION CHANNELS. The Company plans to expand distribution of
the economy-priced COUNTRY KITCHEN brand into the mass merchandise and
drugstore channels of trade. The Company also plans to leverage its WIGWAM
brand and expand its foodservice business.
CO-PACK AGREEMENTS
MRS. BUTTERWORTH'S syrup is currently contract manufactured and distributed
under the transitional MBW Co-Pack Agreement which terminates on or prior to
December 31, 1997 and under the Red Wing Co-Pack Agreement. See "The
Acquisitions--The MBW Acquisition--MBW Co-Pack Agreement." The Company entered
into a co-pack agreement (the "Red Wing Co-Pack Agreement") with The Red Wing
Company, Inc. ("Red Wing"), dated as of June 9, 1997, pursuant to which Red Wing
will contract manufacture MRS. BUTTERWORTH'S syrup for a period of five years.
Founded in 1912, Red Wing is a contract manufacturer of preserves, jellies,
syrups, sauces, dressings and other food products. Subject to certain
conditions, the Company may terminate the Red Wing Co-Pack Agreement after two
years with 180 days prior written notice. The Red Wing Co-Pack Agreement is
non-exclusive and does not restrict the Company from entering into additional
co-pack agreements with third parties.
Red Wing will contract manufacture MRS. BUTTERWORTH'S syrup for conversion
fees which are less than those the Company has paid under the MBW Co-Pack
Agreement. Because Red Wing is one of the largest purchasers of corn syrup in
the United States, the Company believes that its raw material costs under the
Red Wing Co-Pack Agreement will be less than those incurred by the MBW
Predecessor. Under the Red Wing Co-Pack Agreement, MRS. BUTTERWORTH'S syrup will
be produced and distributed from Red Wing's San Jose, California and Streator,
Illinois facilities. The Company commenced transferring production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. See "The Acquisitions--The Red Wing
Co-Pack Agreement."
LOG CABIN syrups initially will be contract manufactured and distributed by
Kraft for up to nine months under the LC Co-Pack Agreement. See "The
Acquisitions--The LC Acquisition--LC Co-Pack Agreement." Prior to the end of the
term of the LC Co-Pack Agreement, the Company will enter into a co-packing
agreement with Red Wing or another third party for the manufacture of LOG CABIN
syrup products.
4
<PAGE>
THE ACQUISITIONS, FINANCINGS AND RELATED TRANSACTIONS
THE LC ACQUISITION
Pursuant to an Asset Purchase Agreement between the Company and Kraft, dated
as of May 7, 1997 (the "LC Asset Purchase Agreement"), on July 1, 1997 (the "LC
Acquisition Date") the Company purchased substantially all of the assets of the
LOG CABIN syrup business from Kraft for approximately $222.0 million. The assets
acquired by the Company include (i) the LOG CABIN U.S. and foreign trademarks
(except for those held in Mexico), (ii) the equipment for the manufacture of
syrup, (iii) inventories (raw materials, packaging and finished goods), (iv)
proprietary formulations for LOG CABIN syrups, (v) other product specifications
and customer lists and (vi) rights under certain contracts, licenses, purchase
orders and other arrangements and permits. Additionally, the Company entered
into (i) the LC Transition Services Agreement with Kraft, under which Kraft will
provide certain marketing, transactions processing, accounting and other
services for a period of up to six months from the LC Acquisition Closing Date;
(ii) the LC Co-Pack Agreement, under which Kraft will contract manufacture and
distribute syrup for the Company for a period of up to nine months from the LC
Acquisition Closing Date; and (iii) the LC Excluded Products Co-Pack Agreement
under which the Company will be obligated until February 13, 2000 to contract
manufacture and distribute syrup for that part of Kraft's syrup businesses not
disposed of pursuant to the LC Asset Purchase Agreement (the "Excluded
Products"). See "The Acquisitions--The LC Acquisition." Following the expiration
of the LC Co-Pack Agreement, the Company intends to move the syrup manufacturing
equipment to a third party manufacturing facility. If the equipment is not
necessary for the Company's syrup production requirements, the Company will
either store or sell the equipment.
Financing for the acquisition of the LOG CABIN syrup business and the
related expenses consisted of (i) $28.3 million of additional equity capital
provided by the Equity Investors; (ii) $40.0 million of term loans (the "Term
Facility") and $47.0 million of revolving loans (the "Revolving Facility")
borrowed under a senior secured credit facility among the Company, Holdings, the
lenders named therein, The Chase Manhattan Bank ("Chase Manhattan"), as
administrative agent, and Chase Securities Inc. ("CSI"), as arranging agent (the
"Senior Credit Facilities"); (iii) $102.5 million in proceeds received from the
offering of the Series C Notes (the "Series C Notes Offering"); and (iv) $12.0
million of cash on hand at the Company. The acquisition of the LOG CABIN syrup
business, the borrowings under the Term Facility and the Revolving Facility, the
Series C Notes Offering and the payment of transaction fees and expenses related
thereto are referred to herein as the "LC Acquisition." See "Use of Proceeds,"
"Description of Notes," "Security Ownership" and "Description of Senior Credit
Facilities."
The sources and uses of funds for the LC Acquisition were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
<S> <C>
SOURCES:
Cash on hand............................................................. $ 12.0
Senior Credit Facilities:
Revolving Facility(1).................................................. 47.0
Term Facility.......................................................... 40.0
The Series C Notes Offering(2)........................................... 102.5
Equity proceeds.......................................................... 28.6
-------
Total sources...................................................... $ 230.1
-------
-------
USES:
Purchase price........................................................... $ 222.0
Fees and expenses........................................................ 8.1
-------
Total uses......................................................... $ 230.1
-------
-------
</TABLE>
- ------------------------------
(1) Reflects borrowings under the $60.0 million Revolving Facility after giving
effect to the LC Acquisition. The Revolving Facility is available for
working capital and general corporate purposes and includes up to $5.0
million for letters of credit. See "Description of Senior Credit
Facilities."
5
<PAGE>
(2) Includes a $2.5 million premium received in connection with the Series C
Notes Offering.
THE MBW ACQUISITION
On December 31, 1996 (the "MBW Acquisition Closing Date"), the Company
acquired substantially all of the assets of the MRS. BUTTERWORTH'S syrup and
pancake mix business from a subsidiary of Unilever for approximately $114.1
million. The assets acquired by the Company include (i) the MRS. BUTTERWORTH'S
trademarks for the United States, Canada and Puerto Rico, (ii) the equipment for
the manufacture of syrup, (iii) inventories (raw materials, packaging and
finished goods), (iv) proprietary formulations for MRS. BUTTERWORTH'S syrups and
pancake mixes, (v) other product specifications and customer lists and (vi)
rights under certain contracts, licenses, purchase orders and other arrangements
and permits. See "The Acquisitions--The MBW Acquisition". Financing for this
acquisition and the related fees and expenses consisted of (i) $33.8 million of
equity capital provided by Equity Investors and; (ii) $95.0 million of bank
indebtedness. The acquisition of the Mrs Butterworth's syrup and pancake mix
business, the financing thereof (not including the offering of the Series A
Notes) and the payment of related transaction fees and expenses are referred to
herein as the "MBW Acquisition". See "Security Ownership" and "Description of
Senior Credit Facilities." On February 10,1997, the Company issued the Old Notes
(the "Series A Notes Offering") to repay a total of approximately $95.0 million
of bank indebtedness, to pay accrued and unpaid interest with respect to such
bank indebtedness being repaid and to pay certain fees and expenses incurred in
connection with the Series A Notes Offering. The Series A Notes Offering
together with the payment of such bank indebtedness is referred to herein as the
"MBW Refinancing."
6
<PAGE>
THE EXCHANGE OFFER
The New Notes....... The forms and terms of the New Notes are identical in all
material respects to the terms of the Old Notes for which
they may be exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions, registration
rights and liquidated damages provisions relating to the
Old Notes described below under "Description of Notes" and
"Old Notes Exchange and Registration Rights Agreement."
The Exchange The Company is offering to exchange up to $100,000,000
Offer............. aggregate principal amount of the New Notes for up to
$100,000,000 aggregate principal amount of Old Notes. Old
Notes may be exchanged only in integral multiples of
$1,000.
Expiration Date; The Exchange Offer will expire at 5:00 p.m., New York City
Withdrawal of time, on , 1997, or such later date and time
Tender............ to which it is extended by the Company (the "Expiration
Date"). The tender of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration
Date. The Expiration Date will not in any event be
extended to a date later than , 1997. Any Old
Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or
termination of the Exchange Offer.
Certain Conditions
to the Exchange
Offer............. The Exchange Offer is subject to customary conditions,
which may be waived by the Company. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Procedures for Each holder of Old Notes wishing to accept the Exchange
Tendering Old Offer must complete, sign and date the Letter of
Notes............. Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any other
required documentation to the Exchange Agent at the
address set forth herein. By executing the Letter of
Transmittal, each holder will represent to the Company
that, among other things, (i) any New Notes to be received
by it will be acquired in the ordinary course of its
business, (ii) it has no arrangement with any person to
participate in the distribution of the New Notes and (iii)
it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate,
it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable. Each Holder whose Old Notes are held through
DTC and wishes to participate in the Exchange Offer may do
so through DTC's Automated Tender Offer Program ("ATOP")
7
<PAGE>
<TABLE>
<S> <C>
by which each tendering participant will agree to be bound
by the Letter of Transmittal as though each Holder had
executed such Letter of Transmittal.
Interest on the New Interest on the New Notes will accrue from the date of
Notes............. issuance (the "New Note Issue Date") at the rate of 9 7/8%
per annum, and will be payable semi-annually in arrears on
each February 15 and August 15, commencing on February 15,
1998. Holders of the New Notes will also on February 15,
1998 receive an amount equal to the accrued interest on
the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New
Notes.
Special Procedures
for Beneficial
Owners............ Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such Old Notes
in the Exchange Offer should contact such registered
holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing
the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership
of the Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take considerable
time and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Holders of Notes who wish to tender their Old Notes and
Procedure......... whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the Expiration
Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Registration The Company has agreed to use its best efforts to
Requirements...... consummate on or prior to 180 days after the date of
original issuance of the Old Notes (the "Issue Date") the
registered Exchange Offer pursuant to which holders of the
Old Notes will be offered an opportunity to exchange their
Old Notes for the New Notes which will be issued without
legends restricting the transfer thereof. In the event
that applicable interpretations of the staff of the
Commission do not permit the Company to effect the
Exchange Offer or in certain other circumstances, the
Company has agreed to file a Shelf Registration Statement
covering resales of the Old Notes and to use its best
efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act and, subject
to certain exceptions, keep such Shelf
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Registration Statement effective until three years after
the Issue Date. If the Company fails to consummate the
Exchange Offer on or prior to 180 days after the Issue
Date or, in the event that the Company is not in
compliance with certain obligations under the Exchange and
Registration Rights Agreement, the Company shall be
obligated to pay liquidated damages to holders of the Old
Notes. See "Old Notes Exchange and Registration Rights
Agreement."
Certain Federal
Income Tax
Considerations.... For a discussion of certain federal income tax
considerations relating to the exchange of the New Notes
for the Old Notes, see "Certain United States Federal
Income Tax Considerations."
Use of Proceeds..... There will be no proceeds to the Company from the exchange
of Notes pursuant to the Exchange Offer.
Exchange Agent...... Wilmington Trust Company is the Exchange Agent. The
address and telephone number of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent."
TERMS OF THE NOTES
Relationship to the The form and terms of the New Notes are substantially the
Old Notes......... same as the form and terms of the Old Notes except that
the New Notes are registered under the Securities Act and,
therefore, will not bear legends restricting the transfer
thereof and will not contain the registration rights and
liquidated damages provisions relating to the Old Notes.
See "Description of Notes" and "Old Notes Exchange and
Registration Rights Agreement."
Certain The Indenture restricts, among other things, the Company's
Restrictions...... ability to incur additional indebtedness, incur liens, pay
dividends or make certain other restricted payments, enter
into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company, merge
or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. The New
Notes are subordinated in right of payment to all existing
and future Senior Indebtedness of the Company, including
the Revolving Facility under the Senior Credit Facilities
which mature on December 31, 2003 (which Facilities may be
refinanced by the Company). A default under the Senior
Credit Facilities or other indebtedness of the Company for
any reason, including after a Change of Control, which
results in acceleration of such indebtedness in an amount
in excess of $5.0 million is an Event of Default under the
Indenture.
</TABLE>
9
<PAGE>
Relationship to the The occurrence of certain of the events that would
Senior Credit constitute a Change of Control under the Indenture would
Facilities........ also constitute a default under the Senior Credit
Facilities. These events include the following: (i) prior
to an initial public offering, Permitted Holders ceasing
to be the beneficial owner of a majority of the voting
securities of the Company; (ii) following an initial
public offering, any person other than a Permitted Holder
beneficially owning more than 35% of voting securities of
the Company while the Permitted Holders beneficially own
less than such an amount; and (iii) certain changes in the
composition of the Board of Directors of the Company. See
"Description of Senior Credit Facilities" and "Description
of Notes--Events of Default." Future Senior Indebtedness
of the Company and its Subsidiaries may contain
prohibitions of certain events that would constitute a
Change of Control or require such Senior Indebtedness to
be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require the
Company to repurchase the Notes would cause a default
under such Senior Indebtedness, even if the Change of
Control itself does not, due to the financial effect of
such repurchase on the Company unless the Company's
obligations under such Senior Indebtedness were satisfied
or a waiver were to be obtained from the holders of such
Senior Indebtedness. Finally, the Company's ability to pay
cash to the holders upon a repurchase may be limited by
the Company's then existing financial resources. There can
be no assurance that sufficient funds will be available
when necessary to make any required repurchase. The
Company's current ability to repurchase the New Notes upon
a Change of Control or Asset Sale would be determined by
the proceeds received upon such Change of Control or Asset
Sale. In addition, the Company would be prohibited from
repurchasing the New Notes without first satisfying its
obligations under any outstanding Senior Indebtedness.
Even if sufficient funds were otherwise available, the
terms of the Senior Credit Facilities prohibit the
Company's prepayment of the Notes prior to their scheduled
maturity unless the Company's obligations thereunder were
satisfied or a waiver were to be obtained. Consequently,
if the Company is not able to prepay the Senior Credit
Facilities and any other Senior Indebtedness containing
similar restrictions or obtain requisite consents or
waivers, as described above, the Company will be unable to
fulfill its repurchase obligations if holders of Notes
exercise their repurchase rights following a Change of
Control, thereby resulting in a default under the
Indenture. For a discussion of the restrictions and
remedies available in the event the Company were to fail
to repurchase the Notes, see "Description of Notes--Events
of Default." In the event of such a default, depending
upon the circumstances in
10
<PAGE>
<TABLE>
<S> <C>
existence at such a time, the Company may amend the Change
of Control provisions contained in the Indenture. However,
the Indenture permits the provisions and protections
pertaining to Change of Control payments to be amended
with the consent of the Holders of at least a majority in
principal amount of the Notes.
Asset Upon an Asset Disposition, the Indenture and the Senior
Dispositions...... Credit Facilities require the Company to make certain
prepayments or payments due under the Senior Credit
Facilities or other Senior Indebtedness before it is
required to offer to purchase a portion of the Notes.
Additionally, the Indenture provides that in the event of
an Asset Disposition by the Company, the proceeds of the
Asset Disposition will be applied to repurchase the Other
Notes prior to any repurchase of the Notes. Further the
terms of the Senior Credit Facilities generally prohibit
the Company's prepayment of the Notes prior to their
scheduled maturity.
Waiver of Certain Under the provisions of the Indenture, Holders of the
Liabilities....... Notes waive and release directors officers, employees or
stockholders of the Company from any liability or claims
arising under the Notes or the Indenture or in connection
therewith. To the extent that such waiver and release may
be deemed to apply to liability under the Securities Act,
the Company has been advised that in the opinion of the
Commission, any such waiver and release would be against
public policy as expressed in the Securities Act and
would, therefore, be unenforceable.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by participants in the Exchange Offer.
11
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited summary pro forma financial
data of the Company for the indicated periods. The unaudited summary pro forma
statement of operations data give effect to the MBW Acquisition, the MBW
Refinancing and the LC Acquisition (collectively, the "Transactions") as if they
had occurred on January 1, 1996 for the year ended December 31, 1996 and the six
months ended June 30, 1996 and June 28, 1997. The unaudited summary pro forma
balance sheet information gives effect to the LC Acquisition as if it had
occurred on June 28, 1997. The unaudited summary pro forma financial data do not
purport to represent what the Company's results of operations or financial
condition would have actually been had the Transactions been consummated as of
such dates or for such periods or project the Company's results of operations or
financial condition for any future period. The unaudited summary pro forma
financial data should be read in conjunction with the Pro Forma Financial
Information and the notes thereto. See "Pro Forma Financial Information" and the
separate historical financial statements of the Company, the MBW Predecessor and
the LC Business and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, --------------------------------
1996 JUNE 30, 1996 JUNE 28, 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................ $ 196,047 $ 96,015 $ 94,113
Cost of products sold............................................ 65,699 31,195 32,347
-------------- --------------- ---------------
Gross profit................................................... 130,348 64,820 61,766
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................................... 18,373 8,952 9,475
Trade promotions............................................... 41,067 20,107 16,531
Consumer marketing............................................. 14,829 9,929 4,964
-------------- --------------- ---------------
Total brokerage, distribution and marketing expenses........... 74,269 38,988 30,970
Selling, general and administrative expenses..................... 14,141 7,178 5,965
Amortization of goodwill and other intangibles................... 9,901 4,951 4,951
-------------- --------------- ---------------
Operating profit............................................... 32,037 13,703 19,880
Amortization of deferred financing fees.......................... 1,277 638 638
Interest expense................................................. 26,616 13,309 13,309
-------------- --------------- ---------------
Income (loss) before income taxes.............................. 4,144 (244) 5,933
Provision for (benefit from) income taxes........................ 1,595 (93) 2,285
-------------- --------------- ---------------
Net income (loss).............................................. $ 2,549 $ (151) $ 3,648
-------------- --------------- ---------------
-------------- --------------- ---------------
</TABLE>
12
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before
participating in the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company is significantly leveraged. At June 28, 1997, on a pro forma
basis after giving effect to the LC Acquisition, the Company would have had
outstanding $287.0 million in aggregate principal amount of indebtedness
(excluding trade payables and other liabilities) and availability of $13.0
million under the Revolving Facility. The degree to which the Company is
leveraged could have important consequences to holders of the Notes, including
the following: (i) the Company will have significant cash interest expense and
principal repayment obligations with respect to outstanding indebtedness,
including the Senior Credit Facilities, the Notes and the Other Notes; (ii) the
Company could be vulnerable to changes in general economic conditions or
increases in prevailing interest rates; (iii) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; (iv) the Company
may be substantially more leveraged than certain of its competitors, which may
place the Company at a competitive disadvantage; (v) all of the indebtedness
outstanding under the Senior Credit Facilities will be secured by substantially
all the assets of the Company and matures prior to the maturity of the Notes;
and (vi) the Company's substantial degree of leverage may limit its flexibility
to adjust to changing market conditions, reduce its ability to withstand
competitive pressures and make it more vulnerable to a downturn in general
economic conditions or its business. See "Description of Senior Credit
Facilities," "Description of Notes" and "Description of Other Notes."
The Company believes that its cash flow from operations will be sufficient
to meet its payment obligations under the Senior Credit Facilities and other
operational requirements. If the Company is unable to generate sufficient cash
flow from operations, it may be required to delay or forego its acquisition
strategy, reduce or delay planned product improvement initiatives or refinance
all or a portion of amounts outstanding under the Senior Credit Facilities at or
prior to their maturity, which is prior to the maturity of the Notes. Other
potential measures to raise cash include the sale of assets or equity. However,
the Company's ability to raise funds by selling assets is restricted by the
Senior Credit Facilities, and its ability to effect equity financings is
dependent on results of operations and market conditions. In the event that the
Company is unable to refinance such indebtedness or raise funds through asset
sales, sales of equity or otherwise, its ability to pay principal of, and
interest on, the Notes would be adversely affected.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indentures restrict among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, the Senior Credit Facilities contain
other and more restrictive covenants and prohibit the Company from prepaying its
other indebtedness (including the Notes and the Other Notes). See "Description
of Notes -- Certain Covenants," "Description of Senior Credit Facilities" and
"Description of Other Notes." The Senior Credit Facilities prohibit modification
of the terms of any Subordinated Indebtedness, including the Indentures, the
Notes and the Other Notes, which would increase the rate of interest on such
indebtedness, change to earlier dates the dates upon which principal and
interest are due or make any other changes adverse to the interests of the
lenders under the Senior Credit Facilities. Additionally, the Senior Credit
Facilities prohibit prepayment of the New Notes prior to maturity or refinancing
of amounts outstanding under the Senior Credit Facilities. The Senior Credit
Facilities require the Company to
13
<PAGE>
maintain specified financial ratios and satisfy financial condition tests. The
financial covenants require the Company to maintain (i) a minimum interest
coverage ratio of 1.35:1.00 until December 31, 1997, increasing to 1.65:1.00
thereafter until December 31, 1998, increasing to 1.90:1.00 thereafter until
December 31, 1999, increasing to 2.00:1.00 thereafter until December 31, 2000,
increasing to 2.25:1.00 thereafter until December 31, 2001 and then increasing
to 2.50:1.00 thereafter until termination; (ii) a maximum leverage ratio of
5.85:1.00 until December 31, 1997, decreasing to 5.50:1.00 thereafter until
December 31, 1998, decreasing to 5.00:1.00 thereafter until December 31, 1999,
decreasing to 4.50:1.00 thereafter until December 31, 2000, and then decreasing
to 4.00:1.00 thereafter until termination; (iii) a minimum fixed charge ratio of
1.10:1.00 until December 31, 1997, increasing to 1.25:1.00 until December 31,
1998, increasing to 1.40:1.00 until December 31, 1999, increasing to 1.50:1.00
until December 31, 2000, increasing to 1.55:1.00 until December 31, 2000, and
then increasing to 1.60:1.00 until termination; and (iv) a maximum consolidated
maintenance capital expenditures amount of $2.0 million for the year ending
December 31, 1997 and $2.0 million for each calendar year thereafter.
A breach of any of the above-referenced financial covenants would constitute
an event of default under the Senior Credit Facilities and would entitle the
Lenders under the Senior Credit Facilities to accelerate the indebtedness due
thereunder. If the amount of such indebtedness so accelerated were to be in
excess of $5 million, such acceleration would also constitute an Event of
Default under the Indenture. The Company's ability to meet those financial
ratios and tests can be affected by events beyond its control, and there can be
no assurance that the Company will meet those tests. A breach of any of these
covenants could result in a default under the Senior Credit Facilities and/or
the Indentures. Upon the occurrence of an event of default under the Senior
Credit Facilities, the lenders could elect to declare all amounts outstanding
under the Senior Credit Facilities, together with accrued interest, to be
immediately due and payable. If the Company were unable to repay those amounts,
the lenders could proceed against the collateral granted to them to secure that
indebtedness. If the lenders under the Senior Credit Facilities accelerate the
payment of the indebtedness, there can be no assurance that the assets of the
Company would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company, including the Notes. See "Description of Senior
Credit Facilities."
SUBORDINATION; ASSET ENCUMBRANCES
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness, including the Senior Credit Facilities, including the
principal of (and premium, if any) and interest on and all other amounts due on
or payable in connection with Senior Indebtedness. As of June 28, 1997, on a pro
forma basis after giving effect to the LC Acquisition, there would have been
$87.0 million of Senior Indebtedness outstanding (excluding unused commitments
of $13.0 million under the Revolving Facility). By reason of such subordination,
in the event of the insolvency, liquidation, reorganization, dissolution or
other winding-up of the Company or upon a default in payment with respect to, or
the acceleration of, any Senior Indebtedness, the holders of such Senior
Indebtedness and any other creditors who are holders of Senior Indebtedness and
creditors of subsidiaries that are not guarantors of the Notes must be paid in
full before the Holders of the Notes may be paid. The Company does not currently
have any subsidiaries, however, the Indenture does not restrict the ability of
the Company to create, acquire or capitalize subsidiaries in the future. The
Indenture permits subsidiaries of the Company to incur debt provided certain
conditions are met and such subsidiaries guarantee the Notes. If the Company
incurs any additional PARI PASSU debt, the holders of such debt would be
entitled to share ratably with the holders of the Notes and the Other Notes in
any proceeds distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company. This may have
the effect of reducing the amount of proceeds paid to Holders of the Notes. In
addition, no payments may be made with respect to the principal of (and premium,
if any) or interest on the Notes if a payment default exists with respect to
Senior Indebtedness and, under certain circumstances, no payments may be made
with respect to the principal of (and premium, if any) or interest on the Notes
for a period of up to 179 days if a non-payment default exists with respect to
Senior Indebtedness. See "Description of Notes."
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<PAGE>
The Company has granted the lenders under the Senior Credit Facilities
security interests in substantially all of the current and future assets of the
Company, including a pledge of all of the issued and outstanding shares of
capital stock of the Company's future domestic subsidiaries. In the event of a
default on such indebtedness (whether as a result of the failure to comply with
a payment or other covenant, a cross-default, or otherwise), the parties granted
such security interests will have a prior secured claim on the capital stock of
the Company and the assets of the Company and any guarantors under the Senior
Credit Facilities. If such parties should attempt to foreclose on their
collateral, the Company's financial condition and the value of the Notes would
be materially adversely affected. See "Description of Senior Credit Facilities."
LIMITATION ON CHANGE OF CONTROL
The Indentures require the Company, in the event of a Change of Control in
respect of which it has not elected to redeem the Notes or the Other Notes, to
repurchase any Notes and Other Notes that holders thereof desire to have
repurchased at 101% of the principal amount thereof, plus accrued interest to
the Change of Control repurchase date. See "Description of Notes -- Change of
Control."
The Change of Control purchase feature of the Notes and the Other Notes may
in certain circumstances discourage or make more difficult a sale or takeover of
the Company. There can be no assurance that the Company will have funds
available to redeem or repurchase the Notes upon the occurrence of a Change of
Control. In particular, a Change of Control may cause an acceleration of the
Senior Credit Facilities and other indebtedness, if any, of the Company, in
which case such indebtedness would be required to be repaid in full before
redemption or repurchase of the Notes. See "Description of Notes -- Change of
Control," "Description of Senior Credit Facilities" and "Description of Other
Notes." The occurrence of the events that would constitute a Change of Control
would also constitute a "Change of Control" under the Series C Indenture. The
inability to repay such indebtedness, if accelerated, or to redeem or repurchase
all of the Notes upon the occurrence of a Change in Control would constitute an
event of default under the Indenture.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. A number of these competitors have multiple product lines, have
substantially greater financial and other resources available to them and may be
substantially less leveraged than the Company, and there can be no assurance
that the Company can compete successfully with such other companies. Competitive
pressures or other factors could cause the Company's products to lose market
share or result in significant price erosion, which would have a material
adverse effect on the Company's results of operations. See "Business --
Competition."
RAW MATERIALS
The Company uses agricultural commodities, flavors, other raw materials and
packaging in the production of its products which are purchased from growers,
commodity processors, importers, other food companies and packaging
manufacturers. While all such materials are available from numerous independent
suppliers, commodity raw materials are subject to fluctuations in price
attributable to, among other things, changes in crop size and federal and state
agricultural programs. Such fluctuations could have a material adverse effect on
the performance of the Company. See "Business -- Raw Materials."
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<PAGE>
RISKS RELATING TO THE LC ACQUISITION
The process of integrating the assets acquired pursuant to the LC
Acquisition may result in unforeseen operating difficulties, may require
substantial attention from members of the Company's senior management and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of the Company's existing operations. In
addition, in connection with the LC Acquisition, the Company has entered into
the LC Co-Pack Agreement with Kraft which has agreed to manufacture and
distribute syrup for the Company at prices based on historical manufacturing
costs for a period of up to nine months from the LC Acquisition Closing Date.
Thereafter, the Company intends to enter into a new co-pack agreement with a
third party or manufacture the syrup in a new facility to be acquired or leased
by the Company. There can be no assurance that the Company will be able to enter
into a new co-pack agreement on substantially the same terms as the LC Co-Pack
Agreement or will be able to acquire or lease such facility. LOG CABIN syrup
products have historically been sold directly by Kraft's sales force. The
Company intends to sell the LOG CABIN syrup products through its network of
independent food brokers; however, there can be no assurance that this change in
sales channels will be effective. In addition, Kraft has historically provided
computer, accounting, sales and marketing support. The Company has entered into
the LC Transition Services Agreement pursuant to which Kraft will provide
various sales, marketing, transactions processing, and accounting services to
the Company for a period of up to six months after the LC Acquisition Closing
Date. There can be no assurance that the Company will be able to perform these
services at a comparable cost. In order to transition the LOG CABIN business
into the Company's operations, the Company will increase its sales department by
three people, its marketing department by four people and its general and
administration department by five people. In addition, to accommodate the
additional personnel, the Company will expand its offices. Following the
expiration of the LC Co-Pack Agreement, the Company intends to move the syrup
manufacturing equipment to a third party manufacturing facility. If the
equipment is not necessary for the Company's syrup production requirements, the
Company will either store or sell the equipment. The Company expects the total
costs of this transition will be approximately $5.1 million.
RISKS RELATING TO THE MBW ACQUISITION
The Company was formed for the purpose of the MBW Acquisition. The Company's
business was previously operated as a product line of Unilever. There can be no
assurance that the Company will not encounter unanticipated problems or expenses
in establishing MRS. BUTTERWORTH'S as an independent company. The Company
believes that the costs of hiring personnel, establishing its corporate
infrastructure and transferring the production of MRS. BUTTERWORTH'S syrup from
Conopco to Red Wing will be approximately $5.8 million. In addition, Conopco
historically provided computer, accounting and human resources support,
warehouse space, a network of third-party distribution services and a network of
regional food brokers. There can be no assurance that the Company will be able
to perform these services at a comparable cost. The majority of the existing
broker agreements were transferred to the Company concurrently with the MBW
Acquisition. Although the Company believes that it will be able to continue such
broker agreements on substantially the same terms as those previously negotiated
with Conopco, there can be no assurance that the Company will be able to do so.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company plans to continue to pursue additional acquisitions of well
recognized national and regional dry grocery brands. There can be no assurance,
however, that the Company will be able to identify additional acquisitions or
that, if consummated, any anticipated benefits will be realized from such
acquisitions. In addition, the availability of additional acquisition financing
cannot be assured and, depending on the terms of such additional acquisitions,
could be restricted by the terms of the Senior Credit Facilities and/or the
Indentures. The process of integrating acquired operations into the Company's
existing operations may result in unforeseen operating difficulties, may require
substantial
16
<PAGE>
attention from members of the Company's senior management and may require
significant financial resources that would otherwise be available for the
ongoing development or expansion of the Company's existing operations. Possible
future acquisitions by the Company could result in the incurrence of additional
debt, contingent liabilities and amortization expenses related to goodwill and
other intangible assets, all of which could materially adversely affect the
Company's financial condition and operating results.
IMPACT OF GOVERNMENTAL REGULATION
The Company is subject to numerous federal, state and local laws and
regulations concerning, among other things, health and safety matters, food
manufacture, product labeling, advertising and the environment. Compliance with
existing federal, state and local laws and regulations is not expected to have a
material adverse effect upon the earnings or competitive position of the
Company. However, the Company cannot predict the effect, if any, of laws and
regulations that may be enacted in the future, or of changes in the enforcement
of existing laws and regulations that are subject to extensive regulatory
discretion. See "Business -- Certain Legal and Regulatory Matters."
DEPENDENCE ON KEY MANAGEMENT
The Company's success will depend to a significant extent on Messrs. Ferraro
and Willett and upon Dartford. Although the Company has entered into employment
agreements with these executive officers and a management services agreement
with Dartford, there can be no assurance the Company will be able to retain its
executive officers and key personnel or attract additional qualified management
in the future.
CONTROL BY INVESTOR GROUP
All of the outstanding shares of the Company's Common Stock are beneficially
owned by MBW LLC. Accordingly, MBW LLC and the Equity Investors control the
Company and have the power to elect all of its directors, appoint new management
and approve any action requiring the approval of the holders of the Company's
Common Stock, including adopting amendments to the Company's Certificate of
Incorporation and approving mergers or sales of substantially all of the
Company's assets. See "Management." The directors elected by MBW LLC will have
the authority to make decisions affecting the capital structure of the Company,
including the issuance of additional capital stock, the implementation of stock
repurchase programs and the declaration of dividends. Pursuant to MBW LLC's
Limited Liability Company Agreement, for so long as MDC owns more than 50% of
the voting interests of MBW LLC, MDC will have the right to designate a majority
of the Board of Directors of the Company. See "Security Ownership."
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes or the Old
Notes. The Company does not intend to apply for listing of the New Notes on any
securities exchange or any automated dealer quotation system. Although the
Initial Purchasers have informed the Company that they currently intend to make
a market in the New Notes, they are not obligated to do so and any such market
making may be discontinued at any time without notice. There can be no assurance
as to the liquidity of any markets that may develop for the New Notes, the
ability of holders to sell the New Notes, or the price at which holders would be
able to sell the New Notes. Future trading prices of the New Notes will depend
on many factors, including among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. Historically,
the market for securities similar to the New Notes, including non-investment
grade debt, has been subject to disruptions that have caused substantial
volatility in the prices of such securities. There can be no assurance that any
market for the New Notes, if such market develops, will not be subject to
similar disruptions.
17
<PAGE>
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the Series C Notes) in connection
with the LC Acquisition and payments to consummate the LC Acquisition with the
proceeds thereof are subject to review under relevant federal and state
fraudulent conveyance statutes in a bankruptcy or reorganization case or a
lawsuit by or on behalf of creditors of the Company. Under these statutes, if a
court were to find that obligations (such as the Series C Notes) were incurred
with the intent of hindering, delaying or defrauding present or future creditors
or that the Company received less than a reasonably equivalent value or fair
consideration for those obligations and, at the time of the incurrence of the
obligations, the Company either (i) was insolvent or rendered insolvent by
reason thereof, (ii) was engaged or was about to engage in a business or
transaction for which its remaining unencumbered assets constituted unreasonably
small capital or (iii) intended to or believed that it would incur debts beyond
its ability to pay such debts as they matured or became due, such court could
void the Company's obligations under the Series C Notes, subordinate the Series
C Notes to other indebtedness of the Company or take other action detrimental to
the holders of the Series C Notes. The measure of insolvency for purposes of a
fraudulent conveyance claim will vary depending upon the law of the jurisdiction
being applied. Generally, however, a company will be considered insolvent at a
particular time if the sum of its debts at that time is greater than the then
fair value of its assets or if the fair saleable value of its assets at that
time is less than the amount that would be required to pay its probable
liability on its existing debts as they become absolute and mature. There can be
no assurance, however, as to what standard a court would apply to evaluate the
parties' intent or to determine whether the Company was insolvent at the time
of, or rendered insolvent upon consummation of, the LC Acquisition or that,
regardless of the standard, a court would not determine that the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the LC
Acquisition.
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<PAGE>
THE ACQUISITIONS
THE LC ACQUISITION
LC ASSET PURCHASE AGREEMENT
Pursuant to the LC Asset Purchase Agreement, the Company acquired
substantially all of the assets of the LOG CABIN syrup business for a cash
purchase price of approximately $222.0 million. The purchase price to be paid on
the LC Acquisition Closing Date is subject to adjustment within 45 days of the
LC Acquisition Closing Date on a dollar-for-dollar basis to the extent that the
book value of the finished goods inventory is less than or greater than $3.8
million. The assets acquired by the Company include (i) the LOG CABIN U.S. and
foreign trademarks, patents, copyrights and other intellectual property rights
relating to LOG CABIN products (except for those intellectual property rights
held in Mexico), (ii) the machinery, equipment and spare parts used in the
manufacture of LOG CABIN syrups, (iii) inventories held by Kraft on the LC
Acquisition Closing Date, including raw materials, packaging and finished goods,
(iv) proprietary formulations for LOG CABIN syrups, (v) other product
specifications and customer lists and (vi) rights under certain contracts,
licenses, purchase orders and other arrangements and permits. The Company did
not assume any pre-closing liabilities or obligations of Kraft except for
liabilities for refunds, adjustments, exchanges, returns and warranty and
merchantability claims, provided, however, that the Company will have no
liability for returns of defective products sold prior to the LC Acquisition
Closing Date and returned within 60 days after the LC Acquisition Closing Date
to the extent the value of such products exceeds $100,000. The LC Asset Purchase
Agreement contains customary representations, covenants and indemnification
provisions.
LC CO-PACK AGREEMENT
The Company and Kraft entered into a co-pack agreement dated July 1, 1997
(the "LC Co-Pack Agreement") pursuant to which Kraft will contract manufacture
and distribute all of the Company's requirements for specified syrup, subject to
certain minimum supply limits. Prices for the products will be based upon
historical manufacturing costs and will be fixed as specified in the LC Co-Pack
Agreement, with certain scheduled increases, and will be subject to adjustment
based upon purchase price variances for raw materials and packaging supplies and
fluctuations in monthly production volumes below certain monthly minimum levels.
The LC Co-Pack Agreement will remain in effect for nine months from the LC
Acquisition Closing Date, unless earlier terminated by the Company with 60 days
prior written notice. In addition, pursuant to the LC Co-Pack Agreement, the
Company licenses Kraft to use certain equipment acquired by the Company and
located in Kraft's manufacturing facilities for the purpose of manufacturing,
processing and packaging Excluded Products. This license commenced on the LC
Acquisition Closing Date and will terminate 30 days before the date on which the
Company elects to remove such equipment.
THE LC EXCLUDED PRODUCTS CO-PACK AGREEMENT
The Company and Kraft entered into a co-pack agreement relating to the
Excluded Products dated July 1, 1997 (the "LC Excluded Products Co-Pack
Agreement") pursuant to which the Company will provide manufacturing, processing
and packaging for the Excluded Products. The Company will commence providing
these services on the date that the relevant equipment used to make the Excluded
Products is removed from Kraft's manufacturing facility and begins operating at
the Company's facility or that of a third-party co-packer engaged by the
Company. The Excluded Products consist of individual syrup portion packs
manufactured, marketed, distributed and sold by Kraft pursuant to an agreement
with Alliant Food Services, Inc. Sales of the Excluded Products were
approximately $4.9 million in 1996. During the term of the LC Excluded Products
Co-Pack Agreement, Kraft will pay the Company prices for the Excluded Products
based upon the Company's fully allocated costs, without a margin, calculated in
19
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the same manner as Kraft's prices that will be set forth in the LC Co-Pack
Agreement, and subject to the same type and frequency of adjustments as the
prices set forth in the LC Co-Pack Agreement. The Company's obligation under the
LC Excluded Products Co-Pack Agreement will terminate on February 13, 2000,
unless earlier terminated pursuant to the terms of the LC Excluded Products
Co-Pack Agreement.
LC TRANSITION SERVICES AGREEMENT
The Company and Kraft entered into a transition services agreement dated
July 1, 1997 (the "LC Transition Services Agreement"), pursuant to which Kraft
will provide to the Company marketing services, transactions processing
services, accounting services and other related services. Such services will
generally be provided at the cost historically allocated to the LOG CABIN syrup
business for such services, adjusted to reflect any changes in the nature or
level of services. The LC Transition Services Agreement will continue for a
period of six months from the date thereof, unless earlier terminated pursuant
to its terms.
THE MBW ACQUISITION
MBW ASSET PURCHASE AGREEMENT
On the MBW Acquisition Closing Date, pursuant to the Asset Purchase
Agreement between Conopco and the Company, dated as of December 18, 1996 (the
"MBW Asset Purchase Agreement"), the Company acquired substantially all of the
assets of the MRS. BUTTERWORTH'S syrup and pancake mix business for a cash
purchase price of $114.6 million. The purchase price paid on the MBW Acquisition
Closing Date was subsequently reduced by $483,000 pursuant to the purchase price
adjustment mechanism set forth in the MBW Asset Purchase Agreement. The assets
acquired by the Company include (i) the MRS. BUTTERWORTH'S trademarks for the
United States, Canada and Puerto Rico and patents, copyrights and other
intellectual property rights relating to MRS. BUTTERWORTH'S products, (ii) the
machinery, equipment and spare parts used in the manufacture of MRS.
BUTTERWORTH'S syrups, (iii) inventories held by Conopco on the MBW Acquisition
Closing Date, including raw materials, packaging and finished goods, (iv)
proprietary formulations for MRS. BUTTERWORTH'S syrups and pancake mixes, (v)
other product specifications and customer lists and (vi) rights under certain
contracts, licenses, purchase orders and other arrangements and permits. Except
for warranty and related claims not to exceed $150,000, the Company did not
assume any pre-closing liabilities or obligations of Conopco. The MBW Asset
Purchase Agreement contains customary representations, covenants and
indemnification provisions.
MBW CO-PACK AGREEMENT
Pursuant to a co-pack agreement between Van den Bergh Foods Company ("VDB"),
a division of Conopco, and the Company dated as of December 31, 1996 (the "MBW
Co-Pack Agreement"), VDB will contract manufacture and package all of the
Company's requirements for specified syrup and pancake mix products, subject to
certain minimum and maximum supply limits. Prices for the products are fixed
based on the Conopco's actual 1996 costs, with certain scheduled increases, and
are subject to adjustment based upon purchase price variances for raw materials
and packaging supplies and fluctuations in monthly production volumes below
certain monthly minimum or above certain monthly maximum levels. The Co-Pack
Agreement terminates on December 31, 1997, subject to earlier termination with
respect to one or more products by mutual agreement of the parties. The Company
has entered into the Red Wing Co-Pack Agreement pursuant to which Red Wing will
contract manufacture MRS. BUTTERWORTH'S syrup for a period of five years
See."--The Red Wing Co-Pack Agreement."
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<PAGE>
MBW TRANSITION SERVICES AGREEMENT
Pursuant to a transition services agreement between the Company and Conopco
dated as of December 31, 1996 (the "MBW Transition Services Agreement"), Conopco
provided the Company with certain operational and financial services which it
performed prior to the MBW Acquisition for a period not to exceed six months
from the MBW Acquisition Closing Date. The Company initially paid Conopco a
weekly fee of up to $17,000 for Conopco's sales services and a monthly fee of
$82,800 for all other services provided by Conopco under the MBW Transition
Services Agreement. The fees the Company pays to Conopco were reduced
proportionately as the Company assumed responsibility for the functions
described above. The MBW Transition Services Agreement terminated on June 30,
1997.
OTHER AGREEMENTS
Pursuant to a Shared Technology License Agreement dated as of December 31,
1996 between Conopco and the Company, Conopco granted the Company a
nonexclusive, perpetual and royalty-free right and license to use any
proprietary and/or confidential trade secrets, know-how, processes and other
technology used in connection with the MRS. BUTTERWORTH'S business.
Pursuant to a Flavor Supply Agreement dated as of December 31, 1996 (the
"Flavor Supply Agreement") between Quest International Flavors & Food
Ingredients Company ("Quest"), an affiliate of Unilever, and the Company, Quest
has agreed to provide the Company with certain flavor mixtures used in the
production of MRS. BUTTERWORTH'S syrups for a period of twelve years, subject to
certain minimum and maximum order limits. The Flavor Supply Agreement may be
terminated by either Quest or the Company upon written notice of a time period
specified therein. The Company believes that in the event that the Flavor Supply
Agreement is terminated, the Company could readily obtain an alternative supply
of flavor mixtures on comparable terms. Consequently, the Company does not
believe that it is dependent upon the Flavor Supply Agreement.
THE RED WING CO-PACK AGREEMENT
The Company entered into the Red Wing Co-Pack Agreement pursuant to which
Red Wing will contract manufacture and package all of the Company's requirements
for MRS. BUTTERWORTH'S syrup. Prices for the products are specified in the Red
Wing Co-Pack Agreement and are subject to adjustment based upon purchase price
variances for raw materials, packaging supplies and other production related
costs. Under the Red Wing Co-Pack Agreement, MRS. BUTTERWORTH'S syrup will be
produced and distributed from Red Wing's San Jose, California and Streator,
Illinois facilities. In consideration of certain additions made to Red Wing's
Streator, Illinois facility, the Company will pay additional charges on each
case of products produced up to an aggregate amount that is the lesser of the
actual construction costs of such additions or $1,850,000. During the initial
five year term, the Company will be subject to certain annual minimum purchase
requirements. The Company commenced transferring production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. The Company may terminate in whole or
in part the Red Wing Co-Pack Agreement on or after two years from the date
thereof with 180 days written notice. In the event the Company so terminates, it
will be obligated to pay within 30 days of such termination the charges that
would have been paid in connection with the additions to the Streator facility.
In addition, if the Company fails to fulfill the minimum annual purchase
requirements, an additional 180 days will be added to the two year period for
each year such purchase requirements are not met. Unless earlier terminated, the
Red Wing Co-Pack Agreement will expire five years from the date thereof, but is
subject to automatic renewal for additional one year terms unless either party
gives 180 days written notice of its intent not to renew.
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USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy obligations of the Company under
the Exchange and Registration Rights Agreement. The Company will not receive any
proceeds from the issuance of the New Notes offered hereby. In consideration for
issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange
Offer--Terms of the Exchange Offer." The Old Notes surrendered in exchange for
the New Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
28, 1997, reflecting the MBW Acquisition and the MBW Refinancing, and as
adjusted to give effect to the LC Acquisition. This table should be read in
conjunction with the "Pro Forma Financial Information" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 28, 1997
----------------------
<S> <C> <C>
AS ADJUSTED
ACTUAL (UNAUDITED)
--------- -----------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash................................................................................. $ 12.6 $ --
--------- -----------
--------- -----------
Long-term debt (including current maturities):
Revolving Facility(1).............................................................. -- 47.0
Term Facility...................................................................... -- 40.0
Series A Notes..................................................................... 100.0 100.0
Series C Notes(2).................................................................. -- 102.5
--------- -----------
Total long-term debt............................................................. 100.0 289.5
Total stockholder's equity(3)........................................................ 33.5 61.0
--------- -----------
Total capitalization................................................................. $ 133.5 $ 350.5
--------- -----------
--------- -----------
</TABLE>
- ------------------------------
(1) Reflects borrowings under a $60.0 Revolving Facility. See "Description of
Senior Credit Facilities."
(2) Includes a $2.5 million premium received in connection with the Series C
Notes Offering.
(3) Stockholder's equity, as adjusted, reflects an equity contribution from
Holdings of $27.5 million for the LC Acquisition, which is net of certain
transaction expenses of $1.1 million.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Exchange and Registration Rights Agreement, the Company has
agreed to file a registration statement with respect to an offer to exchange the
Old Notes for senior debt securities of the Company with terms substantially
identical to the Old Notes (except that the New Notes will not contain terms
with respect to transfer restrictions, registration rights and liquidated
damages) on or prior to 60 days after the Issue Date and to use best efforts to
cause such registration statement to become effective under the Securities Act
within 150 days after the Issue Date. The Old Notes were issued on July 1, 1997.
In the event that applicable interpretations of the staff of the Commission do
not permit the Company to effect the Exchange Offer as contemplated thereby, or
if certain holders of the Old Notes notify the Company that they are not
eligible to participate in, or would not receive freely tradeable New Notes in
exchange for tendered Old Notes pursuant to, the Exchange Offer, the Company
will use its best efforts to cause to become effective a shelf registration
statement (the "Shelf Registration Statement") with respect to the resale of the
Old Notes and to keep the Shelf Registration Statement effective until three
years after the Issue Date. In the event that the Company is not in compliance
with certain obligations under the Exchange and Registration Rights Agreement,
the Company shall be obligated to pay liquidated damages to holders of the Old
Notes. See "Old Notes Exchange and Registration Rights Agreement."
Each holder of the Old Notes that wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or Holdings or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holder's information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. Only
broker-dealers who acquired the Old Notes as a result of market-making
activities or other trading activities may participate in the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
23
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes surrendered pursuant to the Exchange Offer. Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $100.0 million aggregate principal amount
of the Series C Notes are outstanding. This Prospectus, together with the Letter
of Transmittal, is being sent to all registered holders of Old Notes. There will
be no fixed record date for determining registered holders of Old Notes entitled
to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Exchange and Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and continue to accrue interest and will
be entitled to the rights and benefits such holders have under the Indenture and
the Exchange and Registration Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 1 of
the Exchange and Registration Rights Agreement. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes from
the Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "-- Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth
24
<PAGE>
below under "--Certain Conditions to the Exchange Offer" shall not have been
satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders of Old Notes. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer, depending upon the significance of the amendment
and the manner of disclosure to the registered holders, if the Exchange Offer
would otherwise expire during such period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 9 7/8% per annum, payable
semi-annually, on February 15 and August 15 of each year, commencing on February
15, 1998. Holders of New Notes will receive interest on February 15, 1998 from
the date of initial issuance of the New Notes, plus an amount equal to the
accrued interest on the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the
25
<PAGE>
Company in whole or in part at any time and from time to time in its sole
discretion. The failure by the Company at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date or, in the alternative,
comply with DTC's ATOP procedures described below. In addition, either (i) Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at the Depository Trust Company (the "Book-Entry
Transfer Facility" or "DTC") pursuant to the procedure for book-entry transfer
described below or properly transmitted Agent's Message (as defined below) must
be received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder of Old Notes. The transfer of registered ownership
may take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the
26
<PAGE>
case may be, are required to be guaranteed, such guarantor must be a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
provide evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Old Notes to the Exchange Agent in accordance with
the Depositary's ATOP procedures for transfer. The Depositary will then send an
Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgement from a participant
in DTC's ATOP that is tendering Old Notes which are the subject of such book
entry confirmation, that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely Book-Entry Confirmation of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the
27
<PAGE>
terms and conditions of the Exchange Offer or if Old Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "--Exchange Agent" on or prior to the Expiration Date or, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), or properly transmitted Agent's Message as well as all
tendered Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three (3) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
28
<PAGE>
For a withdrawal to be effective, (i) a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent" or (ii) holders must comply with the appropriate procedures
of DTC's ATOP system. Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes were registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering" above at any time
on or prior to the Expiration Date.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Corporate Trust Administration c/o Harris Trust Company of New York,
1100 North Market Street as Agent
Rodney Square North 75 Water Street
Wilmington, Delaware 19890-0001 New York, New York 10004
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-8864
</TABLE>
29
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$250,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, and
related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Old Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of Notes tendered, or if tendered Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth (i) in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws and (ii) otherwise set forth in the
Offering Memorandum dated June 18, 1997 distributed in connection with the
Series C Notes Offering. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. Based on interpretations by the
staff of the Commission, New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer. Any holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or such securities laws have been complied
with. The Company has agreed, pursuant to the Exchange and Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the New Notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the New Notes may request in writing.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--THE COMPANY AND MBW PREDECESSOR
The following table sets forth selected historical financial data of the MBW
Predecessor for the years ended December 31, 1994, 1995 and 1996 and the six
months ended June 30, 1996 and for the Company for the six months ended June 28,
1997. The selected historical statement of operations data for the years ended
December 31, 1994, 1995 and 1996 are derived from the audited financial
statements of the MBW Predecessor included elsewhere in this Prospectus which
have been audited by Price Waterhouse LLP. The selected historical statement of
operations data for the six months ended June 30, 1996 are derived from the
unaudited financial statements of the MBW Predecessor which are included
elsewhere in this Prospectus which, in the opinion of management, include all
normal, recurring adjustments. The selected historical statement of operations
data for the six months ended June 28, 1997 are derived from the unaudited
financial statements of the Company which are included elsewhere in this
Prospectus and which, in the opinion of management, include all normal,
recurring adjustments. This table should be read in conjunction with the
historical financial statements and related notes thereto of the Company and the
MBW Predecessor included elsewhere in this Prospectus and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MBW PREDECESSOR COMPANY
------------------------------------------------ ------------
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
---------------------------------- JUNE 30, JUNE 28,
1994 1995 1996 1996 1997
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales...................................................... $ 96,729 $ 91,302 $ 89,541 $ 43,548 $ 42,891
Cost of products sold.......................................... 29,930 27,743 28,955 13,793 14,271
---------- ---------- ---------- ------------ ------------
Gross profit................................................. 66,799 63,559 60,586 29,755 28,620
---------- ---------- ---------- ------------ ------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution................................... 8,662 7,583 8,140 3,818 4,699
Trade promotions............................................. 21,911 19,380 17,672 8,697 7,074
Consumer marketing........................................... 15,297 13,291 10,835 6,140 4,367
---------- ---------- ---------- ------------ ------------
Total brokerage, distribution and marketing expenses......... 45,870 40,254 36,647 18,655 16,140
---------- ---------- ---------- ------------ ------------
Selling, general and administrative expenses................... 6,829 6,120 6,753 3,376 2,328
Amortization of goodwill and other intangibles................. -- -- -- -- 1,658
Transition costs............................................... -- -- -- -- 324
---------- ---------- ---------- ------------ ------------
Operating profit............................................. 14,100 17,185 17,186 7,724 8,170
---------- ---------- ---------- ------------ ------------
Amortization of deferred financing fees........................ -- -- -- -- 2,502
Interest expense, net.......................................... -- -- -- -- 5,093
---------- ---------- ---------- ------------ ------------
Income before income taxes................................... 14,100 17,185 17,186 7,724 575
Provision for income taxes..................................... 5,429 6,616 6,616 2,974 230
---------- ---------- ---------- ------------ ------------
Net income(1) $ 8,671 $ 10,569 $ 10,570 $ 4,750 $ 345
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
BALANCE SHEET DATA:
Total assets(2) NA NA NA NA $ 144,063
Long-term debt(2) NA NA NA NA 100,000
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(3).......................... NA NA NA NA 1.07
</TABLE>
- ------------------------------
(1) Amount represents net sales less direct and allocated expenses for the MBW
Predecessor.
(2) Total assets and long-term debt balance sheet data are not available for
the MBW Predecessor because Unilever did not maintain balance sheets or
separate asset and liability accounts by product line for the MBW
Predecessor.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as net income before provision for income taxes, plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of deferred financing fees and one-third of
rental expense on operating leases, representing that portion of rental
expense deemed by the Company to be attributable to interest. Unilever did
not allocate any fixed charges to the MBW Predecessor.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--LC BUSINESS
The following table sets forth selected historical financial data of the LC
Business for the periods indicated. The selected historical statement of
operations data for the years ended December 31, 1994, December 30, 1995 and
December 28, 1996 are derived from the audited financial statements of the LC
Business included elsewhere in this Prospectus which have been audited by
Coopers & Lybrand L.L.P. The selected historical statement of operations data
for the six months ended June 29, 1996 and June 28, 1997 are derived from the
unaudited financial statements of the LC Business which are included elsewhere
in this Prospectus and which, in the opinion of management, include all normal,
recurring adjustments. This information should be read in conjunction with the
historical financial statements and related notes thereto of the LC Business
appearing elsewhere in this Prospectus and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $115,894 $106,330 $104,466
Cost of products sold.................................. 35,254 35,804 36,237
------------ ------------ ------------
Gross profit......................................... 80,640 70,526 68,229
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................... 7,553 7,620 7,099
Trade promotions..................................... 20,898 23,239 21,355
Consumer marketing................................... 7,940 5,478 3,994
------------ ------------ ------------
Total brokerage, distribution and marketing
expenses............................................. 36,391 36,337 32,448
Selling, general and administrative expenses........... 7,863 7,738 7,388
Amortization of goodwill and other intangibles......... 1,350 1,350 1,350
------------ ------------ ------------
Operating profit..................................... 35,036 25,101 27,043
Provision for income taxes............................. 14,391 10,461 11,229
------------ ------------ ------------
Net income(1)........................................ $ 20,645 $ 14,640 $ 15,814
------------ ------------ ------------
------------ ------------ ------------
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2).................. NA NA NA
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JUNE 29, 1996 JUNE 28, 1997
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................. $51,509 $51,222
Cost of products sold.................................. 16,269 18,067
------------- -------------
Gross profit......................................... 35,240 33,155
Brokerage, distribution and marketing expenses:
Brokerage and distribution........................... 3,589 3,239
Trade promotions..................................... 10,452 9,457
Consumer marketing................................... 3,789 597
------------- -------------
Total brokerage, distribution and marketing
expenses............................................. 17,830 13,293
Selling, general and administrative expenses........... 3,802 3,637
Amortization of goodwill and other intangibles......... 675 675
------------- -------------
Operating profit..................................... 12,933 15,550
Provision for income taxes............................. 5,303 6,376
------------- -------------
Net income(1)........................................ $ 7,630 $ 9,174
------------- -------------
------------- -------------
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2).................. NA NA
</TABLE>
- ------------------------
(1) Amount represents net sales less direct and allocated expenses for the
years ended December 31, 1994, December 30, 1995, and December 28, 1996 and
for the six months ended June 30, 1996.
(2) Kraft did not allocate any fixed charges to the LC Business.
32
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") for the year ended December 31, 1996 are based on the
audited financial statements of the MBW Predecessor and the LC Business which
are included elsewhere in this Prospectus. The Unaudited Pro Forma Balance Sheet
as of June 28, 1997 is based on unaudited financial information of the Company
and unaudited financial information of the LC Business which are included
elsewhere in this Prospectus, and which, in the opinion of management, include
all normal, recurring adjustments. The Unaudited Pro Forma Statement of
Operations for the six months ended June 30, 1996 is based on the unaudited
financial information of the MBW Predecessor and the LC Business which are
included elsewhere in this Prospectus, and which, in the opinion of management,
include all normal, recurring adjustments. The Unaudited Pro Forma Statement of
Operations for the six months ended June 28, 1997 is based on the unaudited
financial information of the Company and the LC Business, which are included
elsewhere in this Prospectus and which, in the opinion of management, include
all normal, recurring adjustments. The Pro Forma Financial Statements give
effect to the LC Acquisition as if it had occurred as of June 28, 1997 for
balance sheet data. For statement of operations data, the Pro Forma Financial
Statements give effect to the Transactions as if they had each occurred as of
January 1, 1996. See "Prospectus Summary--The Acquisitions, Financings and
Related Transactions".
The pro forma financial information set forth below reflects pro forma
adjustments that are based upon available information and assumptions that the
Company believes are reasonable. The pro forma financial information does not
purport to represent what the Company's results of operations or financial
condition actually would have been had the Transactions been consummated as of
such dates or for such periods or project the Company's results of operations or
financial condition for any future period. The Pro Forma Financial Statements
and accompanying notes should be read in conjunction with the historical
financial statements of the Company and the Predecessor and other financial
information pertaining to the Company including "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
33
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LC BUSINESS
STATEMENT OF COMPANY
COMPANY ASSETS TO BE PRO FORMA PRO FORMA
ACTUAL ACQUIRED(a) ADJUSTMENTS BALANCE SHEET
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Cash.................................................. $ 12,642 $ -- $ (11,665)(b) $ 977
Accounts receivable................................... 5,716 -- -- 5,716
Accounts receivable--other............................ 1,722 -- -- 1,722
Inventories........................................... 1,698 6,717 -- 8,415
Prepaid expenses...................................... 142 -- -- 142
----------- ------------- ------------ --------------
Total current assets.............................. 21,920 6,717 (11,665) 16,972
Machinery and equipment............................... 5,448 7,468 -- 12,916
Goodwill and other intangible assets.................. 109,807 -- 208,215(c) 318,022
Other assets.......................................... 6,888 -- 6,265(d) 13,153
----------- ------------- ------------ --------------
Total assets...................................... $ 144,063 $ 14,185 $ 202,815 $ 361,063
----------- ------------- ------------ --------------
----------- ------------- ------------ --------------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accrued expenses...................................... $ 10,523 $ -- $ 10,523
Net current deferred tax liability.................... 35 35
Revolving Facility.................................... -- 47,000(e) 47,000
Term Facility......................................... -- 40,000(e) 40,000
Series A Notes........................................ 100,000 -- 100,000
Series C Notes........................................ -- 102,500(f) 102,500
----------- ------------ --------------
Total liabilities................................. 110,558 189,500 300,058
Common stock.......................................... 33,160 27,500(g) 60,660
Retained earnings..................................... 345 -- 345
----------- ------------ --------------
Total stockholder's equity........................ 33,505 27,500 61,005
----------- ------------ --------------
Total liabilities and stockholder's equity........ $ 144,063 $ 217,000 $ 361,063
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Full financial statements, including complete historical balance sheets, of
the LC Business have not been presented as Kraft did not operate the LC
Business as a separate division. Accordingly, it is not practicable to
separate other components of assets, liabilities or cash flows related
specifically to the LC Business.
(b) Reflects the use of cash for the LC Acquisition.
(c) Reflects the excess of cost over the fair market value of the net tangible
assets acquired in connection with the LC Acquisition. Goodwill and
trademarks will be amortized on a straight-line basis over 40 years and
other intangibles over periods ranging from five to 20 years. The Company
will evaluate the net realizable value of intangible assets on an ongoing
basis relying on a number of factors, including operating results and future
undiscounted cash flows.
(d) Reflects deferred financing costs incurred in connection with the LC
Acquisition.
(e) Reflects borrowings under the Senior Credit Facilities.
(f) Reflects issuance of the Series C Notes including a $2.5 million premium
received in connection with the Series C Notes Offering.
(g) Reflects a $27.5 million equity contribution from Holdings, which is net of
certain transaction expenses of $1.1 million.
34
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW MBW LC INCREMENTAL
PREDECESSOR PRO FORMA MBW BUSINESS PRO FORMA COMPANY PRO
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS FORMA
----------- ----------------- ------------ ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........... $89,541 $ 2,040(a) $91,581 $104,466 $ -- $196,047
Cost of products
sold.............. 28,955 958(b)(c) 29,913(h) 36,237 (451)(k)(l) 65,699(q)
----------- ------- ------------ ---------- -------- -----------
Gross profit...... 60,586 1,082 61,668 68,229 451 130,348
----------- ------- ------------ ---------- -------- -----------
Brokerage,
distribution and
marketing
expenses:
Brokerage and
distribution.... 8,140 -- 8,140 7,099 3,134(m) 18,373
Trade
promotions...... 17,672 2,040(a) 19,712 21,355 -- 41,067
Consumer
marketing....... 10,835 -- 10,835 3,994 -- 14,829
----------- ------- ------------ ---------- -------- -----------
Total brokerage,
distribution and
marketing
expenses.......... 36,647 2,040 38,687 32,448 3,134 74,269
Selling, general and
administrative
expenses.......... 6,753 --(d) 6,753(i) 7,388 --(n) 14,141(r)
Amortization of
goodwill and other
intangibles....... -- 3,066(e) 3,066 1,350 5,485(o) 9,901
----------- ------- ------------ ---------- -------- -----------
Operating
profit.......... 17,186 (4,024) 13,162 27,043 (8,168) 32,037
Amortization of
deferred financing
fees.............. -- 856(f) 856 -- 421(p) 1,277
Interest expense.... -- 10,175(f) 10,175 -- 16,441(p) 26,616
----------- ------- ------------ ---------- -------- -----------
Income before
income taxes.... 17,186 (15,055) 2,131 27,043 (25,030) 4,144
Provision for income
taxes............. 6,616 (5,796)(g) 820 11,229 (10,454)(g) 1,595
----------- ------- ------------ ---------- -------- -----------
Net income........ $10,570 $(9,259) $ 1,311 $ 15,814 $(14,576) $ 2,549
----------- ------- ------------ ---------- -------- -----------
----------- ------- ------------ ---------- -------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations
35
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW MBW LC INCREMENTAL
PREDECESSOR PRO FORMA MBW BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........... $43,548 $ 958(a) $44,506 $ 51,509 $ -- $ 96,015
Cost of products
sold.............. 13,793 786(b)(c) 14,579(h) 16,269 347(k)(l) 31,195(q)
----------- ----------------- ----------- ---------- ----------------- -----------
Gross profit.... 29,755 172 29,927 35,240 (347) 64,820
----------- ----------------- ----------- ---------- ----------------- -----------
Brokerage,
distribution and
marketing
expenses:
Brokerage and
distribution.... 3,818 -- 3,818 3,589 1,545(m) 8,952
Trade
promotions...... 8,697 958(a) 9,655 10,452 -- 20,107
Consumer
marketing....... 6,140 -- 6,140 3,789 -- 9,929
----------- ----------------- ----------- ---------- ----------------- -----------
Total brokerage,
distribution and
marketing
expenses........ 18,655 958 19,613 17,830 1,545 38,988
Selling, general and
administrative
expenses.......... 3,376 --(d) 3,376(i) 3,802 --(n) 7,178(r)
Amortization of
goodwill and other
intangibles....... -- 1,533(e) 1,533 675 2,743(o) 4,951
----------- ----------------- ----------- ---------- ----------------- -----------
Operating
profit........ 7,724 (2,319) 5,405 12,933 (4,635) 13,703
Amortization of
deferred financing
fees.............. -- 428(f) 428 -- 210(p) 638
Interest expense.... -- 5,088(f) 5,088 -- 8,221(p) 13,309
----------- ----------------- ----------- ---------- ----------------- -----------
Loss before
income
taxes......... 7,724 (7,835) (111) 12,933 (13,066) (244)
Benefit from income
taxes............. 2,974 (3,016)(g) (42) 5,303 (5,354)(g) (93)
----------- ----------------- ----------- ---------- ----------------- -----------
Net loss........ $ 4,750 $(4,819) $ (69) $ 7,630 $ (7,712) $ (151)
----------- ----------------- ----------- ---------- ----------------- -----------
----------- ----------------- ----------- ---------- ----------------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations.
36
<PAGE>
AURORA FOODS INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MBW LC INCREMENTAL
COMPANY PRO FORMA MBW BUSINESS PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $42,891 $ -- $42,891 $ 51,222 $ -- $ 94,113
Cost of products sold...... 14,271 --(c) 14,271 18,067 9(k)(l) 32,347(q)
----------- ---------------- ----------- ---------- -------- -----------
Gross profit............. 28,620 -- 28,620 33,155 (9) 61,766
----------- ---------------- ----------- ---------- -------- -----------
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution........... 4,699 -- 4,699 3,239 1,537(m) 9,475
Trade promotions......... 7,074 -- 7,074 9,457 -- 16,531
Consumer marketing....... 4,367 -- 4,367 597 -- 4,964
----------- ---------------- ----------- ---------- -------- -----------
Total brokerage,
distribution and
marketing expenses..... 16,140 -- 16,140 13,293 1,537 30,970
Selling, general and
administrative
expenses................. 2,328 -- 2,328 3,637 --(n) 5,965(r)
Transition expenses........ 324 (324) (j) -- -- -- --
Amortization of goodwill
and other intangibles.... 1,658 -- 1,658 675 2,618(o) 4,951
----------- ---------------- ----------- ---------- -------- -----------
Operating profit......... 8,170 324 8,494 15,550 (4,164) 19,880
Amortization of deferred
financing fees........... 2,502 (2,074)(f) 428 -- 210(p) 638
Interest expense........... 5,093 (5)(f) 5,088 -- 8,221(p) 13,309
----------- ---------------- ----------- ---------- -------- -----------
Income before taxes...... 575 2,403 2,978 15,550 (12,595) 5,933
Provision for income
taxes.................... 230 917(g) 1,147 6,376 (5,238)(g) 2,285
----------- ---------------- ----------- ---------- -------- -----------
Net income............... $ 345 $ 1,486 $ 1,831 $ 9,174 $ (7,357) $ 3,648
----------- ---------------- ----------- ---------- -------- -----------
----------- ---------------- ----------- ---------- -------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations.
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(a) Represents the reclassification of amounts accounted for as cash discounts
by Conopco to trade promotions by the Company.
(b) Adjustment reflects net additional expenses related to cost of products sold
as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
COST OF PRODUCTS SOLD:
MBW Predecessor historical expenses.......................... $ 28,955 $ 13,793
Less Company expenses:
Co-pack agreements(1)...................................... 29,393 14,313
Depreciation(2)............................................ 520 266
-------- --------
MBW pro forma expenses................................... 29,913 14,579
-------- --------
Difference................................................... $ 958 $ 786
-------- --------
-------- --------
</TABLE>
- ------------------------------
(1) These expenses include the MBW Predecessor's historical volumes for
syrup and pancake mix products, as adjusted to give effect to the
contractual rates included in the MBW Co-Pack Agreement with Conopco.
(2) Represents depreciation of the Company's equipment, reflecting an
increase in depreciation expense over the MBW Predecessor's historical
expense as a result of a higher depreciable basis for the acquired
equipment. The equipment will be depreciated over an average life of
10 years.
(c) The Company entered into a co-pack agreement with Red Wing on June 9, 1997,
pursuant to which Red Wing will contract manufacture Mrs. Butterworth's
Syrup for a period of five years. Red Wing's conversion fees are less than
those the Company has paid under the MBW Co-Pack Agreement. Because Red Wing
is one of the largest purchasers of corn syrup in the United States, the
Company believes that its annual raw material costs under the Red Wing
Co-Pack Agreement will be $1.5 million less than those incurred by the MBW
Predecessor. The Company commenced transferring production of Mrs.
Butterworth's syrup from Conopco to Red Wing in August 1997 and expects to
complete the transition by December 1997. However, as this potential
adjustment is not viewed as directly related to the MBW Acquisition, the pro
forma cost savings are not included in the pro forma statement of
operations.
(d) The Company has formal and informal agreements in place to operate the
business on a stand-alone basis, and at the MBW Acquisition Closing Date had
completed a thorough analysis of anticipated costs going forward. Based on
these agreements and analysis, the Company developed a detailed annual
operating budget which reflected approximately $3.7 million in factually
supportable selling, general and administrative costs, which is
approximately $3.0 million lower than Unilever's corporate allocated costs.
A substantial portion of these savings are attributable to a lower headcount
relative to the headcounts included in the historical allocations from
Unilever. These direct and indirect allocations included multiple layers of
Unilever management which the Company will not need to replicate. At the MBW
Acquisition Date, on a stand-alone basis, the Company budgeted for 22
employees, consisting of seven in executive and finance functions, four in
marketing functions, 10 in sales functions and one in research and
development. The table below reflects cost savings resulting from the new
personnel infrastructure of the Company as compared to the MBW Predecessor's
historical selling, general and administrative expenses.
38
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- -------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
MBW Predecessor historical expenses.......................... $ 6,753 $ 3,376
Less MBW pro forma expenses:
Executive and finance(1)................................... 1,568 784
Division management and marketing.......................... 302 152
Sales...................................................... 1,096 548
Research and development................................... 192 96
Other(2)................................................... 553 276
------- -------
Total MBW pro forma expenses................................. 3,711 1,856
------- -------
Difference................................................... $ 3,042 $ 1,520
------- -------
------- -------
</TABLE>
- ---------------------
(1) Includes aggregate annual and semiannual expenses of $850 and
$425, respectively, related to management and advisory services
provided by Dartford and MDC.
(2) Includes professional fees, facilities expenses and other related
expenses.
However, as these potential adjustments are not viewed as directly related to
the MBW Acquisition, the pro forma cost savings are not included in the
unaudited pro forma statements of operations.
(e) Reflects intangible amortization expense as a result of the MBW Acquisition.
Goodwill and the Mrs. Butterworth's trademark will be amortized on a
straight line basis over a 40-year period and other intangibles will be
amortized over periods ranging from five to 20 years.
(f) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The MBW Predecessor was not
allocated any interest expense from Conopco. The pro forma commitment fee on
the unused portion of the Revolving Facility is based on an unused balance
of $60.0 million. The table below presents pro forma interest expense, noted
with the respective interest rates or fee, and pro forma amortization of
deferred financing costs:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED ------------------------------
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 28, 1997
------------------- -------------- --------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
PRO FORMA INTEREST EXPENSE:
Historical interest expense....................... $ -- $ -- $ 5,093
MBW pro forma interest expense
Series A Notes (9.875%)......................... 9,875 4,938 4,938
Commitment fee on Revolving Facility (.50%)..... 300 150 150
-------- -------------- --------------
MBW pro forma interest expense................ 10,175 5,088 5,088
-------- -------------- --------------
Difference........................................ $ 10,175 $ 5,088 $ (5)(1)
-------- -------------- --------------
-------- -------------- --------------
MBW Pro forma amortization of deferred financing
costs........................................... $ 856 $ 428 $ 428(2)
-------- -------------- --------------
-------- -------------- --------------
</TABLE>
- -------------------
(1) Difference reflects higher interest rates on the debt incurred at the
MBW Acquisition Closing Date than on the Series A Notes.
(2) A pro forma adjustment of $2,074 is required for the difference
between the historical amortization of the deferred financing fees on
the Senior Subordinated Credit Facility incurred on the MBW
Acquisition Closing Date and the pro forma amortization of deferred
financing fees on the Series A Notes.
39
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
(g) Reflects a reduction in the provision for income taxes, as a result of the
pro forma decrease in income before income taxes and the effect of the
Company's amortization of goodwill being deductible for income tax purposes.
(h) Pro forma depreciation expense included in cost of products sold is $520,000
and $260,000 for the year ended December 31, 1996 and the six month period
ended June 30, 1996, respectively.
(i) Pro forma depreciation expense included in selling, general and
administrative expenses is $76,000 and $38,000 for the year ended December
31, 1996 and the six month period ended June 30, 1996, respectively. Pro
forma operating lease expense included in selling, general and
administrative expenses is $135,000 and $67,500 for the year ended December
31, 1996 and the six month period ended June 30, 1996, respectively.
(j) Represents one-time costs incurred by the Company to establish operations
including broker conversions and orientations, recruiting fees and costs
related to the MBW Transition Services Agreement.
(k) Adjustment to convert cost of products sold from a Last-In, First-Out
inventory basis to a First-In, First-Out basis to be consistent with the
inventory accounting policy of the Company.
(l) Log Cabin syrups initially will be contract manufactured and distributed by
Kraft for up to nine months under the LC Co-Pack Agreement. Prior to the end
of the term of the LC Co-Pack Agreement, the Company will enter into a
co-packing agreement with Red Wing or another third party for the
manufacture of Log Cabin syrup products. The Company believes that its
annual raw material costs under a new co-pack agreement will be $1.5 million
less than those incurred by the Log Cabin Business. However, as this
potential adjustment is not viewed as directly related to the LC
Acquisition, the pro forma cost savings are not included in the pro forma
statement of operations.
(m) Reflects brokerage expense at the contractual rates which the Company will
be charged under its existing contracts with its broker network for the sale
of LOG CABIN syrup products. See note (n) below.
(n) Based on the Company's operations to date, it has developed a detailed
annual operating budget which reflects approximately $6.0 million in
factually supportable selling, general and administrative costs. The LC
Business historical expenses included multiple layers of Kraft management
which the Company does not have. A substantial portion of the savings the
Company will realize is attributable to a lower headcount relative to the
headcounts included in the historical allocations from Kraft. The Company is
budgeting for an increase from 22 to 34 employees in connection with the LC
Acquisition. The table below reflects cost savings resulting from the new
personnel infrastructure of the Company as compared to the historical
selling, general and administrative expenses of the MBW Predecessor and LC
Business.
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED -------------------------------
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 28, 1997
------------------- --------------- --------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
MBW Predecessor historical expenses................ $ 6,753 $ 3,376 $ 2,328
LC Business historical expenses.................... 7,388 3,802 3,637
-------- ------- -------
14,141 7,178 5,965
Less Company pro forma expenses:
Executive and finance(1)......................... 2,551 1,276 1,276
Division management and marketing................ 746 373 373
Sales and marketing.............................. 1,953 976 976
Other(2)......................................... 721 360 360
-------- ------- -------
Total Company pro forma expenses................... 5,971 2,985 2,985
-------- ------- -------
Difference......................................... $ 8,170 $ 4,193 $ 2,980
-------- ------- -------
-------- ------- -------
</TABLE>
------------------------------
(1) Includes aggregate annual and semi-annual expenses of $850 and $425,
respectively, related to management and advisory services provided by
Dartford and MDC.
(2) Includes professional fees, facilities expenses and other related
expenses.
However, as these potential adjustments are not viewed as directly related to
the acquisition of the LC Business, the pro forma cost savings are not
included in the unaudited pro forma statements of operations.
(o) Reflects intangible amortization expense as a result of the LC Acquisition.
Goodwill and the Log Cabin trademark will be amortized on a straight line
basis over a 40 year period and other intangibles will be amortized over
periods ranging from five to 20 years.
(p) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The LC Business was not allocated
any interest expense from Kraft. The pro forma commitment fee on the unused
portion of the Revolving Facility is based on an unused balance of $13.0
million. The pro forma amortization of deferred financing costs is based on
the terms of the respective debt facilities. The table below presents pro
forma net interest expense noted with the respective interest rate or fee,
and pro forma amortization of deferred financing costs:
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, ------------------------------
1996 JUNE 30, 1996 JUNE 28, 1997
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
COMPANY PRO FORMA INTEREST EXPENSE:
Incremental interest expense adjustments:
Revolving Facility (8.0%)........................... $ 3,760 $ 1,880 $ 1,880
Term Facility (8.0%)................................ 3,200 1,600 1,600
Series C Notes(1)................................... 9,716 4,858 4,858
Commitment fee on Revolving Facility (0.50%)........ 65 33 33
Reduction in commitment fee on Revolving Facility
(0.50%)(2)........................................ (300) (150) (150)
-------------- -------------- --------------
Incremental interest expense........................ 16,441 8,221 8,221
MBW pro forma interest expense........................ 10,175 5,088 5,088
-------------- -------------- --------------
Total Company pro forma interest expense.............. $ 26,616 $ 13,309 $ 13,309
-------------- -------------- --------------
-------------- -------------- --------------
Incremental pro forma amortization of deferred
financing costs..................................... $ 421 $ 210 $ 210
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
----------------------------
(1) Interest expense on a principal amount of the Series C Notes reflects an
interest rate of 9.875% on a principal amount of $100.0 million, offset
by amortization of the bond premium of $2.5 million received in
connection with the Series C Notes Offering.
(2) Reflects a decrease in commitment fees payable as set forth in note (e)
above as a result of the use of the Revolving Facility for the LC
Acquisition.
(q) Pro forma depreciation expense for the total Company included in cost of
products sold is $949,000, $475,000 and $475,000 for the year ended December
31, 1996 and the six month periods ended June 30, 1996 and June 28, 1997,
respectively.
(r) Pro forma depreciation expense for the total Company included in selling,
general and administrative expenses is $76,000, $38,000 and $38,000 for the
year ended December 31, 1996 and the six month periods ended June 30, 1996
and June 28, 1997, respectively. Pro forma operating lease expense included
in selling, general and administrative expenses is $135,000, $67,500, and
$67,500 for the year ended December 31, 1996 and the six month periods ended
June 30, 1996 and June 28, 1997, respectively.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY AND MBW PREDECESSOR
The Company markets and sells the MRS. BUTTERWORTH'S brand of syrup and
pancake mix products. As product lines of Unilever, MRS. BUTTERWORTH'S was not
accounted for as a separate legal entity or division. The discussion which
follows is based on the historical financial information of the Company and the
MBW Predecessor.
The MBW Predecessor's selling, general and administrative expenses have
consisted solely of corporate allocations from Conopco. As a result, the level
of these expenses does not reflect the actual expenses required to operate the
Company on a stand-alone basis. Management has established a new corporate
infrastructure to operate the Company on a stand-alone basis and has staffed
approximately 90% of its sales and marketing functions. See "Pro Forma Financial
Information."
Under Conopco's ownership, MRS. BUTTERWORTH'S aggregate marketing
expenditures were reduced consistently over the last several years and
emphasized a trade-oriented marketing strategy. Management intends to maintain
aggregate marketing expenditures at a level consistent with recent experience,
but to reallocate those expenditures by placing a greater emphasis on
advertising and consumer marketing. See "Business--MRS. BUTTERWORTH'S Growth
Strategy."
In May 1996, MRS. BUTTERWORTH'S adopted a "value pricing" strategy to
position its brand as the best value among the three national syrup brands. MRS.
BUTTERWORTH'S began the implementation of this strategy by reducing the
wholesale list prices of certain of its products, resulting in lower everyday
shelf prices to the consumer. This strategy was adopted to decrease MRS.
BUTTERWORTH'S reliance on price discounting and to reduce costly
buy-one-get-one-free promotions and was intended to increase sales volume and
decrease overall marketing expenditures. The initial results of this strategy
are reflected in MRS. BUTTERWORTH'S performance for the year ended December 31,
1996 and the six months ended June 28, 1997 and the related discussion below.
43
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
MBW PREDECESSOR
----------------------------------------------------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- JUNE 30,
1994 1995 1996 1996
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $ 96,729 100.0% $ 91,302 100.0% $ 89,541 100.0% $ 44,507(1) 100.0%
Cost of products sold........ 29,930 30.9 27,743 30.4 28,955 32.3 13,793 31.0
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Gross profit............... 66,799 69.1 63,559 69.6 60,586 67.7 30,714 69.0
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution............. 8,662 8.9 7,583 8.3 8,140 9.1 4,776 10.7
Trade promotions......... 21,911 22.7 19,380 21.2 17,672 19.7 8,697(1) 19.5
Consumer marketing....... 15,297 15.8 13,291 14.6 10,835 12.1 6,140 13.8
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total brokerage,
distribution and
marketing expenses....... 45,870 47.4 40,254 44.1 36,647 40.9 19,613 44.0
Selling, general and
administrative expenses.... 6,829 7.1 6,120 6.7 6,753 7.6 3,376 7.6
Transition costs............. -- -- -- -- -- -- -- --
Amortization of goodwill and
other intangibles.......... -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Operating profit........... 14,100 14.6 17,185 18.8 17,186 19.2 7,725 17.4
Amortization of deferred
financing fees............. -- -- -- -- -- -- -- --
Interest expense, net........ -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Income before income
taxes.................... 14,100 14.6 17,185 18.8 17,186 19.2 7,725 17.4
Provision for income taxes... 5,429 5.6 6,616 7.2 6,616 7.4 2,974 6.7
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Net income (2)............. $ 8,671 9.0% $ 10,569 11.6% $ 10,570 11.8% $ 4,751 10.7%
----------- --------- ----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
COMPANY
----------------------
SIX MONTHS
ENDED
JUNE 28,
1997
----------------------
<S> <C> <C>
AMOUNT %
----------- ---------
<S> <C> <C>
Net sales.................... 42,891 100.0%
Cost of products sold........ 14,271 33.3
----------- ---------
Gross profit............... 28,620 66.7
Brokerage, distribution and
marketing expenses:
Brokerage and
distribution............. 4,699 11.0
Trade promotions......... 7,074 16.5
Consumer marketing....... 4,367 10.2
----------- ---------
Total brokerage,
distribution and
marketing expenses....... 16,140 37.7
Selling, general and
administrative expenses.... 2,328 5.4
Transition costs............. 324 0.7
Amortization of goodwill and
other intangibles.......... 1,658 3.9
----------- ---------
Operating profit........... 8,170 19.0
Amortization of deferred
financing fees............. 2,502 5.8
Interest expense, net........ 5,093 11.9
----------- ---------
Income before income
taxes.................... 575 1.3
Provision for income taxes... 230 0.5
----------- ---------
Net income (2)............. $ 345 0.8%
----------- ---------
----------- ---------
</TABLE>
- ------------------------
(1) Net sales and trade promotions for the MBW Predecessor for the six months
ended June 30, 1996 reflect the reclassification of cash discounts to
provide consistency with the Company's presentation and accounting policy
and to facilitate comparison between periods. However, net sales and trade
promotions for the years ended December 31, 1994, 1995 and 1996 reflect the
MBW Predecessor's historical presentation of these amounts.
(2) Amount represents net sales less direct and allocated expenses for the MBW
Predecessor.
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET SALES declined 3.6% to $42.9 million for the six months ended June 28,
1997 as compared to $44.5 million for the six months ended June 30, 1996. Sales
volume increased 4.2% to 47.3 million pounds in the 1997 period from 45.4
million pounds in the 1996 period.
Syrup sales decreased $1.7 million to $38.1 million in the 1997 period from
$39.8 million in the 1996 period. In May 1996, MRS. BUTTERWORTH'S adopted a
value pricing strategy to position its brand as the best value among the three
premium priced national brands. The value pricing strategy has benefitted the
brand through higher volumes and lower trade and consumer marketing expenses,
but resulted in a net decrease in syrup sales during the six months ended June
28, 1997. The decrease in net syrup sales is a result of lower list prices for
the Company's syrup products in the 1997 period as compared to the 1996 period
because of the adoption of the value pricing strategy in May 1996. The effect on
the sales line was partially offset by an increase in syrup volume.
Syrup volume increased 4.4% to 40.0 million pounds in the 1997 period from
38.3 million pounds in the 1996 period. The increase in syrup volume was
attributable to increases in sales of the Company's
44
<PAGE>
ORIGINAL brand, club and foodservice syrups, which was partially offset by
decreases in sales of its COUNTRY BEST RECIPE brand.
Pancake mix sales increased 4.3% to $4.9 million in the 1997 period from
$4.7 million in the 1996 period. Pancake mix volume improved 2.8% to 7.3 million
pounds in the 1997 period from 7.1 million pounds in the 1996 period. Pancake
mix results increased primarily due to improved merchandising support.
GROSS PROFIT as a percentage of net sales was 66.7% for the 1997 period as
compared to 69.0% for the 1996 period. The decrease in gross margin was
primarily due to lower list prices related to the value pricing strategy adopted
in May 1996. The decline was also attributable to increased sales of lower
margin pancake mix and foodservice syrup products.
OPERATING PROFIT as a percentage of net sales increased to 19.0% in the 1997
period as compared to 17.4% in the 1996 period. The improvement in the operating
profit margin was primarily due to lower marketing spending and lower selling,
general and administrative expenses. Total marketing expenses in the 1997 period
were lower than in the comparable 1996 period due to lower trade promotion
spending as the result of the value pricing strategy and a reduction in high
value in-ad coupons used in the 1996 period. Selling, general and administrative
expenses were $2.3 million in the 1997 period under the Company's stand-alone
structure as compared to $3.4 million allocated to the business by Unilever in
the prior year period. Operating profit for the 1997 period also reflects $1.7
million of goodwill amortization and $0.3 million of transition expenses related
to the MBW Acquisition.
PROVISION FOR INCOME TAXES. The provision for income taxes of $0.2 million
in the 1997 represented an effective tax rate of 40.0% as compared to 38.5% in
the 1996 period.
NET INCOME was $0.3 million in the 1997 period as compared to net sales less
direct and allocated expenses of $4.8 million in the 1996 period. The decline in
the 1997 period from the 1996 period has the result of interest expense and
amortization of deferred financing costs associated with the MBW Acquisition.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES declined 1.9% to $89.5 million for the year ended December 31,
1996 as compared to $91.3 million for the year ended December 31, 1995. Sales
volume increased 2.7% to 94.7 million pounds in 1996 from 92.2 million pounds in
1995.
Syrup sales decreased $1.8 million to $79.1 million in 1996 from $80.9
million in 1995. Syrup volume increased 3.4% to 78.6 million pounds in 1996 from
76.0 million pounds in 1995. Adoption of the value pricing strategy in May 1996,
has benefitted the brand through higher volumes and savings on consumer
marketing expenses, but resulted in a net decrease in syrup sales during 1996.
Management does not believe that this decrease represents a continuing material
declining trend.
Pancake mix sales remained constant at $10.4 million in 1996, the same as in
1995. Pancake mix was flat at 16.1 million pounds in 1996 which was the same
volume achieved in 1995.
GROSS PROFIT as a percentage of net sales was 67.7% for the year ended
December 31, 1996 as compared to 69.6% for the year ended December 31, 1995. The
decrease in gross profit margin was primarily due to lower wholesale prices
related to the Company's value pricing strategy.
OPERATING PROFIT as a percentage of net sales improved to 19.2% for the year
ended December 31, 1996 as compared to 18.8% for the year ended December 31,
1995. The operating margin improvement was primarily the result of a reduction
in consumer marketing expense as a percentage of net sales to 12.1% in 1996 from
14.6% in 1995 due to a reduction in costly buy-one-get-one-free promotions.
45
<PAGE>
PROVISION FOR INCOME TAXES. The provision for income taxes of $6.6 million
in 1996 represented an effective tax rate of 38.5%, the same as in 1995.
NET SALES less direct and allocated expenses was $10.6 million in 1995 and
1996 due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES decreased 5.6% to $91.3 million in the year ended December 31,
1995 from $96.7 million in the year ended December 31, 1994. Sales volume
decreased 10.1% to 92.2 million pounds in 1995 from 102.6 million pounds in
1994.
Syrup sales decreased $3.0 million to $80.9 million in 1995 from $83.9
million in 1994, and syrup volume declined 8.4% to 76.1 million pounds from 83.1
million pounds in 1994. Syrup sales and volume declines were primarily due to
the phasing out of the MAPLE VALLEY syrup brand, one of the MBW Predecessor's
lower priced brands, and an overall decrease in promotional support for MRS.
BUTTERWORTH'S. The declines were partially offset by the impact during 1995 of
an industry-wide price increase in August 1994.
Pancake mix sales declined $2.4 million to $10.4 million in 1995 from $12.8
million in 1994. Pancake mix volume decreased 17.0% to 16.1 million pounds from
19.4 million pounds in 1994. Increased competition in MRS. BUTTERWORTH'S key
Central and Mid-Central regions was the primary cause of the decrease in sales
and volume.
GROSS PROFIT as a percentage of net sales was 69.6% in 1995 as compared to
69.1% in 1994. The increase in gross profit margin was primarily a result of the
impact during 1995 of the August 1994 price increase, which resulted in the
average price of retail syrup increasing from 1994 to 1995 while raw materials
costs as a percentage of net sales remained essentially unchanged. Also
contributing to the gross margin increase during 1995 was the phasing out of the
MAPLE VALLEY brand, one of the MBW Predecessor's lower margin brands.
OPERATING PROFIT as a percentage of net sales increased to 18.8% in 1995 as
compared to 14.6% in 1994. This increase was primarily the result of the August
1994 price increase and reductions in trade promotions, consumer marketing and
brokerage and distribution expense as a percentage of net sales.
PROVISION FOR INCOME TAXES. The provision for income taxes of $6.6 million
in 1995 represented an effective tax rate of 38.5%, the same as in 1994.
NET SALES less direct and allocated expenses increased to $10.6 million in
1995 compared to $8.7 million in 1994 due to the factors discussed above.
LC BUSINESS
The Company markets and sells the LOG CABIN, COUNTRY KITCHEN and WIGWAM
brands of syrup. As product lines of Kraft, LOG CABIN, COUNTRY KITCHEN and
WIGWAM were not accounted for as separate legal entities or divisions. The LOG
CABIN label is positioned as a premium syrup and the COUNTRY KITCHEN label is
positioned as an economy syrup. For the year ended December 31, 1996, the LOG
CABIN brand accounted for 69% and 74% of LOG CABIN'S net sales and product
profit, respectively. The discussion which follows is based on the historical
financial information of the LC Business.
46
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1995 1996
--------------- --------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales........................................ $115,894 100.0 $106,330 100.0 $104,466 100.0
Cost of products sold............................ 35,254 30.4 35,804 33.7 36,237 34.7
-------- ----- -------- ----- -------- -----
Gross profit................................... 80,640 69.6 70,526 66.3 68,229 65.3
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................... 7,553 6.5 7,620 7.1 7,099 6.8
Trade promotions............................... 20,898 18.0 23,239 21.9 21,355 20.5
Consumer marketing............................. 7,940 6.9 5,478 5.2 3,994 3.8
-------- ----- -------- ----- -------- -----
Total brokerage, distribution and marketing
expenses..................................... 36,391 31.4 36,337 34.2 32,448 31.1
Selling, general and administrative expenses..... 7,863 6.8 7,738 7.2 7,388 7.0
Amortization of goodwill......................... 1,350 1.2 1,350 1.3 1,350 1.3
-------- ----- -------- ----- -------- -----
Operating Profit............................... 35,036 30.2 25,101 23.6 27,043 25.9
Provision for income taxes....................... 14,391 12.4 10,461 9.8 11,229 10.7
-------- ----- -------- ----- -------- -----
Net sales less direct and allocated expenses... $ 20,645 17.8 $ 14,640 13.8 $ 15,814 15.2
-------- ----- -------- ----- -------- -----
-------- ----- -------- ----- -------- -----
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 29, 1996 JUNE 28, 1997
-------------- --------------
AMOUNT % AMOUNT %
------- ----- ------- -----
<S> <C> <C> <C> <C>
Net sales........................................ $51,509 100.0 $51,222 100.0
Cost of products sold............................ 16,269 31.6 18,067 35.3
------- ----- ------- -----
Gross profit................................... 35,240 68.4 33,155 64.7
Brokerage, distribution and marketing expenses:
Brokerage and distribution..................... 3,589 7.0 3,239 6.3
Trade promotions............................... 10,452 20.3 9,457 18.5
Consumer marketing............................. 3,789 7.4 597 1.1
------- ----- ------- -----
Total brokerage, distribution and marketing
expenses..................................... 17,830 34.7 13,293 25.9
Selling, general and administrative expenses..... 3,802 7.4 3,637 7.1
Amortization of goodwill......................... 675 1.3 675 1.3
------- ----- ------- -----
Operating Profit............................... 12,933 25.0 15,550 30.4
Provision for income taxes....................... 5,303 10.3 6,376 12.4
------- ----- ------- -----
Net sales less direct and allocated expenses... $7,630 14.7 $9,174 18.0
------- ----- ------- -----
------- ----- ------- -----
</TABLE>
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
NET SALES decreased 0.6% to $51.2 million for the six months ended June 28,
1997, as compared to $51.5 million for the comparable period in 1996.
Retail syrup sales increased $0.4 million to $47.7 million in the 1997
period from $47.3 million in the 1996 period. The increase in sales was
primarily attributable to an increase in COUNTRY KITCHEN sales, which was
partially offset by a decline in LOG CABIN sales. LOG CABIN brand sales of $33.8
million in the 1997 period decreased $1.9 million from sales of $35.7 million in
the 1996 period due to reduced promotional activity on the brand. Furthermore,
LOG CABIN is listed at a higher average price than any of its competitors which
has driven down sales. COUNTRY KITCHEN sales increased $2.3 million to $13.9
million in the 1997 period from sales of $11.6 million in the 1996 period due to
increased consumer demand in the economy price segment.
Foodservice sales declined $.7 million to $2.0 million in the 1997 period
from $2.7 million in the 1996 period.
GROSS PROFIT as a percentage of net sales was 64.7% for the 1997 period as
compared to 68.4% for the 1996 period. In the 1997 period, the allocation of
fixed manufacturing expense to the LC Business increased by approximately $1.5
million relative to the 1996 period. The 1996 period also included a LIFO
inventory adjustment which resulted in a $0.3 million reduction in cost of
products sold. Adjusting for these two factors, the gross margin in the 1997
period was 67.7% as compared to 67.8% in the 1996 period.
OPERATING PROFIT as a percentage of net sales improved to 30.4% for the 1997
period as compared to 25.0% for the 1996 period. The improvement in the
operating profit margin primarily was the result of a decrease in marketing
expenditures. Total marketing spending as a percent of net sales reduced to
19.6% in the 1997 period from 27.7% in the 1996 period.
47
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES decreased 1.7% to $104.5 million for the year ended 1996, as
compared to $106.3 million for the year ended 1995.
Retail syrup sales declined $2.0 million to $96.3 million in 1996 from $98.3
million in 1995. The sales decline was primarily attributable to decreases in
the COUNTRY KITCHEN brand. COUNTRY KITCHEN sales decreased $1.7 million to $24.0
million in 1996 from sales of $25.7 million in 1995 due to a decline in
promotional support from 1995 levels. LOG CABIN sales were $72.3 million in 1996
as compared to $72.6 million in 1995. LOG CABIN brand sales stabilized in 1996,
after declines in 1994 and 1995, primarily as the result of a refocusing of the
LOG CABIN brand through increased marketing support.
Foodservice sales decreased $0.2 million to $5.1 million in 1996 from $5.3
million in 1995.
GROSS PROFIT as a percentage of net sales was 65.3% in 1996 as compared to
66.3% in 1995 primarily due to increased prices for corn syrup.
OPERATING PROFIT as a percentage of net sales improved to 25.9% in 1996 as
compared to 23.6% in 1995. The improvement in the operating profit margin was
the result of a reduction in total trade promotions and advertising. Total
marketing spending as a percentage of net sales was reduced to 24.3% in 1996
from 27.1% in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES declined 8.3% to $106.3 million for the year ended 1995, as
compared to $115.9 million for the year ended 1994.
Retail syrup sales decreased $11.5 million to $98.3 million in 1995 from
$109.8 million in 1994. The decrease in sales was principally due to a decrease
in sales of the LOG CABIN brand. Sales of COUNTRY KITCHEN increased by $2.9
million to $25.7 million in 1995 from $22.8 million in 1994 due to increased
trade promotions in response to increased competition from COUNTRY RICH, AUNT
JEMIMA'S comparable economy brand. Sales of LOG CABIN decreased $14.4 million to
$72.6 million 1995 from $87.0 million in 1994. LOG CABIN sales level declined
primarily due to two factors: (i) a shift in trade promotions and consumer
marketing support from LOG CABIN to COUNTRY KITCHEN, and (ii) an organizational
re-alignment within Kraft which resulted in decreased management focus on the
LOG CABIN brand. During 1995, the LOG CABIN brand was transitioned into a new
salesforce and marketing support team.
Foodservice sales increased $2.0 million to $5.3 million in 1995 from $3.3
million in 1994. The increase in sales was the result of increased sales of LOG
CABIN gallon jugs and an increase in private label sales.
GROSS PROFIT as a percentage of net sales was 66.3% in 1995 as compared to
69.6% in 1994. The decrease in the gross profit margin was the result of higher
product costs, specifically increased corn syrup prices and packaging costs,
that were unable to be absorbed by the industry-wide price increase that was
taken in June 1994.
OPERATING PROFIT as a percentage of net sales decreased to 23.6% in 1995
from 30.2% in 1994. The operating profit margin decrease was the result of lower
gross margins, higher freight costs and an increase in marketing expenses. While
there was an allocation shift in dollars spent from advertising and consumer
marketing to trade promotions, total marketing as a percent of net sales
increased to 27.1% in 1995 from 24.9% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred substantial indebtedness in connection with the MBW
Refinancing and the LC Acquisition. Interest payments on the Notes, the Other
Notes and the Senior Credit Facilities
48
<PAGE>
represent significant cash requirements for the Company. As of June 28, 1997, on
a pro forma basis, after giving effect to the LC Acquisition, the Company would
have had $100.0 million in aggregate principal amount of indebtedness
outstanding under the Old Notes, $100.0 million in aggregate principal amount of
indebtedness outstanding under the Other Notes; $40.0 million outstanding under
the Term Facility and $47.0 million under the Revolving Facility. The Company
will be required to make periodic payments of interest on the Notes, the Other
Notes and the Senior Credit Facilities. See "Description of Notes" and
"Description of Senior Credit Facilities."
In addition to its debt service obligations, the Company's liquidity needs
will be for working capital, capital expenditures and acquisitions. The assets
of the Mrs. Butterworth's business capitalized relating to machinery and
equipment acquired in the MBW Acquisition, and referred to elsewhere herein as
capital expenditures, were $21,000, $64,000 and $470,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. The Company believes the costs
of building its corporate organization and transferring the production of MRS.
BUTTERWORTH'S syrup from Conopco to Red Wing will be approximately $5.8 million.
The assets of the Log Cabin business capitalized relating to machinery and
equipment acquired in the LC Acquisition, and referred to elsewhere herein as
capital expenditures, were $800,000, $1,200,000 and $500,000 for the years ended
December 31, 1994, 1995 and 1996, respectively. Capital expenditure requirements
have historically been financed with internally generated funds and have been
primarily related to refurbishments and improvements of manufacturing equipment.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Facility. After consummation of the LC
Acquisition, $13.0 million is available to the Company for borrowing under the
Revolving Facility. See "Description of the Senior Credit Facilities."
The Company anticipates that available cash, cash flow from operations and
availability under its Revolving Facility will be sufficient to meet the
Company's working capital requirements, capital expenditures, interest payments
on the Notes and Other Notes and interest and amortization requirements under
the Senior Credit Facilities for the next twelve months.
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Financial Statements included herein.
49
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company markets and sells MRS. BUTTERWORTH'S, the number one brand of
regular syrup in the United States. Originally introduced in 1960, MRS.
BUTTERWORTH'S syrup is well known for its unique buttery flavor and distinctive
grandmother-shaped bottle and enjoys 100% aided brand awareness among syrup
consumers. In addition to its strong national presence, MRS. BUTTERWORTH'S is
the number one brand of syrup in the Central and Mid-Central United States, the
two regions of the country with the highest per capita syrup consumption. MRS.
BUTTERWORTH'S strong market position in syrup is complemented by the Company's
pancake mix products in which it is the fourth leading brand. MRS. BUTTERWORTH'S
leading market positions and strong brand recognition have enabled it to realize
a long history of high operating margins, stable sales and growth in operating
profit.
On July 1, 1997, the Company acquired substantially all the assets of the
LOG CABIN syrup business from Kraft. THE LOG CABIN syrup business consists of
the retail syrup business marketed under the LOG CABIN and COUNTRY KITCHEN
brands and the foodservice syrup business marketed under the LOG CABIN and
WIGWAM brands. The LOG CABIN trademark dates back to 1888 and, the Company
believes it is one of the oldest and most widely recognized trademarks in the
United States. LOG CABIN syrup products have the number one market share overall
in the United States. LOG CABIN'S premium maple heritage, together with its
geographic strength on the east and west coasts, complements MRS. BUTTERWORTH'S
buttery flavor and strength in the central United States. Further extending the
Company's customer base is the addition of the COUNTRY KITCHEN and WIGWAM
trademarks. Introduced in 1954, COUNTRY KITCHEN is an economy-priced syrup
targeted towards the price conscious consumer and has the leading market share
in that segment.
The Company plans to combine the manufacture and distribution of LOG CABIN
syrup products with its MRS. BUTTERWORTH'S products and as a result expects to
realize $3.0 million in annual cost savings. LOG CABIN products will be sold by
the Company's independent food brokers and will be marketed and administered by
the Company, which will expand its corporate organization from 22 to 34 persons.
For the twelve months ended June 28, 1997, the Company's combined pro forma
sales, EBITDA and income before taxes were $194.1 million, $49.1 million and
$10.3 million, respectively (which amounts do not reflect the expected
manufacturing and distribution annual cost savings of $3.0 million discussed
above.) The Company believes that EBITDA is a useful measurement. MRS.
BUTTERWORTH'S and LOG CABIN products represented 46% and 54%, respectively, of
the Company's pro forma sales for the same period.
In order to effect the transition to an independent operating company, the
Company established a corporate infrastructure which is organized into three
operational groups--the product management group, the financial/administrative
group and the sales group. In addition, in connection with the Red Wing Co-Pack
Agreement, the Company is in the process of transferring the production of MRS.
BUTTERWORTH'S syrup and the related equipment from Conopco's facilities to Red
Wing's facilities. The Company expects to complete this transfer by December 31,
1997. The total cost of this transition is expected to be approximately $5.8
million.
In connection with the LC Acquisitions, the Company has expanded its
corporate organization from 22 to 34 persons. The Company will also increase its
office space in connection with this expansion. In addition, the Company is
negotiating with Red Wing and other third parties for the contract manufacture
of its LOG CABIN syrup products. The Company estimates that the transition costs
related to the LOG CABIN syrup business will be approximately $5.1 million.
The syrup and pancake mix categories in the United States are stable and are
characterized by broad household penetration and steady growth. Sales of syrup
products are driven by the consumption of host foods, product innovation and
consumers' desire for more traditional "home style" meals. From 1993 to 1996,
the syrup and pancake mix categories grew at compound annual rates of
approximately
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1.4% and 3.5%, respectively. The Company's products are sold nationally through
an independent broker network to retail grocery stores, mass merchandisers,
military exchanges and foodservice distributors. The Company's syrups and
pancake mixes are sold in nearly 100% and 63%, respectively, of all retail
grocery stores in the United States. For the twelve months ended June 28, 1997,
the Company's syrup and pancake mix sales represented approximately 95% and 5%
of pro forma sales, respectively.
The Company believes that its brands provide an attractive platform upon
which to build a focused, branded dry grocery products company. The Company
believes that the performance of certain dry grocery categories and brands has
suffered in recent years as a result of declining levels of marketing support
and little or no new product innovation by the major food companies.
Consequently, the Company believes that many of these undermanaged brands are
likely candidates for divestiture from their corporate parents. While these
categories and brands tend to be mature, there are expanding segments within the
categories and growth opportunities that have not been realized. As a result,
the Company believes that an attractive opportunity exists for building a
branded dry grocery products company through strategic acquisitions of
established, well-recognized national and regional brands that have been
undermanaged in recent years. The Company's objective is to renew the growth of
the brands it acquires by providing them the focus, strategic direction,
marketing resources and dedicated sales and marketing organizations that they
have lacked.
The Company's principal executive office is located at Community Corporate
Center, 445 Hutchinson Avenue, Columbus, Ohio 43235. The Company's telephone
number is (614) 436-8600.
MRS. BUTTERWORTH'S GROWTH STRATEGY
The Company believes that MRS. BUTTERWORTH'S has significant growth
potential which has not been realized due to a lack of corporate support and
marketing resources from Unilever in recent years. The Company plans to improve
MRS. BUTTERWORTH'S performance by increasing management attention to the brand
and by devoting the marketing resources necessary to exploit opportunities in
the syrup and pancake mix categories. The Company intends to implement its
strategy through the following initiatives:
- POSITION BRAND AS BEST VALUE. The Company plans to position MRS.
BUTTERWORTH'S as the best value among the three leading national syrup brands by
continuing to provide its distinctive, premium quality product at prices which
are moderately below those of the other national brands. In May 1996, MRS.
BUTTERWORTH'S lowered the everyday prices of its syrup products. To offset the
cost of lowering everyday prices, MRS. BUTTERWORTH'S also reduced its costly and
relatively ineffective buy-one-get-one-free promotions. The Company believes
that full implementation of MRS. BUTTERWORTH'S value pricing strategy will
result in continued increases in sales and market share.
- REFORMULATE LITE PRODUCT. MRS. BUTTERWORTH'S LITE has not been
reformulated or improved since its introduction in 1985. Over the last five
years, competitors have focused their research and development efforts on the
lite syrup segment, taking advantage of newly developed ingredients and
formulations. While MRS. BUTTERWORTH'S is the leading brand in the regular syrup
segment, MRS. BUTTERWORTH'S share of the lite syrup segment is 15.0% and is
significantly below AUNT JEMIMA'S leading 32.6% share of the segment. The
Company plans to reformulate and improve the taste of MRS. BUTTERWORTH'S LITE.
Management believes that this reformulation, coupled with MRS. BUTTERWORTH'S
leading position in the regular syrup segment and increased marketing support,
can expand the Company's share of the lite segment and further strengthen the
Company's overall syrup market share.
- ROLL OUT PRODUCT LINE EXTENSIONS. Management believes MRS. BUTTERWORTH'S
strong brand equity and leading market shares in the syrup category present
considerable opportunities for product line extensions. For example, an
opportunity exists to develop a product which is directed at children and
packaged in plastic, as compared to the current glass packaging. Opportunities
also exist for MRS. BUTTERWORTH'S in the flavored syrup segment, as none of the
major national brands currently offer
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these specialty products. In addition, management believes that opportunities
exist for growth in the Company's pancake mix business with increased marketing
and sales support for its recently redesigned and updated packaging.
- ADOPT CONSUMER BASED MARKETING STRATEGY. Over the next two years, the
Company plans to reduce its reliance on costly and relatively inefficient trade
spending and periodic price discounting and increase its advertising and
consumer promotional events. The Company plans to reduce or eliminate
buy-one-get-one-free promotions and its heavy reliance on coupons in free
standing inserts. The Company will reallocate those marketing dollars to
advertising and more focused consumer promotions such as cross-promotions with
host foods. In addition, the Company will direct its advertising expenditures to
support the introduction of new or improved products and reinforce MRS.
BUTTERWORTH'S unique brand equity and positioning as the best value among the
national brands.
LOG CABIN GROWTH STRATEGY
LOG CABIN'S overall share of the retail syrup category has decreased from
35% in 1972 to 19% in 1996. The Company attributes the decrease to declining
levels of corporate support and marketing resources from Kraft over this period
of time. The Company plans to undertake the following initiatives to revitalize
the LOG CABIN brand and profitably grow the business:
- RESTORE LOG CABIN'S PREMIUM IMAGE. The Company believes that historically,
the LOG CABIN brand has been perceived by the consumer as a premium, real
maple syrup. In recent years, LOG CABIN'S premium image has eroded due to
a lack of marketing support. For example, packaging of LOG CABIN syrup
products has been downgraded from glass to clear plastic to opaque
plastic. Advertising support for the brand was eliminated in 1994. The
Company plans to restore LOG CABIN'S premium image by upgrading LOG
CABIN'S packaging and renewing advertising support for the brand that
promotes its premium, real maple heritage and warm, homespun image.
- RETURN TO CONSUMER BASED MARKETING STRATEGY. Over the last four years, LOG
CABIN'S marketing program has consisted almost entirely of trade spending
and price discounting. Little or no money was spent promoting LOG CABIN
products to the consumer through coupons or advertising. In order to bring
consumers back to the LOG CABIN brand, the Company plans to increase
advertising support for the brand and implement focused consumer
promotional activities such as point-of-sale coupons and cross-promotions
with host foods. The Company expects to fund these programs in part
through the elimination of certain inefficient trade programs.
- BENEFIT FROM GROWTH IN HOST FOOD. Sales of syrup products are related to
sales of host foods, which include pancakes, waffles and french toast.
Over the last five months, following little or no growth over the last
three years, sales of frozen breakfast products have grown at
approximately a 10% annual rate as a result of increased marketing
activity by host food manufacturers. The Company believes that sales of
syrup products will benefit from renewed growth in host foods.
- EXPAND DISTRIBUTION CHANNELS. The Company plans to expand distribution of
the economy-priced COUNTRY KITCHEN brand into the mass merchandise and
drugstore channels of trade. The Company also plans to leverage its WIGWAM
brand and expand its foodservice business.
INDUSTRY
The U.S. syrup category is approximately $463 million. Sales of syrup are
driven by the consumption of host foods, product innovation and consumers'
desire for traditional "home style" meals. Sales in the syrup category increased
in 1991 and 1992 due to the increased consumption of host foods, which was
driven primarily by new product introductions of host foods. Growth in the syrup
category has also been driven by product innovation, such as the development of
lite and specialty flavored syrups. Syrup is widely consumed across the United
States and has a 60% household penetration rate. Approximately 95% of syrup is
consumed with pancakes, waffles and french toast, and syrup is consumed with 7%
of all U.S. breakfasts, equal in frequency of consumption to hot cereals and
baked goods. On average, syrup
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users consume the product once every two weeks and purchase syrup approximately
once every three months. The most common purchase size is 24 ounces. Consumption
increases slightly during the winter months.
The syrup category has three major segments: regular, lite and pure
maple/specialty flavored, which represent approximately 59%, 29% and 12% of
syrup sales, respectively. Regular syrup is a full-calorie, corn syrup based
product. Lite syrup is also a corn syrup based product, but has only half the
calories of regular syrup. Pure maple, diet and other specialty syrups, all of
which are non-corn syrup based products, occupy market niches and are not
currently offered by any of the major national syrup manufacturers.
The three leading brands of syrup (AUNT JEMIMA, MRS. BUTTERWORTH'S and LOG
CABIN) account for approximately 53% of total syrup sales in the United States.
The remaining 47% is fragmented, with private label accounting for approximately
20% of sales and numerous other national and regional brands accounting for the
remainder. Management believes that private label's share of the syrup market
will remain relatively flat due to the lack of opportunity for growth in
distribution of private label syrup and the relatively high level of private
label syrup which is currently sold on promotion. Private label syrup currently
has approximately 96% distribution to retail grocery stores, leaving little room
for growth in distribution. In addition, approximately 35% of private label
syrup is sold on promotion, a relatively high percentage of promoted sales for a
private label product. Finally, since 1988 private label syrup prices have
increased at nearly double the rate of the three leading syrup brands, reducing
the premium for branded syrups from approximately 80% to 55%.
The U.S. retail grocery pancake mix category had sales of $145 million in
1996 and grew at a compound annual rate of 3.5% from 1993 to 1996, largely due
to a trend among consumers to return to traditional meals and the perceived
value offered by pancake mix compared with substitute products. Pancake mix has
a household penetration rate of 30%. The purchase cycle is once every three
months, similar to syrup. The pancake mix category is less fragmented than the
syrup category with the four leading brands (AUNT JEMIMA, HUNGRY JACK, KRUSTEAZ
and MRS. BUTTERWORTH'S) accounting for approximately 70% of sales. Private label
and smaller national and regional competitors account for the remainder. See
"--Competition."
PRODUCTS AND MARKETS
MRS. BUTTERWORTH'S (46% of pro forma Company sales)
The Company markets and sells the MRS. BUTTERWORTH'S brand of syrup and
pancake mix. The retail grocery channel is the primary market for the Company's
products and accounted for approximately 85% of MRS. BUTTERWORTH'S sales for the
year ended December 31, 1996. In this channel, the MRS. BUTTERWORTH'S syrup
products are primarily sold in 12, 24 and 36 ounce bottles and pancake mix
products are primarily sold in two pound paperboard boxes. The remaining 15% of
the MRS. BUTTERWORTH'S sales are in other channels, including membership
warehouses, convenience stores, mass merchandisers, foodservice and the U.S.
military. In these channels, MRS. BUTTERWORTH'S syrup products are also sold in
gallon and portion pack units and pancake mix products are also sold in five
pound polybags.
SYRUPS (89% of MRS. BUTTERWORTH'S sales). MRS. BUTTERWORTH'S syrup products
include regular syrup, which is a full-calorie corn syrup based product, and
lite syrup, which is a half-calorie corn syrup based product. MRS. BUTTERWORTH'S
syrups are primarily sold in highly recognizable grandmother-shaped glass
bottles. MRS. BUTTERWORTH'S is the leading brand of regular syrup in the United
States with an 18.1% share of the regular syrup segment. MRS. BUTTERWORTH'S
produces and sells regular syrup under its ORIGINAL label, which was introduced
in 1960, and its COUNTRY BEST RECIPE label, a cinnamon-vanilla flavor introduced
in 1994. MRS. BUTTERWORTH'S ORIGINAL 24 ounce stock keeping unit ("SKU") is the
number one ranked SKU in the syrup category and sales of all MRS. BUTTERWORTH'S
ORIGINAL sizes accounted for approximately 47% of the Company's sales for the
year ended December 31, 1996. MRS. BUTTERWORTH'S
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LITE, introduced in 1985, is the third leading brand in the lite syrup segment,
with a 15.0% share of that segment.
PANCAKE MIXES (11% of MRS. BUTTERWORTH'S sales). MRS. BUTTERWORTH'S pancake
mixes include add-in mixes, to which the user adds eggs and vegetable oil, and
complete mixes, to which the user adds only water. The Company's add-in mix is
sold under the MRS. BUTTERWORTH'S OLD-FASHIONED label. The Company's complete
mixes are sold under its MRS. BUTTERWORTH'S BUTTERMILK COMPLETE and MRS.
BUTTERWORTH'S ORIGINAL COMPLETE labels. The Company's pancake mixes are
manufactured by Cereal Food Processors, Inc. and Gooch Milling and Elevator Co.,
Inc.
LOG CABIN (54% of pro forma Company sales)
The Company also markets and sells the LOG CABIN and COUNTRY KITCHEN brands
of syrup. The retail grocery channel is the primary market for LOG CABIN'S
products and accounted for approximately 84% of LOG CABIN'S sales for the year
ended December 31, 1996. In this channel, LOG CABIN'S retail products are
primarily sold in 12, 24, and 36 ounce sizes. In addition, approximately 11% of
LOG CABIN'S sales are in other channels including mass merchandisers, club
stores and the U.S. military. The remaining 5% of LOG CABIN'S sales are in
foodservice. The Company's foodservice products are sold in portion-control
packs and gallon jugs under the LOG CABIN, LOG CABIN LITE and WIGWAM labels and
under private label arrangements to the restaurant and institution channels.
LOG CABIN'S product lines include LOG CABIN, which is a premium priced
syrup, and COUNTRY KITCHEN, which is an economy syrup. Together, the two brands
have a 19.3% share of the syrup category.
LOG CABIN has a 16.3% market share of the regular syrup segment. The
heritage of the LOG CABIN brand dates back to 1887 and enjoys a strong consumer
awareness. Additionally, LOG CABIN LITE was introduced in 1985 and is the second
leading brand in the lite syrup segment with a 15.7% share of that segment.
COUNTRY KITCHEN has an 8.9% market share of the regular syrup segment.
Introduced in 1954, the product is positioned to target the economy segment of
the syrup category, providing a lower cost alternative for price conscious
consumers. Of this economy segment, COUNTRY KITCHEN has the highest share
amongst its competitors such as AUNT JEMIMA'S COUNTRY RICH and numerous regional
brands. COUNTRY KITCHEN is marketed under both a regular and lite version.
MARKETING, SALES AND DISTRIBUTION
MRS. BUTTERWORTH'S
The MRS. BUTTERWORTH'S trademark has been developed over 36 years and has
been supported through a mix of trade promotions, consumer marketing and
advertising. In addition, MRS. BUTTERWORTH'S unique grandmother-shaped bottle
provides strong brand identification at the point of sale. MRS. BUTTERWORTH'S
products are sold by a network of independent brokers and are distributed on a
national basis from Conopco's Olathe, Kansas facility.
Originally introduced in 1960, MRS. BUTTERWORTH'S is a well-recognized
trademark in the United States. MRS. BUTTERWORTH'S warm, homespun and
"grandmotherly" image appeals to young and old consumers alike. According to a
1995 Nielsen Brandbuilder study, MRS. BUTTERWORTH'S has 100% aided brand
awareness among syrup consumers. MRS. BUTTERWORTH'S also has significantly
higher Nielsen scores than its competitors in key consumer areas including "rich
tasting", "attractive packaging" and "attractive advertising". Consumer
awareness and attraction to the MRS. BUTTERWORTH'S brand is reinforced through
MRS. BUTTERWORTH'S unique grandmother-shaped glass bottle, which provides
customers with strong point-of-purchase brand identification.
MRS. BUTTERWORTH'S trade promotions have consisted of price discounting,
in-store advertising and couponing in retailer flyers. In the second quarter of
1996, MRS. BUTTERWORTH'S adopted a strategy to position its syrup products as
the best value among the three leading national brands. MRS. BUTTERWORTH'S
reduced its wholesale prices, resulting in lower everyday shelf prices to the
consumer for MRS. BUTTERWORTH'S regular syrup products. This strategy was
adopted to decrease reliance on price discounting.
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MRS. BUTTERWORTH'S consumer marketing has relied heavily on coupons in free
standing inserts, which historically have had low average redemption rates, and
costly buy-one-get-one-free promotions. The pricing strategy implemented in the
second quarter of 1996 was adopted to decrease reliance on buy-one-get-one-free
promotions and has resulted in a reduction in MRS. BUTTERWORTH'S consumer
marketing expenditures. The Company intends to shift the focus of its consumer
marketing to targeted couponing, such as cross-promotions with host food
products.
MRS. BUTTERWORTH'S advertising has been limited in recent years.
Historically, MRS. BUTTERWORTH'S advertising consisted primarily of television
advertising which was aimed at promoting MRS. BUTTERWORTH'S unique brand image.
The Company's advertising emphasized the old-fashioned "grandmotherly" image
associated with the brand and its homemade quality and wholesome taste.
Additionally, MRS. BUTTERWORTH'S advertising campaign, which used a "talking
syrup bottle," appeals to both children and adults. MRS. BUTTERWORTH'S
advertising has a strong recall score and has been highly effective in
motivating the purchase of MRS. BUTTERWORTH'S products and the Company intends
to continue this advertising.
The majority of MRS. BUTTERWORTH'S syrup and pancake mix products are sold
through a network of approximately 60 independent brokers to retail grocery
stores, membership warehouses, convenience stores and mass merchandisers. Retail
grocery sales account for approximately 85% of MRS. BUTTERWORTH'S sales of
syrups and pancake mixes. A small number of these brokers also sell products
manufactured by the Company's competitors. The Company also uses a separate
broker network of approximately 40 independent brokers which sells syrups and
pancake mixes to the foodservice distributors and operators. The Company's food
brokers do not distribute its products. They perform the sales and merchandising
functions necessary for the business. Distribution of products from the
Company's warehouses is arranged by the purchaser of the products. MRS.
BUTTERWORTH'S syrups and pancake mixes are distributed on a national basis from
Conopco's Olathe, Kansas facility. None of the Company's customers account for
more than 10% of the Company's sales.
LOG CABIN
The LOG CABIN brand has a heritage dating back over a century and is widely
recognized as the "real" maple syrup people "grew up with." While LOG CABIN
remains the number one brand of syrup overall, a significant reduction in
corporate marketing support for the brand combined with aggressive marketing
programs by its principal national competitors have led to an erosion in its
market share from 35% in 1972 to 19%. LOG CABIN'S number one market position has
endured primarily on the basis of the brand's longevity in the market and strong
consumer awareness.
LOG CABIN'S marketing activities over the last four years have principally
consisted of trade promotions and price discounting. During this period, the
brand also developed an "animated cabin" television advertisement which achieved
above average consumer enjoyment, brand rating and memorability. However, in
response to heavy price promotions from MRS. BUTTERWORTH'S, AUNT JEMIMA and
HUNGRY JACK during the 1993 through 1995 period, LOG CABIN redirected its
advertising spending to price discounting and buy-one-get-one free promotions.
The Company intends to revitalize the LOG CABIN brand by reducing the
brand's reliance on inefficient trade spending and increasing consumer-based
promotional events and advertising. The shift from trade spending will refocus
LOG CABIN'S marketing emphasis on the consumer.
LOG CABIN'S products have historically been sold through Kraft's direct
sales force to retail grocery stores, mass merchandisers, club stores,
foodservice and the U.S. military. The Company intends to transition LOG CABIN
sales to its existing broker network shortly after the LC Acquisition is
completed.
COMPETITION
The three major national brands of syrup are AUNT JEMIMA, MRS. BUTTERWORTH'S
and LOG CABIN. Sales of these three brands account for approximately 53% of
total syrup sales in the United States. Smaller
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national and regional brands, including MAPLE GROVE FARMS, GOLDEN GRIDDLE and
VERMONT MAID, and private label syrups also compete in the syrup category.
Competition is based primarily on price and consumer positioning.
LOG CABIN (including the COUNTRY KITCHEN brand) is the number one national
brand of syrup overall with a 19.3% market share, followed by AUNT JEMIMA and
MRS. BUTTERWORTH'S with market shares of 18.5% and 15.0%, respectively. MRS.
BUTTERWORTH'S is the number one brand of regular syrup in the United States,
with an 18.1% share of the regular syrup segment, followed by LOG CABIN
(excluding the COUNTRY KITCHEN brand) and AUNT JEMIMA with regular segment
shares of 16.3% and 13.6%, respectively. In addition, COUNTRY KITCHEN is the
leading national brand of economy-priced syrup with the highest market share
among its economy-priced competitors, which include Aunt Jemima's COUNTRY RICH
and numerous regional brands.
MRS. BUTTERWORTH'S is also the leading brand of syrup in the Central
(Chicago, Denver, Kansas City) and Mid-Central (Detroit, Indianapolis,
Pittsburgh) regions of the United States, the two regions of the country with
the highest per capita syrup consumption. LOG CABIN sales are strongest in the
eastern and western regions of the United States.
The U.S. pancake mix category is more concentrated than the syrup category,
with four major brands representing approximately 70.0% of the total market.
AUNT JEMIMA is the leader in the pancake mix category, with a 30.9% market
share, followed by HUNGRY JACK, KRUSTEAZ and MRS. BUTTERWORTH'S, with market
shares of 15.6%, 14.9% and 6.3%, respectively.
RAW MATERIALS
The Company utilizes a variety of basic raw materials in the manufacture of
its syrup and pancake mix products, including corn syrup, liquid sucrose, flour,
sugar, maple sugar and flavorings. The Company also utilizes significant
quantities of glass, plastic and cardboard for its packaging requirements.
Supplies of ingredients and packaging requirements are readily available from a
number of sources and are purchased based on price. See "The Acquisitions."
PRODUCTION AND EQUIPMENT
MRS. BUTTERWORTH'S syrup is manufactured and packaged at Conopco's Olathe,
Kansas facility under the MBW Co-Pack Agreement between the Company and Conopco
pursuant to which Conopco has agreed to contract manufacture syrup for the
Company for a period of up to one year from the MBW Acquisition Closing Date at
prices which are based on historical manufacturing costs. In addition, the
Company has entered into the Red Wing Co-Pack Agreement pursuant to which Red
Wing will contract manufacture MRS. BUTTERWORTH'S syrup products. In August
1997, the Company commenced transferring production of MRS. BUTTERWORTH'S syrup
from Conopco to Red Wing. See "The Acquisitions--The Red Wing Co-Pack
Agreement." Raw materials, packaging supplies and finished goods related to the
MRS. BUTTERWORTH'S syrup business are also warehoused at Conopco's Olathe,
Kansas facility.
The Company owns all of the equipment used in each stage of the production
of MRS. BUTTERWORTH'S syrup, including batching, filling and case-packing the
products. The equipment was purchased by the Company in the MBW Acquisition and
has the capacity to produce approximately two times the number of cases of syrup
as has been produced historically. All of the equipment is located in Conopco's
Olathe, Kansas facility.
MRS. BUTTERWORTH'S retail pancake mixes are manufactured and packaged by two
third parties under co-packing agreements. The Company assumed these agreements
at their historical prices at the MBW Acquisition Closing Date. MRS.
BUTTERWORTH'S foodservice pancake mixes, which account for approximately 1% of
the Company's sales, are manufactured at a separate facility owned by Conopco.
LOG CABIN syrup products are manufactured and packaged at Kraft's Chicago,
Illinois and Lehigh Valley, Pennsylvania facilities under the LC Co-Pack
Agreement between the Company and Kraft pursuant to which Kraft has agreed to
contract manufacture syrup for the Company for a period of up to nine
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months from the LC Acquisition Closing Date at prices which are based on
historical manufacturing costs. Prior to the end of the term of the LC Co-Pack
Agreement, the Company will either enter into a co-packing agreement with Red
Wing or another third party for the manufacture of LOG CABIN syrup products. Raw
materials, packaging supplies and finished goods related to the syrup business
are also warehoused at Kraft's Chicago and Lehigh Valley facilities.
TRADEMARKS
In the MBW Aquisition, the Company acquired a number of registered
trademarks in the United States, Canada and Puerto Rico. In the LC Acquisition,
the Company acquired the U.S. and foreign trademarks (excluding Mexico) of the
LC Business, including LOG CABIN and COUNTRY KITCHEN. Management is not aware of
any fact that would negatively impact the continued use of any of its trademarks
and trade names.
EMPLOYEES
The Company's labor requirements related to the manufacturing of MRS.
BUTTERWORTH'S syrup and foodservice pancake mix will be covered under the MBW
Co-Pack Agreement until December 31, 1997 and thereafter under the Red Wing
Co-Pack Agreement. The Company's labor requirements related to the manufacturing
of LOG CABIN syrup products will be covered under the LC Co-Pack Agreement for a
period of up to nine months from the LC Acquisition Closing Date. The Company
has filled substantially all senior management positions and has staffed
approximately ninety percent of its sales, marketing and administrative
functions. The Company has completed the transition of all services previously
provided by Conopco under the MBW Transition Services Agreement, which expires
on June 30, 1997. In connection with the LC Acquisition, the Company entered
into the LC Transition Services Agreement, pursuant to which Kraft will provide
the Company with marketing services, transaction processing services, accounting
services and other services related to the LOG CABIN syrup products for a period
of up to six months from the LC Acquisition Closing Date. The Company will
increase its corporate staff from 22 to 34, primarily in the sales and marketing
areas to accomodate the additional volume and products of the LOG CABIN syrup
business.
CERTAIN LEGAL AND REGULATORY MATTERS
LITIGATION
The Company did not assume any litigation relating to the MBW Predecessor or
the LC Business that was pending as of the MBW Acquisition Closing Date or the
LC Acquisition Closing Date. Conopco and Kraft have agreed to indemnify, subject
to certain limitations, the Company with respect to any litigation that may
arise in the future to the extent such litigation relates to the conduct of the
MBW Predecessor prior to the MBW Acquisition Closing Date and the LC Business
prior to the LC Acquisition Closing Date, respectively. See "The Acquisitions."
Historically, each of Conopco and Kraft has been the defendant in various legal
actions related to its respective businesses, none of which had, or were
expected to have, a material adverse effect on the operations or financial
condition of the MBW Predecessor or the LC Business, respectively.
PUBLIC HEALTH
The Company is subject to the Federal Food, Drug and Cosmetic Act and
regulations promulgated thereunder by the Food and Drug Administration (the
"FDA"). This comprehensive regulatory program governs, among other things, the
manufacturing, composition and ingredients, labeling, packaging and safety of
food. For example, the FDA regulates manufacturing practices for foods through
its current "good manufacturing practices" regulations, and specifies the
"recipes," called standards of identity, for certain foods. In addition, the
Nutrition Labeling and Education Act of 1990, as amended, prescribes the format
and content of certain information required to appear on the labels of food
products. The
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Company is subject to regulation by certain other governmental agencies,
including the U.S. Department of Agriculture.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of the
facilities. Enforcement actions for violations of federal, state and local
regulations may include seizure and condemnation of violative products, cease
and desist orders, injunctions and/or monetary penalties. Management believes
that the Company's facilities and practices are sufficient to maintain
compliance with applicable government regulations, although there can be no
assurances in this regard.
ENVIRONMENTAL
The Company did not assume any liabilities for environmental matters
relating to the operation of the MBW Predecessor prior to the MBW Acquisition
Closing Date or the LC Business prior to the LC Acquisition Closing Date. Like
all other businesses, the Company is subject to a full range of federal, state
and local laws and regulations pertaining to the environment, including the
discharge of materials into the environment and the handling and disposal of
wastes (including solid and hazardous wastes). These laws include, but are not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 6901 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 9601 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Toxic Substances Control At, 15 U.S.C Section 2601 et seq.; the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et
seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Section 651 et seq.; and their state and local counterparts and equivalents.
However, because of the nature of its business, the Company does not expect the
costs of compliance with, or any liability under, such laws and regulations to
have a material adverse effect on its operations or financial condition.
58
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------- --------- ----------------------------------------------------
<S> <C> <C>
Ian R. Wilson....................................... 67 Chairman of the Board of Directors
Thomas J. Ferraro................................... 48 President and Director
Dirk C. Grizzle..................................... 35 Chief Financial Officer
James B. Ardrey..................................... 39 Executive Vice President and Director
Ray Chung........................................... 48 Executive Vice President and Director
C. Gary Willett..................................... 43 Executive Vice President
Alan Mintz.......................................... 54 Vice President, Sales
M. Laurie Cummings.................................. 33 Vice President and Secretary
David E. De Leeuw................................... 52 Director
Charles Ayres....................................... 37 Director
Tyler T. Zachem..................................... 31 Director
Peter Lamm.......................................... 45 Director
Richard C. Dresdale................................. 40 Director
</TABLE>
IAN R. WILSON, Chairman of the Board of Directors of the Company since
December 1996. Mr. Wilson is the Managing Partner of Dartford. Mr. Wilson
currently serves as Chairman of the Board of Directors of Van de Kamp's and
Windy Hill. Prior to forming Dartford, Mr. Wilson served as Chairman and Chief
Executive Officer of Windmill. Prior to that, Mr. Wilson was Chairman and Chief
Executive Officer of Wyndham. From 1983 to 1984 Mr. Wilson was the Chairman and
Chief Executive Officer of Castle & Cooke, Inc. (now known as Dole Food Company,
Inc.), an international food and real estate concern. Prior to Castle & Cooke,
Inc., Mr. Wilson spent 25 years with The Coca-Cola Company in a series of
management positions, most recently as Vice Chairman of The Coca-Cola Company
and President of the Pacific Group. Mr. Wilson's past and present service as a
director includes membership on the boards of Novell, Inc., Revlon, Inc., Crown
Zellerbach Corporation, Castle & Cooke, Inc., Wilson Bottling Corporation,
Golden State Foods, New Age Beverages, Ltd., Van de Kamp's and Windy Hill.
THOMAS J. FERRARO, President and Director of the Company since December
1996. Prior to joining the Company, Mr. Ferraro served as President of Campfire,
Inc. from September 1994 to June 1996, which recently merged into International
Home Foods, Inc. Prior to joining Campfire, Inc. Mr. Ferraro spent eleven years
at Borden, Inc. serving as Vice President of Sales for the Niche Grocery
division from 1991 to 1994. Mr. Ferraro's experience with niche grocery products
extends back to his early career from 1978 to 1983 with RJR Nabisco Inc. and
from 1973 to 1978 with Drackett Products, a division of Bristol-Meyers Squibb
Company, where he held a variety of marketing and sales positions.
DIRK C. GRIZZLE, Chief Financial Officer of the Company since June 1997.
Prior to joining the Company, Mr. Grizzle served as Vice President of Finance at
the BISYS Group, Inc. from August 1995 to June 1997. From November 1992 to
August 1995, Mr. Grizzle served as Controller, Treasurer and Secretary for Bell
Atlantic International, Inc. from 1984 to 1992, Mr. Grizzle served in a series
of various positions with KPMG Peat Marwick, most recently as a Senior Manager
in KPMG's International Services practice in London, England. Prior to joining
KPMG, Mr. Grizzle was the Controller of Scioto Investment Company from 1982 to
1984.
JAMES B. ARDREY, Executive Vice President and Director of the Company since
December 1996. Mr. Ardrey is a Partner in Dartford. From January 1993 to
February 1995, Mr. Ardrey was a consultant to Windmill, conducting its
divestiture program. From 1984 to 1992, Mr. Ardrey was an investment banker with
Paine Webber Incorporated, serving as Managing Director from 1990 to 1992. Prior
to joining Paine Webber Incorporated, Mr. Ardrey was a consultant with Booz,
Allen & Hamilton. Mr. Ardrey currently serves as a Director of Van de Kamp's.
59
<PAGE>
RAY CHUNG, Executive Vice President and Director of the Company since
December 1996. Mr. Chung is a Partner in Dartford. Mr. Chung has previously
served as a Director, Executive Vice President and Chief Financial Officer of
Windmill from 1989 to 1995 and as a Director, Executive Vice President and Chief
Financial Officer of Wyndham from 1985 to 1990. From May 1984 to September 1985,
Mr. Chung served as Vice President--Finance for the Kendall Company, a
subsidiary of the Colgate-Palmolive Company. Between 1981 and 1984, Mr. Chung
served as Vice President--Finance for Riviana Foods, Inc. Mr. Chung currently
serves as a Director of Windy Hill and VDK Holdings, Inc.
C. GARY WILLETT, Executive Vice President of the Company since December
1996. Prior to joining the Company, Mr. Willett served as Executive Vice
President/General Manager of Campfire, Inc. from August 1995 to September 1996,
which recently merged into International Home Foods, Inc. Prior to Campfire,
Inc., Mr. Willett spent 12 years with Borden, Inc. from June 1983 to August 1995
in a series of marketing and general management positions, most recently as a
Vice President/G.M. of Elmer's. Before joining Borden, Inc., Mr. Willett spent
six years with The Kellogg Company from September 1977 to May 1983 in various
marketing and sales positions.
ALAN MINTZ, Vice President, Sales of the Company since January 1997. Prior
to joining the Company in January 1997, Mr. Mintz spent twelve years with
Borden, Inc. from July 1985 to January 1997, as General Manager of the BAMA
foods division and as the Area Vice President of the Signature Flavors division.
Prior to joining Borden, Inc., Mr. Mintz held various sales positions at General
Foods Corp. from August 1967 to June 1985.
M. LAURIE CUMMINGS, Vice President and Secretary of the Company since
December 1996. Ms. Cummings is a partner in Dartford. Ms. Cummings was Vice
President, Controller and Treasurer of Windmill from 1989 to 1995. Between 1987
and 1990, Ms. Cummings was the Controller and Assistant Treasurer of Wyndham.
Ms. Cummings currently serves as Vice President of Windy Hill and Van de Kamp's.
DAVID E. DE LEEUW, Director of the Company since December 1996. Mr. De Leeuw
is a managing general partner of MDC Management Company III, L.P., which is the
general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. III
(Europe), L.P., a managing general partner of MDC Management Company IIIA, L.P.,
which is the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a
member of Gamma Fund, LLC. Prior to founding McCown De Leeuw & Co. with George
E. McCown in 1984 and beginning in 1978, Mr. De Leeuw was Manager of the
Leveraged Acquisition Unit and Vice President in the Capital Markets Group at
Citibank, N.A. Mr. De Leeuw also worked with W.R. Grace & Co. where he was
Assistant Treasurer and Manager of Corporate Finance from 1974 until 1978. Mr.
De Leeuw began his career as an investment banker with Paine Webber Incorporated
in 1969. He currently serves as a director of Vans, Inc., DEC International
Inc., Nimbus CD International, Inc., Pelican Companies, Inc., Tiara Motorcoach
Corporation, Papa Gino's Inc. and Outsourcing Solutions Inc.
CHARLES AYRES, Director of the Company since December 1996. Mr. Ayres is a
general partner of MDC Management Company III, L.P., which is the general
partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. III
(Europe), L.P., a general partner of MDC Management Company IIIA, L.P., which is
the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a member of
Gamma Fund, LLC. Mr. Ayres has been associated with McCown De Leeuw & Co. since
1991. From 1987 until 1991 Mr. Ayres was a partner of HMA Investments, Inc., a
private investment firm focused on middle market management buyouts. Mr. Ayres
began his career as an investment banker with Lazard Freres & Co. in 1982 where
he remained until 1985. He currently serves as a director of Nimbus CD
International, Inc., ASC Network Corp., Tiara Motorcoach Corporation and Papa
Gino's, Inc.
TYLER T. ZACHEM, Director of the Company since December 1996. Mr. Zachem is
a principal of MDC Management Company III, L.P., which is the general partner of
McCown De Leeuw & Co. III, L.P., and McCown De Leeuw & Co. III (Europe), L.P.,
and a principal of MDC Management Company IIIA, L.P., which is the general
partner of McCown De Leeuw & Co. III (Asia), L.P. Mr. Zachem has been associated
60
<PAGE>
with McCown De Leeuw & Co. since July 1993. Mr. Zachem worked as a consultant
with McKinsey & Co. in 1993 and as an investment banker with McDonald & Company
from 1989 through 1991. He currently serves as a director of Outsourcing
Solutions Inc.
PETER LAMM, Director of the Company since December 1996. Mr. Lamm is
President of Fenway Partners, Inc., the management company for Fenway, a New
York based direct investment firm for institutional investors with a primary
objective of acquiring controlling positions in leading middle-market companies.
From February 1982 to April 1994, Mr. Lamm was employed by Butler Capital
Corporation, most recently as Senior Direct Investment Officer and a Managing
Director. Until April 1994, Mr. Lamm was also a general partner of the five
limited partnerships managed by Butler Capital Corporation. Mr. Lamm currently
serves as a director of Van de Kamp's, MW Manufacturers Inc., National School
Supply Company, Inc., Brown Moulding Company, Inc., Valley Recreation Products
Inc., Teters Floral Products, Inc. and Bear Archery, Inc.
RICHARD C. DRESDALE, Director of the Company since December 1996. Mr.
Dresdale is a Managing Director of Fenway Partners, Inc. Prior to founding
Fenway with Mr. Lamm and Andrea Geisser, Mr. Dresdale was a principal at
Clayton, Dubilier and Rice, Inc. ("CD&R") from June 1985 to March 1994. Mr.
Dresdale also served as a limited partner of the general partner of three of the
investment partnerships managed by CD&R. From January 1981 to March 1984, Mr.
Dresdale worked as an Investment Officer with Manufacturers Hanover Venture
Capital Corporation. Mr. Dresdale currently serves as a director of MW
Manufacturers Inc., Brown Moulding Company, Inc., Teters Floral Products, Inc.,
Bear Archery, Inc., Nu-kote Holdings, Inc. and Remington Arms Company.
EXECUTIVE COMPENSATION
As described below, the Company entered into employment agreements with
Thomas J. Ferraro, C. Gary Willett, Alan Mintz and Dirk C. Grizzle. The Company
employed no other executive officers on the date hereof.
Pursuant to the Employment Agreement between the Company and Thomas J.
Ferraro dated as of December 31, 1996 (the "Ferraro Employment Agreement"), Mr.
Ferraro shall serve as President of the Company and a director of the Company.
Mr. Ferraro shall receive a base salary of $175,000 per year and is eligible to
receive a bonus of up to 70% of his base salary depending upon the Company's
earnings. Additionally, Mr. Ferraro received 30 Class D Units in MBW LLC (which
are non-voting) on December 31, 1996. The Ferraro Employment Agreement provides
for a two-year term, commencing on the MBW Acquisition Closing Date; however, on
each anniversary of the MBW Acquisition Closing Date the term will automatically
be extended for one additional year so that the term ends two years after the
latest anniversary of the MBW Acquisition Closing Date. If the Company
terminates Mr. Ferraro's employment without cause, the Company is required to
pay him an amount equal to the base salary he would have been entitled to
receive through the end of the current term of the Ferraro Employment Agreement.
The Ferraro Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Ferraro may not compete with or solicit employees from the
Company.
Pursuant to the Employment Agreement between the Company and C. Gary Willett
dated as of December 31, 1996 (the "Willett Employment Agreement"), Mr. Willett
shall serve as Executive Vice President of the Company. Mr. Willett shall
receive a base salary of $140,000 per year and is eligible to receive a bonus of
up to 60% of his base salary depending upon the Company's earnings. The Willett
Employment Agreement provides for a two-year term, commencing on the MBW
Acquisition Closing Date; however, on each anniversary of the MBW Acquisition
Closing Date the term will be automatically extended for one additional year so
that the term ends two years after the latest anniversary of the MBW Acquisition
Closing Date. If the Company terminates Mr. Willett's employment without cause,
the Company is required to pay him an amount equal to the base salary he would
have been entitled to receive
61
<PAGE>
through the end of the current term of the Willett Employment Agreement. The
Willett Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Willett will not compete with or solicit employees from the
Company.
Pursuant to the Employment Agreement between the Company and Alan Mintz
dated as of January 20, 1997 (the "Mintz Employment Agreement"), Mr. Mintz
serves as Vice President of Sales of the Company. Mr. Mintz receives a base
salary of $120,000 per year and is eligible to receive a bonus of up to 60% of
his base salary based upon the Company's earnings. The Mintz Employment
Agreement provides for a one-year term, commencing on January 20, 1997. On July
20, 1997 and each day thereafter, the term will automatically be extended for an
additional day so that the term remaining under the Mintz Employment Agreement
will always be six months. If the Company terminates Mr. Mintz's employment
without cause, the Company is required to pay him an amount equal to the base
salary he would have been entitled to receive through the end of the current
term of the Mintz Employment Agreement. The Mintz Employment Agreement also
provides that until the later of the first anniversary of his termination and
the end of the current term of the employment agreement, Mr. Mintz may not
compete with or solicit employees from the Company.
Pursuant to the Employment Agreement between the Company and Dirk C. Grizzle
dated as of June 16, 1997 (the "Grizzle Employment Agreement"), Mr. Grizzle
serve as Chief Financial Officer of the Company. Mr. Grizzle receives a base
salary of $120,000 per year and is eligible to receive a bonus of up to 60% of
his base salary based upon the Company's earnings. Additionally, Mr. Grizzle
received 8 Class D Units in MBW LLC (which are non-voting) on June 30, 1997. The
Grizzle Employment Agreement provides for a one-year term, commencing on June
30, 1997. On June 30, 1998, the term will be automatically extended for an
additional six-month period on each day thereafter, the remaining term will
automatically be extended for an additional day so that the term remaining under
the Grizzle Employment Agreement will always be six months. If the Company
terminates Mr. Grizzle's employment without cause, the Company is required to
pay him an amount equal to the base salary he would have been entitled to
receive through the end of the current term of the Grizzle Employment Agreement.
The Grizzle Employment Agreement also provides that until the later of the first
anniversary of his termination and the end of the current term of the employment
agreement, Mr. Grizzle may not complete with or solicit employees from the
Company.
DIRECTOR COMPENSATION
Directors who are officers, employees or otherwise affiliates of the Company
do not receive compensation for their services as directors. Directors of the
Company are entitled to reimbursement of their reasonable out-of-pocket expenses
in connection with their travel to and attendance at meetings of the board of
directors or committees thereof. The Company does not intend to pay annual fees
or board attendance fees to directors of the Company who are not also officers,
employees or otherwise affiliates of the Company.
OWNERSHIP AND MANAGEMENT
The Company, a wholly-owned subsidiary of Holdings, which in turn is a
wholly-owned subsidiary of MBW LLC, was organized in November 1996 by Dartford,
majority owner MDC and Fenway to acquire the MRS. BUTTERWORTH'S syrup and
pancake mix business from Conopco. The Company is organized into three
operational groups which report to the President: the product management group,
the financial/ administrative group and the sales group. Dartford provides
day-to-day operational oversight to the Company including corporate and
financial planning, oversight of operations, production of business plans and
identification of possible acquisitions and advice with the financing thereof.
MDC provides strategic advice to the Company, particularly in connection with
the Company's financing needs and capital structure, including the financing of
future acquisitions, and identifies potential acquisition
62
<PAGE>
targets. Fenway also provides strategic advice to the Company and identifies
potential acquisition targets, however it is not required to provide any
services to the Company to receive its fee. There is some overlap in the
services provided by Dartford, MDC and Fenway, especially in connection with
strategic advice, including the Company's financing needs, capital structure and
the identification of potential acquisition targets. See "Certain Related
Transactions."
Dartford was formed by Managing Partner Ian R. Wilson, former Vice Chairman
of The Coca-Cola Company and former Chairman and Chief Executive Officer of
Castle & Cooke, Inc. (Dole Food Company, Inc.), to make investments in the
consumer food and beverage categories. Dartford's five partners have extensive
experience in building and managing leveraged investments in the food and
beverage industries. Over the past ten years, Dartford has successfully built
and managed a number of food companies including Wyndham Foods Inc. ("Wyndham"),
which Dartford grew to become the fourth largest cookie company in the United
States, Windmill Holding Corp. ("Windmill"), a branded baking products company,
Windy Hill Pet Food Company, Inc. ("Windy Hill"), a national supplier of branded
and private label pet food products, and Van de Kamp's, a leading frozen
convenience food company.
In September 1995, Dartford and Fenway organized Van de Kamp's to acquire
the VAN DE KAMP'S frozen seafood product line from The Pillsbury Company and to
serve as the foundation upon which to build a branded frozen convenience food
company. In May 1996, Van de Kamp's acquired MRS. PAUL'S frozen seafood business
from Campbell Soup Company and in July 1996 acquired the AUNT JEMIMA frozen
breakfast (waffles, pancakes and french toast) and CELESTE frozen pizza
businesses from The Quaker Oats Company. Van de Kamp's, under the direction of
Dartford, has assembled a 100 person sales, marketing and administrative
organization, moved and consolidated manufacturing facilities and reinvigorated
its brands with new product introductions and increased marketing support. Under
Dartford's management, Van de Kamp's has grown into a diversified branded frozen
convenience food company, with annual revenues increasing from approximately
$150 million at September 30, 1995 to approximately $400 million at December 31,
1996.
MDC is a private equity investment firm organized in 1984 to buy middle
market companies in partnership with management and build them through strategic
acquisition and internal growth. MDC currently manages three generations of
funds totaling approximately $500 million of contributed and committed capital.
MDC has developed, and committed itself to, an investment process that
identifies and then backs top managers in industries that are undergoing
consolidation or rapid internal growth. Over the past 13 years, MDC has made 30
separate acquisitions, of which 21 have been acquisition-oriented "buy and
builds" similar to the strategy contemplated by the Company, including DIMAC
Corporation, Eastman, Inc. and Outsourcing Solutions Inc.
Fenway is a second generation direct investment firm formed by Peter Lamm,
Richard Dresdale and Andrea Geisser. Together, the firm's principals have 50
years of experience building and managing direct investment portfolios. The
partners of Fenway have acquired and overseen investments in several food
processing and food distribution businesses, most recently as the majority owner
of Van de Kamp's in partnership with Dartford. Fenway focuses its investment
activities on acquiring interests in middle market companies with revenues
between $50 million and $500 million which offer leading market shares, strong
franchises, multiple profit centers and underlying growth.
Mr. Ferraro has over 23 years of grocery products experience, and Mr.
Willett has over 19 years of grocery products experience. Prior to joining MRS.
BUTTERWORTH'S, Messrs. Ferraro and Willett managed Heritage Brands, leading the
leveraged buyout and build-up of Campfire, Inc. Prior to joining Heritage
Brands, Mr. Ferraro spent 11 years with Borden, Inc., most recently as Vice
President of Sales for the Niche Grocery division. His experience with niche
grocery products extends back to his early career with RJR Nabisco Inc. and
Drackett Products, where he held a variety of marketing and sales positions.
Prior to joining Heritage Brands, Mr. Willett held a variety of senior
management positions at Borden, Inc. and The Kellogg Company.
63
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's securities by each person who beneficially owns more
than 5% of such securities, by directors and certain executive officers of the
Company, individually and by directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES
OF THE COMPANY'S OF THE COMPANY'S
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- --------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
5% STOCKHOLDERS:
Aurora Foods Holdings Inc.................................................. 1,000 100.0%
Community Corporate Center
445 Hutchinson Avenue
Columbus, Ohio 43235
All directors and executive officers as a group............................ 0 0.0%
</TABLE>
All of the outstanding capital stock of Holdings is held by MBW LLC. The
Class A and Class B common limited liability company interests ("MBW Common LLC
Securities") are the only classes of MBW LLC's limited liability company
interests that currently possess voting rights. As of August , 1997, there were
65,155 membership units of MBW Common LLC Securities. The following table sets
forth certain information regarding the beneficial ownership of MBW Common LLC
Securities by each person who beneficially owns more than 5% of such securities,
by directors and certain executive officers of the Company, individually, and by
the directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MBW COMMON MBW COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER LLC SECURITIES(1) LLC SECURITIES(1)
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
5% STOCKHOLDERS:
McCown De Leeuw & Co. III, L.P.(2)......................................... 43,250 66.4%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, California 94025
McCown De Leeuw & Co. III (Europe), L.P.(2)................................ 43,250 66.4%
c/o McCown De Leeuw & Co.
McCown De Leeuw & Co. III (Asia), L.P.(2).................................. 43,250 66.4%
c/o McCown De Leeuw & Co.
Gamma Fund, LLC(2)......................................................... 43,250 66.4%
c/o McCown De Leeuw & Co.
Fenway Partners Capital Fund, L.P.(3)...................................... 16,250 24.9%
152 West 57th Street
New York, New York 10019
California Public Employees Retirement System(4)........................... 10,000 15.3%
Lincoln Plaza
400 P Street
Sacremento, California 95814
Dartford Partnership L.L.C.(5)............................................. 3,750 5.8%
456 Montgomery Street, Suite 2200
San Francisco, California 94104
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MBW COMMON MBW COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER LLC SECURITIES(1) LLC SECURITIES(1)
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
OFFICERS AND DIRECTORS OF THE COMPANY:
Ian R. Wilson(5)........................................................... 3,750 5.8%
James B. Ardrey(5)......................................................... 3,750 5.8%
Ray Chung(5)............................................................... 3,750 5.8%
M. Laurie Cummings(5)...................................................... 3,750 5.8%
David E. De Leeuw(2)....................................................... 43,250 66.4%
Charles Ayres(2)........................................................... 43,250 66.4%
Tyler T. Zachem(2)......................................................... 43,250 66.4%
Peter Lamm(3).............................................................. 16,250 24.9%
Richard C. Dresdale(3)..................................................... 16,250 24.9%
Thomas J. Ferraro.......................................................... 200 0.3%
Dirk C. Grizzle............................................................ 150 0.2%
Alan Mintz................................................................. 100 0.2%
C. Gary Willett............................................................ 100 0.2%
All directors and executive officers as a group............................ 63,800 97.9
</TABLE>
- ------------------------
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition, of a security.
(2) Includes 29,974.9 membership units owned by McCown De Leeuw & Co. III, L.P.,
an investment partnership whose general partner is MDC Management Company
III, L.P. ("MDC III"), 2,128.0 membership units held by McCown De Leeuw &
Co. III (Europe), L.P., an investment partnership whose general partner is
MDC Management Company IIIA, L.P. ("MDC IIIA"), 498.7 membership units held
by McCown De Leeuw & Co. III (Asia), L.P., an investment partnership whose
general partner is MDC IIIA, and 648.4 membership units owned by Gamma Fund,
LLC, a California limited liability company. In addition, under an
irrevocable proxy, McCown De Leeuw & Co. III, L.P. has the power to vote all
of the LLC securities held by California Public Employees Retirement System.
The voting members of Gamma Fund, LLC are George E. McCown, David E. De
Leeuw, David E. King, Robert B. Hellman, Jr., Charles Ayres and Steven A.
Zuckerman, who are also the only general partners of MDC III and MDC IIIA.
Voting and dispositive decisions regarding the MBW Common LLC Securities are
made by Mr. McCown and Mr. De Leeuw, as Managing General partners of each of
MDC III and MDC IIIA, who together have more than the required
two-thirds-in-interest vote of the Managing General Partners necessary to
effect such decision on behalf of any such entity. Voting and dispositive
decisions regarding the MBW Common LLC Securities owned by Gamma Fund, LLC
are made by a vote or consent of a majority in number of the voting members
of Gamma Fund, LLC. Messrs. McCown, De Leeuw, King, Hellman, Ayres and
Zuckerman have no direct ownership of any shares of MBW Common LLC
Securities and disclaim beneficial ownership of any shares of MBW Common LLC
Securities except, in the case of Gamma Fund LLC, to the extent of their
proportionate partnership interests or membership interests.
(3) The general partner of Fenway is Fenway Partners, L.P., a Delaware limited
partnership, whose general partner is Fenway Partners Management Inc., a
Delaware corporation. Peter Lamm and Richard Dresdale are directors and
officers of Fenway Partners Management Inc., and as such may be deemed to
have the power to vote or dispose of MBW Common LLC Securities held by
Fenway. Each of Messrs. Lamm and Dresdale have no direct ownership of any
shares of MBW Common LLC Securities and disclaim beneficial ownership of any
shares of MBW Common LLC Securities except to the extent of their indirect
partnership intererests in Fenway.
(4) Under an irrevocable proxy, California Public Employees Retirement System
has granted McCown De Leeuw & Co. III, L.P. the right to vote all of the LLC
Securities it holds.
(5) Mr. Ian Wilson is the managing partner and Ms. M. Laurie Cummings and
Messrs. James B. Ardrey and Ray Chung are partners of Dartford, and as such
they may be deemed to have the power to vote or dispose of MBW Common LLC
Securities held by Dartford. Each of Ms. Cummings, Messrs. Wilson, Ardrey
and Chung disclaims the existence of a group and disclaims beneficial
ownership of MBW Common LLC Securities held by Dartford.
65
<PAGE>
CERTAIN RELATED TRANSACTIONS
DARTFORD MANAGEMENT SERVICES AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into a Management Services Agreement (the "Dartford Management Services
Agreement") with Dartford pursuant to which Dartford provides day-to-day
management oversight to the Company. Management services provided by Dartford
include, but are not limited to, corporate and financial planning, oversight of
operations including the production, distribution and sale of the Company's
products, production of business plans, identification of possible acquisitions
and advice with the financing thereof and definition and development of business
opportunities. The services provided by Dartford with relation to identification
of acquisition targets and financing overlap with some of the services provided
by MDC Management and Fenway. The annual management fee for these services will
be an amount based upon a percentage of consolidated annual net sales of MBW LLC
and its subsidiaries, provided that the fee shall be not less than $600,000 per
year. The net sales of MBW LLC are the same as those of the Company in that MBW
LLC's sole asset is its ownership of all of the outstanding common stock of
Holdings of the Company. In the event MBW LLC were to acquire additional assets
outside the Company, the basis for this management fee would be reevaluated;
however, the Dartford Management Services Agreement does not currently have any
provisions regarding any such change to the fee structure. The annual management
fee will be equal to 0.5% of net sales up to $250 million, an additional amount
equal to 0.375% of net sales above $250 million but less than $500 million and
an additional 0.25% of net sales above $500 million. The annual management fee
is subject to reduction (to an amount not less than $600,000) (i) upon the
Company, Holdings or MBW LLC hiring or appointing a Chief Executive Officer or
other senior executive with responsibility and authority for providing to the
Company the management services provided by Dartford under the Dartford
Management Services Agreement, (ii) upon the sale to the public by the Company,
Holdings or MBW LLC for its own account of shares of capital stock or limited
liability company interests pursuant to a registration statement filed with the
Commission or (iii) during the three months prior to termination of the Dartford
Management Services Agreement after a sale of substantially all of the equity
securities or assets of the Company, Holdings or MBW LLC. Dartford will also
receive a transaction fee for subsequent Acquisitions by the Company equal to
1.25% of the Acquisition Price ($2,750,000 for the LC Acquisition). Pursuant to
the Dartford Management Services Agreement, from the date thereof until the
earlier of June 30, 1998 and the termination of the Dartford Management Services
Agreement, Dartford will not organize and participate in a new investment group
formed for the purpose of effecting acquisitions unless (i) certain changes of
control have occurred in one of Dartford's three investment groups in existence
as of the date of the Dartford Management Services Agreement (a "Current
Investment Group") or (ii) the management services agreement between Dartford
and a member of a Current Investment Group is terminated. In addition, from the
date of the Dartford Management Services Agreement until June 30, 1998, Dartford
may not effect acquisitions through more than four investment groups. From and
after July 1, 1998 until the termination of the Dartford Management Services
Agreement, Dartford may organize and participate in a newly formed investment
group in the event of (i) certain changes of control in one of Dartford's
Current Investment Groups; (ii) the termination of one of the management
services agreements between Dartford and a member of a Current Investment Group;
and (iii) a new member joining Dartford and participating in a material respect
in one of Dartford's Current Investment Groups. The Dartford Management Services
Agreement expires on the earlier of the date six months following a sale of
substantially all of the equity securities or assets of the Company, Holdings or
MBW LLC and the fifth anniversary of the MBW Acquisition Closing Date and is
renewable annually thereafter unless terminated by either party. The Dartford
Management Services Agreement can also be terminated by either party prior to
the expiration of the term upon the occurrence of certain events. In the event
that the Dartford Management Services Agreement is terminated by the Company
(other than in the case of theft, wilful neglect and other limited circumstances
specified therein) Dartford shall be entitled to receive a severence payment
that can be no greater than 200% of the management fee in effect as of such
date. The Company believes that the terms of and fees paid for the management
services rendered are at least as favorable
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to the Company as those which could be negotiated with an unaffiliated third
party. In addition, for services rendered in connection with the MBW
Acquisition, including identification of the acquisition and negotiation of the
terms of the acquisition and the related services agreements, Dartford received
a fee of $250,000 upon the closing of the MBW Acquisition, was reimbursed
$32,655 for out-of-pocket expenses incurred in connection with the MBW
Acquisition and was issued 1,000 membership units of MBW Common LLC Securities.
MDC ADVISORY SERVICES AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into an Advisory Services Agreement (the "MDC Advisory Services
Agreement") with MDC Management Company III, L.P. ("MDC Management"), an
affiliate. Under the MDC Advisory Services Agreement, MDC Management provides
certain advisory functions primarily relating to the structuring of the
Company's bank financing and the capital structure of the Company,
identification and financing of future acquisitions, and general management
advice relating to the overall strategy and positioning of the Company. These
services overlap with some of the services provided by Dartford and Fenway. MDC
Management will receive an annual monitoring fee for providing these services
based upon a percentage of consolidated annual net sales of MBW LLC and its
subsidiaries, provided that the fee shall be not less than $250,000 per year.
The net sales of MBW LLC are the same as those of the Company in that MBW LLC's
sole asset is its ownership of all of the outstanding common stock of Holdings
of the Company. In the event MBW LLC were to acquire additional assets, the
basis for this management fee would be reevaluated. The annual monitoring fee
will be equal to $250,000 for net sales up to $120 million, an additional amount
equal to 0.12821% of net sales above $120 million but less than $250 million, an
additional amount equal to 0.125% of net sales above $250 million but less than
$500 million and an additional 0.083% of net sales above $500 million. MDC
Management will also receive a transaction fee for subsequent Acquisitions by
the Company equal to 0.65625% of the Acquisition Price ($1,444,000 for the LC
Acquisition). The MDC Advisory Services Agreement expires on the earlier of the
date six months following a sale of substantially all of the equity securities
or assets of the Company, Holdings or MBW LLC and the fifth anniversary of the
MBW Acquisition Closing Date and is renewable annually thereafter unless
terminated by the Company. The Company believes that the terms of and fees paid
for the professional services rendered are at least as favorable to the Company
as those which could be negotiated with an unaffiliated third party. In
addition, upon the closing of the MBW Acquisition, MDC Management received a
one-time fee of $1,250,000 for financial advisory services provided to the
Company in connection therewith, including negotiation and structuring of the
Company's bank financing and advising on the capital structure of the Company
(including the issuance of the Other Notes).
FENWAY AGREEMENT
Concurrently with the consummation of the MBW Acquisition, the Company
entered into an agreement (the "Fenway Agreement") with Fenway, an affiliate. As
an incentive to bring acquisition candidates to the Company, under the Fenway
Agreement, Fenway will receive a transaction fee for subsequent Acquisitions
($481,000 for the LC Acquisition) by the Company equal to 0.21875% of the
Acquisition Price. However, Fenway is not required to introduce such acquisition
candidates nor provide any services to the Company to receive the transaction
fee. The Company believes that the terms of and fees paid thereunder are at
least as favorable to the Company as those which could be negotiated with an
unaffiliated third party.
MBW AGREEMENTS
Concurrently with the consummation of the MBW Acquisition, the Company
entered into agreements with Thomas J. Ferraro, President of the Company, and C.
Gary Willett, Executive Vice President of the Company, whereby the officers
executed promissory notes in favor of the Company in exchange for monies
borrowed to assist in the capitalization of their limited liability interests
held with investors.
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The promissory notes mature December 31, 1999 with required annual payments.
Interest is due and payable quarterly at the rate of 8.00% per annum. The
balance currently outstanding on the Mr. Ferraro's and Mr. Willett's promissory
notes are $60,000 and $50,000, respectively. The Company believes that the terms
of these notes and the interest paid thereunder are at least as favorable to the
Company as those which these persons could have negotiated with an unaffiliated
third party.
LOG CABIN AGREEMENTS
Concurrently with the consummation of the LOG CABIN Acquisition, the Company
entered into agreements with Alan Mintz, Vice President of Sales, and Dirk
Grizzle, Chief Financial Officer, whereby the officers executed promissory notes
in favor of the Company in exchange for monies borrowed to assist in the
capitalization of the limited liability interests held with investors. The
promissory notes mature July 1, 2000 with required annual payments. Interest is
due and payable quarterly at the rate of 8.00% per annum. The balances currently
outstanding on the promissory notes are $50,000 for Alan Mintz and $75,000 for
Dirk Grizzle. The Company believes that the terms of these notes and the
interest paid thereunder are at least as favorable to the Company as those which
these persons could have negotiated with an unaffiliated third party.
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DESCRIPTION OF SENIOR CREDIT FACILITIES
The description set forth below is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Company's Senior Credit Facilities, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
In connection with the MBW Acquisition, the Company entered into a Credit
Agreement with Chase Manhattan and various lenders providing for senior secured
credit facilities. In connection with such financing, Chase Manhattan acts as
Administrative Agent and CSI acted as Arranging Agent. In connection with the LC
Acquisition, the Senior Credit Facilities were amended to provide as follows:
The Senior Credit Facilities consist of (i) a senior secured Term Facility
in a principal amount of $40.0 million and (ii) a senior secured Revolving
Facility providing for revolving loans to the Company and the issuance of
letters of credit for the account of the Company, in an aggregate principal and
stated amount at any time not to exceed $60.0 million (of which not more than
$5.0 million may be represented by letters of credit).
Loans and letters of credit under the Revolving Facility will be available
at any time through the final maturity date on December 31, 2003. The Term
Facility will have a final maturity date of December 31, 2003, and will amortize
in quarterly payments of $1.125 million through December 31, 1999 with such
quarterly payments increasing annually in the amount of $250,000 per payment for
each year thereafter until the final maturity date.
The Company is required to make mandatory prepayments on the Senior Credit
Facilities under certain circumstances, including upon certain asset sales,
issuance of debt securities or issuance of equity securities to persons other
than the Equity Investors. The Company will also be required to make prepayments
on the Senior Credit Facilities and permanently reduce commitments under the
Revolving Facility in an amount equal to 50% of the Company's annual trailing
Consolidated Excess Cash Flow commencing with the fiscal year ending in December
1998 and thereafter and upon receipt of cash proceeds from property and casualty
insurance or condemnation awards. At the Company's option, subject to certain
requirements, loans may be prepaid, and revolving credit commitments or letters
of credit may be permanently reduced, in whole or in part at any time without
premium or penalty.
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed by Holdings and any future domestic
subsidiaries of the Company (collectively, the "Guarantors"). In addition, the
Senior Credit Facilities are secured by first priority or equivalent security
interests in all capital stock of the Company (including all the capital stock
of, or other equity interest in, future domestic subsidiaries of the Company)
and the tangible and intangible assets of the Company and the Guarantors.
At the Company's option the interest rate per annum applicable to the
Revolving Facility will be either the rate (grossed-up for maximum statutory
reserve requirements for eurocurrency liabilities) at which eurodollar deposits
for one, two, three or six months (as selected by the Company) are offered to
Chase Manhattan in the interbank eurodollar market in the approximate amount of
Chase Manhattan's share of the relevant Loan (the "Adjusted Eurodollar Rate")
plus a margin of 2.25% (the "Applicable Eurodollar Rate Margin") or the Base
Rate plus a margin of 1.25%. The margin is based upon the Company's ratio of
consolidated total debt to consolidated EBITDA. The Base Rate is the higher of
(i) the rate of interest publicly announced by Chase Manhattan as its prime rate
in effect at its principal office in New York City and (ii) the federal funds
effective rate plus 0.5%.
At the Company's option, the interest rate per annum applicable to loans
under the Term Facility will be either the Adjusted Eurodollar Rate plus a
margin of 2.25% or the Base Rate plus a margin of 1.25%. The Base Rate is the
higher of (i) the rate of interest publicly announced by Chase Manhattan as its
prime
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rate in effect at its principal office in New York City, (ii) the federal funds
effective rate plus 0.5%, and (iii) the secondary market rate for certificates
of deposit (grossed-up for maximum statutory reserve requirements) plus 1%.
The Company pays a per annum fee equal to 0.5% on the undrawn portion of the
commitments in respect of the Revolving Facility and a per annum fee on the face
amount of all outstanding letters of credit equal to the Applicable Eurodollar
Rate Margin then in effect with respect to loans under the Revolving Facility
bearing interest based upon the Eurodollar Rate. The per annum fee is also based
upon the Company's ratio of consolidated total debt to consolidated EBITDA.
The Senior Credit Facilities contain a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into leases,
guarantees, investments or acquisitions, engage in mergers or consolidations,
make capital expenditures, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. In addition, under
the Senior Credit Facilities, the Company is required to comply with specified
ratios and tests, including minimum interest coverage, minimum fixed charge
coverage and maximum leverage ratios and a limitation on capital expenditures.
An event of default under the Senior Credit Facilities will occur (i) if the
Company fails to make payments under the Senior Credit Facilities or, in certain
circumstances, under other outstanding indebtedness; (ii) if the Company
breaches the financial covenants contained in the Senior Credit Facilities;
(iii) if the Company breaches the warranties contained in the Senior Credit
Facilities; (iv) in the event of the bankruptcy, insolvency or reorganization of
the Company; (v) if any judgment or attachment involving, in an individual case
an amount in excess of $1,000,000 or, in the aggregate in excess $2,000,000,
shall be entered against Holdings or the Company and shall remain undischarged
on unstayed for a period of 60 days; (vi) if any judgment or decree of
dissolution entered against the Company; (vii) if there occurs certain specified
ERISA events; (viii) if the Company undergoes a "change in control" as described
below; (ix) if the MBW Co-Pack Agreement, the Log Cabin Co-Pack Agreement, the
Red Wing Co-Pack Agreement or the Flavor Supply Agreement are terminated, and
the Company fails to make alternate arrangements satisfactory to the Lenders;
(x) a failure to comply with the subordination provisions contained in the
Senior Credit Facilities; or (xi) under certain other circumstances customary
for a transaction of this type. An Event of Default under the Indentures will
occur if any of the above occur and an amount in excess of $5 million is
accelerated under the terms of the Senior Credit Facilities and such default is
not cured or rescinded within a 10 day period. See "Description of Notes--Events
of Default." As noted above, an event of default under the Senior Credit
Facilities will occur if there is a change in control in the Company.
A change in control will be deemed to have occurred if (i) prior to the
consummation of any initial public offering of the common stock of Holdings, (x)
MBW LLC ceases to own directly 100% of the outstanding capital stock of Holdings
not including those shares of common stock of Holdings, distributed pursuant to
employee stock plans, (y) MDC, Fenway and Dartford cease to beneficially own in
the aggregate at least 51% of the voting securities of the Company or (z) any
person (other than MDC, Fenway or Dartford), including a "group" within the
meaning of Sections 13(d) and 14(d) (2) of the Exchange Act which includes such
person, acquires beneficial ownership of more than 30% of the voting securities
of the Company; (ii) Holdings shall at any time cease to own 100% of the
outstanding capital stock of the Company; or (iii) after the consummation of any
initial public offering of the common stock of Holdings, (x) MDC, Fenway and
Dartford beneficially own in the aggregate a lesser percentage of the voting
securities of the Company than any other person, including a "group" within the
meaning of Sections 13(d) and 14(d) (2) of the Exchange Act which includes such
person, (y) there is a change in composition of a majority of the Board of
Directors of the Company, (z) any person (other than MDC, Fenway or Dartford),
including a "group" within the meaning of Sections 13(d) and 14(d) (2) of the
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Exchange Act which includes such person, acquires beneficial ownership of more
than 25% of the voting securities of the Company. The change of control
provisions contained in the Indenture differ from those contained in the Senior
Credit Facilities with respect to those changes in percentage ownership and the
composition of the Board of Directors that trigger such provisions. See
"Description of Notes--Change of Control."
The Senior Credit Facilities also contain provisions that prohibit any
modification of the Indentures in any manner adverse to the banks, financial
institutions and other entities under the Senior Credit Facilities (the
"Lenders") and that limit the Company's ability to refinance the Notes without
the consent of such Lenders
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DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued, and the Old Notes were issued under an
indenture dated as of July 1, 1997 (the "Indenture") between the Company and
Wilmington Trust Company, as Trustee (the "Trustee"). The Old Notes and the New
Notes shall be collectively referred to as the "Notes." The terms and conditions
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date of the Indenture. The following statements are summaries of the provisions
of the Notes and the Indenture and do not purport to be complete. Such summaries
make use of certain terms defined in the Indenture and are qualified in their
entirety by express reference to the Indenture. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions." A copy of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, except that, at the
option of the Company, payment of interest may be made by check mailed to the
address of the holders as such address appears in the Note register. Any Old
Notes that remain outstanding after the completion of the Exchange Offer,
together with the New Notes issued in connection with the Exchange Offer, will
be treated as a single class of securities under the Indenture. See "The
Exchange Offer" and "Old Notes Exchange and Registration Rights Agreement."
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $100.0 million aggregate principal amount, and will mature on
February 15, 2007. Each Note will bear interest at the rate per annum shown on
the front cover of this Prospectus from the date of issuance, or from the most
recent date to which interest has been paid or provided for, payable
semi-annually on February 15 and August 15 of each year commencing February 15,
1998 to holders of record at the close of business on the February 1 or August 1
immediately preceding the interest payment date.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable at the option of the
Company prior to February 15, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
the registered address of each holder of Notes to be redeemed, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12 month period commencing on February 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ---------------------------------- ------------------
<S> <C>
2002.............................. 104.9375%
2003.............................. 103.2917%
2004.............................. 101.6458%
2005 and thereafter............... 100.0000%
</TABLE>
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In addition, at any time and from time to time prior to February 15, 2000,
the Company may redeem up to $35.0 million of the aggregate principal amount of
Notes with the cash proceeds of one or more Equity Offerings received by, or
invested in, the Company at a redemption price (expressed as a percentage of
principal amount) of 109.875%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least $65.0 million of the aggregate principal amount
of the Notes remain outstanding after each such redemption.
At any time on or prior to February 15, 2002, the Notes may also be redeemed
as a whole at the option of the Company upon the occurrence of a Change of
Control, upon not less than 30 nor more than 60 days prior notice (but in no
event more than 90 days after the occurrence of such Change of Control) mailed
by first-class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at February 15, 2002 (such redemption price being described under "--Optional
Redemption") plus (2) all required interest payments due on such Note through
February 15, 2002, computed using a discount rate equal to the Treasury Rate
plus 50 basis points over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to February 15, 2002; provided, however, that if
the period from the Redemption Date to February 15, 2002 is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note.
RANKING
The payment of Indebtedness evidenced by, and all other obligations in
respect of, the Notes is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash or Cash Equivalents when due of
all Senior Indebtedness of the Company. However, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "Defeasance" below is not subordinate to any Senior Indebtedness or
subject to the restrictions described herein. At June 28, 1997, on a pro forma
basis after giving effect to the LC Acquisition, the Company would have had
$87.0 million of Senior Indebtedness outstanding (excluding unused revolving
credit commitments of $13.0 million under the Senior Credit Agreement). Although
the Indenture contains limitations on the amount of additional Indebtedness that
the Company may Incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness."
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"Senior Indebtedness" means the principal of, premium (if any), and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, the Bank Indebtedness and all other Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter issued, unless,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness will not include (i) any obligation of the
Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (iii) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations or (v) any Capital Stock.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company, including the Other Notes. The Company has agreed
in the Indenture that it will not incur, directly or indirectly, any
indebtedness that is subordinate or junior in ranking in any respect to Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinate or junior to Secured
Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any), or interest on, or
liquidated damages with respect to, or make any payment on account of any other
obligations with respect to, the Notes or make any deposit pursuant to the
provisions described under "Defeasance" below and may not otherwise purchase or
retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness
is not paid when due in cash or Cash Equivalents or (ii) any other default on
Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash or Cash Equivalents. However, the
Company may pay any such amounts without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay any
amounts in respect of the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Company may resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360 day period,
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irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents of the Senior Indebtedness before the holders of the Notes are
entitled to receive any payment, and until the Senior Indebtedness is paid in
full in cash or Cash Equivalents, any payment or distribution to which holders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of the Senior Indebtedness as their interests may appear. If a
distribution is made to holders of the Notes that, due to the subordination
provisions, should not have been made to them, such holders are required to hold
it in trust for the holders of Senior Indebtedness and pay it over to them as
their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Senior
Subordinated Indebtedness.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of the Notes will have the right to require the Company
to repurchase all or any part of such holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date):
(i) prior to the first public offering of Voting Stock of the Company,
Holdings or MBW LLC, as the case may be, the Permitted Holders cease to be
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of majority voting power of the
Voting Stock of the Company, whether as a result of issuance of securities
of the Company, Holdings or MBW LLC, as the case may be, any merger,
consolidation, liquidation or dissolution of the Company, Holdings or MBW
LLC, as the case may be, any direct or indirect transfer of securities by
any Permitted Holder or otherwise (for purposes of this clause (i) and
clause (ii) below, the Permitted Holders will be deemed to beneficially own
any Voting Stock of a Person (the "specified corporation") held by any other
Person (the "parent corporation") so long as the Permitted Holders
beneficially own, directly or indirectly, a majority of the voting power of
the Voting Stock of the parent corporation);
(ii) following the first public offering of Voting Stock of the Company,
Holdings or MBW LLC, as the case may be, any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company, Holdings or MBW LLC, as the case may be;
provided that the
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Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company, Holdings or MBW LLC, as the
case may be, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company, Holdings or MBW LLC, as
the case may be, (for purposes of this clause (ii), such other person shall
be deemed to beneficially own any Voting Stock of a specified corporation
held by a parent corporation, if such other person "beneficially owns" (as
defined in this clause (ii)), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation); or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder of record of the Notes with a copy to the Trustee stating: (i) that a
Change of Control has occurred and that such holder has the right to require the
Company to purchase such holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on a record
date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts and financial information concerning such
Change of Control; (iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (iv) the
procedures determined by the Company, consistent with the Indenture, that a
holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Agreement. The change
of control provisions contained in the Senior Credit Facilities differ from
those contained in the Indenture with respect to those changes in percentage
ownership and the composition of the Board of Directors that will trigger an
event of default under such provisions. See "Description of Senior Credit
Facilities." Future Senior Indebtedness of the Company and its Subsidiaries may
contain prohibitions of certain events that would constitute a Change of Control
or require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the Senior Credit Agreement
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generally prohibit the Company's prepayment of the Notes prior to their
scheduled maturity. Consequently, if the Company is not able to prepay the Bank
Indebtedness and any other Senior Indebtedness containing similar restrictions
or obtain requisite consents or waivers, as described above, the Company will be
unable to fulfill its repurchase obligations if holders of Notes exercise their
repurchase rights following a Change of Control, thereby resulting in a default
under the Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any of its Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company and any of its Subsidiaries may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Subsidiaries may Incur the following Indebtedness: (i) Bank Indebtedness
provided that the aggregate principal amount of Indebtedness Incurred pursuant
to this clause (i) does not exceed an amount outstanding at any time equal to
$60.0 million less the aggregate amount of permanent reductions of commitments
to extend credit thereunder and repayments of principal thereof (without
duplication of repayments required as a result of such reductions of
commitments); (ii) Indebtedness (A) of the Company to any Wholly-Owned
Subsidiary and (B) of any Subsidiary to the Company or any Wholly-Owned
Subsidiary; (iii) Indebtedness represented by the Notes, any Indebtedness (other
than the Indebtedness described in clauses (i)-(ii) above) outstanding on the
date of the Indenture and any Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iii) or this paragraph (b); (iv)
Indebtedness represented by the Note Guarantees and Guarantees of Indebtedness
Incurred pursuant to clause (i) above; (v) Indebtedness under Currency
Agreements and Interest Rate Agreements which are entered into for bona fide
hedging purposes of the Company or its Subsidiaries (as determined in good faith
by the Board of Directors or senior management of the Company) and correspond in
terms of notional amount, duration, currencies and interest rates, as
applicable, to Indebtedness of the Company or its Subsidiaries Incurred without
violation of the Indentures or to business transactions of the Company or its
Subsidiaries on customary terms entered into in the ordinary course of business;
(vi) Indebtedness of the Company attributable to Capitalized Lease Obligations,
or Incurred to finance the acquisition, construction or improvement of fixed or
capital assets, or constituting Attributable Indebtedness in respect of
Sale/Leaseback Transactions, in an aggregate principal amount at any one time
outstanding not in excess of $5.0 million; and (vii) Indebtedness of the Company
or any of its Subsidiaries (which may comprise Bank Indebtedness) in an
aggregate principal amount at any time outstanding not in excess of $10.0
million.
(c) Notwithstanding any other provision of this covenant, the Company shall
not Incur any Indebtedness (i) pursuant to paragraph (b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem, defease,
retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations or (ii) pursuant to paragraph (a) or (b) if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
(d) The Company shall not Incur any Secured Indebtedness which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such Secured Indebtedness for so long
as such Secured Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (A) dividends or distributions payable in its Capital Stock
(other than Disqualified
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Stock) and (B) dividends or distributions payable to the Company or another
Subsidiary (and, if such Subsidiary is not a Wholly-Owned Subsidiary, to its
other stockholders on a PRO RATA basis), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company or any Subsidiary
held by Persons other than the Company or another Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment"), if
at the time the Company or such Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company could not Incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) or made subsequent to
the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the Issue Date
to the end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment as to which financial results are available (but in no event
more than 135 days prior to the date of such Restricted Payment) (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other cash
contributions to its capital subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries); (C)
aggregate Net Cash Proceeds from the issue or sale of its Capital Stock to an
employee stock ownership plan or similar trust, provided, however, that if such
plan or trust Incurs any Indebtedness to or Guaranteed by the Company to finance
the acquisition of such Capital Stock, such aggregate amount shall be limited to
any increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; and (D) the amount
by which Indebtedness of the Company or its Subsidiaries is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or
its Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or other
property, distributed by the Company or any Subsidiary upon such conversion or
exchange).
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries); provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale shall be excluded from clause (3)(B) of paragraph (a); (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under "Limitation on Sales of Assets and
Subsidiary Stock" below; provided, however, that such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments; (iv)
dividends paid within 60 days after the date of declaration if at such date of
declaration
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such dividend would have complied with this provision; provided, however, that
such dividend shall be included in the calculation of the amount of Restricted
Payments; (v) payment of dividends or other distributions by the Company for the
purposes set forth in clauses (A) through (C) below; provided, however, that any
such dividend or distribution described in clauses (A) and (B) will be excluded
in the calculation of the amount of Restricted Payments and any such dividend or
distribution described in clause (C) will be included in the calculation of the
amount of Restricted Payments: (A) in amounts equal to the amounts required for
Holdings and MBW LLC to pay franchise taxes and other fees required to maintain
its legal existence and provide for audit, accounting, legal and other operating
costs of up to $500,000 per fiscal year; (B) in amounts equal to amounts
required for Holdings and MBW LLC to pay Federal, state and local income taxes
to the extent such income taxes are attributable to the income of the Company
and its Subsidiaries; and (C) in amounts equal to amounts expended by the
Company, Holdings or MBW LLC to repurchase Capital Stock of the Company,
Holdings or MBW LLC owned by employees (including former employees) of the
Company or its Subsidiaries or their assigns, estates and heirs; provided that
the aggregate amount paid, loaned or advanced pursuant to this clause (C) shall
not, in the aggregate, exceed the sum of $3.0 million plus any amounts
contributed by MBW LLC or Holdings to the Company as a result of resales of such
repurchased shares of Capital Stock; or (vi) any repurchase of equity interest
deemed to occur upon exercise of stock options if such equity interests
represent a portion of the exercise price of such options.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Company
shall not, and shall not permit any of its Subsidiaries to, create or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligation
owed to the Company, (ii) make any loans or advances to the Company or (iii)
transfer any of its property or assets to the Company; except: (A) any
encumbrance or restriction pursuant to an agreement in effect on the Issue Date,
including those arising under the Senior Credit Documents; (B) any encumbrance
or restriction with respect to a Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by a Subsidiary prior to the date on which such
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary was acquired by the Company); (C)
any encumbrance or restriction with respect to a Subsidiary pursuant to an
agreement effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clauses (A) or (B) or this clause (C) or contained in
any amendment, supplement or modification (including an amendment and
restatement) to an agreement referred to in clauses (A) or (B) or this clause
(C); provided, however, that the encumbrances and restrictions contained in any
such refinancing agreement or amendment taken as a whole are no less favorable
to the holders of the Notes in any material respect than encumbrances and
restrictions contained in such agreements; (D) in the case of clause (iii), any
encumbrance or restriction (1) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is subject to a
lease, license, or similar contract, (2) by virtue of any transfer of, agreement
to transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Subsidiary not otherwise prohibited by the Indentures, or
(3) contained in security agreements securing Indebtedness of a Subsidiary to
the extent such encumbrance or restrictions restrict the transfer of the
property subject to such security agreements; (E) any such restriction imposed
by applicable law; (F) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition; and (G) purchase obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired.
LIMITATION ON SALES OF ASSETS. (a) The Company shall not, and shall not
permit any Subsidiary to, make any Asset Disposition unless (i) the Company or
such Subsidiary receives consideration (including by way of relief from, or by
any other Person assuming sole responsibility for, any liabilities,
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contingent or otherwise) at the time of such Asset Disposition at least equal to
the fair market value of the shares and assets subject to such Asset
Disposition, (ii) at least 85% of the consideration thereof received by the
Company or such Subsidiary is in the form of cash and (iii) an amount equal to
100% of the Net Available Cash from such Asset Disposition is applied by the
Company (or such Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one year
after the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Subsidiary elects, to reinvest in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary with Net Available Cash
received by the Company or another Subsidiary) within one year after the later
of the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to purchase
the Other Notes pursuant and subject to the conditions of the Series A Indenture
to the holders of the Other Notes at a purchase price of 100% of the principal
amount thereof plus accrued and unpaid interest to the purchase date; and (D)
fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to make an offer to
purchase Notes pursuant and subject to the conditions of the Indenture to the
Noteholders at a purchase price of 100% of the principal amount thereof plus
accrued and unpaid interest to the purchase date; and (E) fifth, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A), (B), (C) and (D), to (x) acquire Additional Assets (other than
Indebtedness and Capital Stock) or (y) prepay, repay or purchase Indebtedness of
the Company (other than Indebtedness owed to an Affiliate of the Company and
other than Disqualified Stock of the Company) or Indebtedness of any Subsidiary
(other than Indebtedness owed to the Company or an Affiliate of the Company), in
each case described in this clause (E) within one year from the receipt of such
Net Available Cash or, if the Company has made an Offer pursuant to clause (C),
six months from the date such Offer is consummated; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions, the Company and
its Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
covenant at any time exceed $1.0 million. The Company shall not be required to
make an offer for Notes pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clauses (A)
and (B)) is less than $10.0 million for any particular Asset Disposition (which
lesser amounts shall be carried forward for purposes of determining whether an
offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness (other than Disqualified Stock) of the
Company or any Subsidiary and the release of the Company or such Subsidiary from
all liability on such Indebtedness in connection with such Asset Disposition and
(y) securities received by the Company or any Subsidiary of the Company from the
transferee that are promptly converted by the Company or such Subsidiary into
cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(D), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes at a purchase price
of 100% of their principal amount plus accrued interest to the purchase date in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price of
the Notes tendered pursuant to the offer is
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less than the Net Available Cash allotted to the purchase of the Notes, the
Company will apply the remaining Net Available Cash in accordance with clause
(a)(iii)(E) above.
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will
not permit any Subsidiary to, directly or indirectly, enter into or conduct any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $5.0 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Subsidiary, as the case may be, from
a financial point of view.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments" (and in the case of Permitted Investments,
only those described in clauses (v), (vi) and (ix) of the definition of
Permitted Investments), (ii) the performance of the Company's or Subsidiary's
obligations under any employment contract, collective bargaining agreement,
employee benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the ordinary course of business, (iii)
payment of compensation to, and indemnity provided on behalf of, employees,
officers, directors or consultants (excluding the Management Services Agreement)
in the ordinary course of business, (iv) maintenance in the ordinary course of
business of benefit programs or arrangements for employees, officers or
directors, including vacation plans, health and life insurance plans, deferred
compensation plans, and retirement or savings plans and similar plans, (v) any
transaction between the Company and a Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries or (vi) the payment of certain fees under the
Management Services Agreement as in effect on the Issue Date.
LIMITATION ON SALE OF SUBSIDIARY CAPITAL STOCK. The Company (i) will not,
and will not permit any Subsidiary to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Subsidiary to any Person (other
than to the Company or a Wholly-Owned Subsidiary) and (ii) will not permit any
Subsidiary to issue any of its Capital Stock (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly-Owned Subsidiary; provided, however, that
the foregoing shall not prohibit such conveyance, sale, lease or other
disposition of all the Capital Stock of a Subsidiary if the net cash proceeds
from such transfer, conveyance, sale, lease, other disposition or issuance are
applied in accordance with the covenant described above under "-- Limitation on
Sales of Assets."
SEC REPORTS. Notwithstanding that the Company may not be required to be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the Commission, and within 15 days after such
reports are filed, provide the Trustee and the holders (at their addresses as
set forth in the register of Notes) with the annual reports and the information,
documents
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and other reports which are otherwise required pursuant to Section 13 and 15(d)
of the Exchange Act. Such requirements may also be satisfied, prior to August
30, 1997, with the filing with the Commission of a registration statement under
the Securities Act that contains the foregoing information (including financial
statements) and by providing copies thereof to the Trustee and the holders. In
addition, following the registration of the common stock of the Company pursuant
to Section 12(b) or 12(g) of the Exchange Act, the Company shall furnish to the
Trustee and the holders, promptly upon their becoming available, copies of the
Company's annual report to stockholders and any other information provided by
the Company to its public stockholders generally.
FUTURE NOTE GUARANTORS. The Company will cause each Subsidiary which Incurs
Indebtedness or which is a guarantor of Indebtedness Incurred pursuant to clause
(b)(i) of the covenant described under "--Limitation on Indebtedness" to execute
and deliver to the Trustee a Note Guarantee pursuant to which such Subsidiary
will Guarantee, jointly and severally, to the holders and the Trustee, subject
to subordination provisions substantially the same as those described above, the
full and prompt payment of the Notes in the Indenture. Each Note Guarantee will
be limited in amount to an amount not to exceed the maximum amount that can be
Guaranteed by that Subsidiary without rendering the Note Guarantee, as it
relates to such Subsidiary, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, engage in any business, other than the food business and such
other business activities which are incidental or related thereto.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indentures;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been Incurred by the Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur at least an additional $1.00 of Indebtedness pursuant to
paragraph (a) of "--Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company will have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (1) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company or another Wholly-Owned
Subsidiary of the Company and (2) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
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EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Merger
and Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes which shall
constitute an Event of Default under clause (ii) above), other than "--Merger
and Consolidation", (v) the failure by the Company to comply for 60 days after
notice with its other agreements contained in the Indentures, (vi) Indebtedness
of the Company or any Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated exceeds
$5.0 million and such default shall not have been cured or such acceleration
rescinded within a 10-day period (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $5.0 million (to the extent not
covered by insurance) is rendered against the Company or a Significant
Subsidiary and such judgment or decree shall remain undischarged or unstayed for
a period of 60 days after such judgment becomes final and non- appealable (the
"judgment default provision") or (ix) the failure of any Note Guarantee to be in
full force and effect (except as contemplated by the terms thereof) or the
denial or disaffirmation by any Note Guarantor of its obligations under the
Indenture or any Note Guarantee if such default continues for 10 days. However,
a default under clauses (iv) and (v) will not constitute an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and accrued
and unpaid interest shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60 day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee,
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however, may refuse to follow any direction that conflicts with law or the
Indentures or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indentures, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption or repurchase of any Note or change the time at which any Note may be
redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of the Notes, (vii) impair the right of any holder to receive payment
of principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes or (viii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f) (2) (B) of
the Code), to add Guarantees with respect to the Notes, to secure the Notes, to
add to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indentures Act. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
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The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Subsidiaries and the judgment default provision described under
"Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "Certain Covenants--Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Subsidiaries), or (viii) or (ix) under "Events of Default" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
Wilmington Trust Company is to be the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Subsidiary in a
Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary
as a result of the acquisition of such Capital Stock by the Company or another
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Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Subsidiary; provided, however, that, in the case
of clauses (ii) and (iii), such Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who is a director or
officer (a) of such Person, (b) of any Subsidiary of such Person or (c) of any
Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock", "-- Limitation on Restricted Payments"
and "--Limitation on Affiliate Transactions" only, "Affiliate" shall also mean
any beneficial owner of shares representing 5% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or a Wholly-Owned Subsidiary or by the Company or a
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) the sale of other
assets so long as the fair market value of the assets disposed of pursuant to
this clause (iv) does not exceed $1.0 million in the aggregate in any fiscal
year and $5.0 million in the aggregate prior to February 15, 2007, (v) for the
purposes of the covenant described under "Certain Covenants--Limitation on Sales
of Assets" only, a disposition subject to the covenant described under "--
Limitation on Restricted Payments" and (vi) the disposition of all or
substantially all of the assets of the Company in the manner permitted pursuant
to the provisions described under the caption "--Merger and Consolidation" or
any disposition that constitutes a Change of Control pursuant to the Indenture.
"Attributable Indebtedness" in respect of a Sale/ Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to Preferred Stock multiplied by the
amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Documents and any Indebtedness that is incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) Indebtedness under such Senior Credit Documents
including Indebtedness that refinances such Indebtedness, as amended from time
to time, including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for postfiling
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interest is allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof (including, without limitation, cash collateralization of letters of
credit).
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard &
Poor's Ratings Group, or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500.0 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above; (v)
commercial paper rated at the time of acquisition thereof at least "A-2" or the
equivalent thereof by Standard & Poor's Ratings Group or "P-2" or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Certificated Securities" means registered Notes issued in certificated
form.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Aurora Foods Inc., a Delaware corporation (formerly MBW
Foods Inc.).
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, to the extent deducted in calculating such Consolidated
Net Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense, in each case for such period,
(v) other non-cash charges reducing Consolidated Net Income (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period or amortization of a prepaid cash expense that
was paid in a prior period), and (vi) for the period ending on the first
anniversary of the Issue Date only, non-recurring relocation and start-up
expenses not in excess of $3 million, in each case for such period, and minus,
to the extent not already deducted in
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calculating Consolidated Net Income, (i) the aggregate amount of "earnout"
payments paid in cash during such period in connection with acquisitions
previously made by the Company and (ii) non-cash items increasing Consolidated
Net Income for such period.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any of its Subsidiaries
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period the Company or any of its Subsidiaries shall have made any Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
attributable to any Indebtedness of the Company or any of its Subsidiaries
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Indebtedness after
such sale), (3) if since the beginning of such period the Company or any of its
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Subsidiary of the Company (or any Person which becomes a Subsidiary of the
Company) or an acquisition of assets, including any Investment in a Subsidiary
of the Company or any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Indebtedness and
including the pro forma expenses and cost reductions calculated on a basis
consistent with Regulation S-X of the Securities Act) as if such Investment or
acquisition occurred on the first day of such period and (4) if since the
beginning of such period any Person (that subsequently became a Subsidiary of
the Company or was merged with or into the Company or any Subsidiary of the
Company since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (2) or (3) above if made by the Company or a
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Subsidiaries, plus, to the extent not included in
such interest expense, (i) interest expense
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attributable to Capitalized Lease Obligations and imputed interest with respect
to Attributable Indebtedness, (ii) amortization of debt discount and debt
issuance cost (other than those debt discounts and debt issuance costs incurred
on the MBW Acquisition Closing Date and the Issue Date), (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Currency Agreements and Interest Rate Agreements
(including amortization of fees), (viii) the product of (A) all Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary multiplied by (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined Federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Subsidiary, except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income;(ii) any net income (loss)
of any person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Subsidiary during such period to the Company
or another Subsidiary as a dividend (subject, in the case of a dividend that
could have been made to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) any extraordinary gain
or loss; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"CSI" means Chase Securities Inc.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
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"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $5.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indentures.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to 123 days after the Stated
Maturity of the Notes.
"Equity Investors" means Dartford Partnership L.L.C, Fenway Partners Capital
Fund, L.P., McCown DeLeeuw & Co. III, L.P., a California limited partnership,
McCown DeLeeuw & Co. III (Europe), a Bermuda limited partnership, L.P., McCown
DeLeeuw III (Asia), L.P., a Bermuda limited partnership, Gamma Fund, LLC, a
California limited liability Company, Bain Securities, Inc., Squam Lake
Investors II, L.P., Thomas J. Ferraro and C. Gary Willett.
"Equity Offering" means any public or private sales of equity securities
(excluding Disqualified Stock) of the Company, Holdings or MBW LLC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the Prospectus and the accompanying Letter of
Transmittal.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP as in effect on the Issue Date.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of any other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holdings" means Aurora Holdings Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a
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Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (other than contingent or "earn-out" payment obligations
and Trade Payables and accrued expenses incurred in the ordinary course of
business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons, (vii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, (viii) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends) and (ix) to the extent not otherwise included
in this definition, obligations of such Person under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above as such amount would be reflected on a balance sheet in
accordance with GAAP and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person.
"Issue Date" means the date on which the Old Notes were originally issued.
"Letter of Transmittal" means the Letter of Transmittal accompanying this
Prospectus.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Services Agreement" means (i) the Management Services Agreement
dated as of December 31, 1996 between the Company and Dartford Partnership
L.L.C. (and its permitted successors and assigns thereunder), (ii) the Advisory
Services Agreement dated as of December 31, 1996 between the Company and MDC
Management Company III, L.P. (and its permitted successors and
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assigns thereunder) and (iii) the Services Agreement dated as of December 31,
1996 between the Company and Fenway Partners Capital Fund, L.P. (and its
permitted successors and assigns thereunder), in each case without giving effect
to any amendment or other modification thereto.
"MBW Acquisition Closing Date" means December 31, 1996.
"MBW LLC" means MBW Investors LLC, a Delaware limited liability company.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets subject
to sale or minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition, (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Subsidiary of the Company after such Asset
Disposition and (v) any portion of the purchase price from an Asset Disposition
placed in escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition) provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock
or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"New Notes" means the Company's 9 7/8% Series D Senior Subordinated Notes
due 2007.
"Note Guarantee" means any guarantee which may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the provisions of the
covenant described under "Certain Covenants --Future Note Guarantors." Each such
Note Guarantee will have subordination provisions equivalent to those contained
in the Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Noteholder" means the Person in whose name a Note is registered in the Note
register.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Old Notes" means the Company's Series C Senior Subordinated Notes due 2007.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means the Equity Investors and their respective
Affiliates.
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"Permitted Investment" means (i) any Investment in a Subsidiary of the
Company or a Person which will, upon making such Investment, become a
Subsidiary; provided, however, that the primary business of such Subsidiary is a
Related Business; (ii) any Investment in another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Subsidiary of the Company; provided, however, that such Person's primary
business is a Related Business; (iii) any Investment in Temporary Cash
Investments; (iv) receivables owing to the Company or any of its Subsidiaries,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business of the Company or such Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries
or in satisfaction of judgments or claims; (viii) Investments the payment for
which consists exclusively of equity securities (exclusive of Disqualified
Stock) of the Company; (ix) loans or advances to employees and directors to
purchase equity securities of the Company, Holdings or MBW LLC; provided that
the aggregate amount of such loans and advances shall not exceed $2.0 million at
any time outstanding; (x) any Investment in another Person to the extent such
Investment is received by the Company or any Subsidiary as consideration for
Asset Disposition effected in compliance with the covenant under "Limitations on
Sales of Assets"; (xi) prepayment and other credits to suppliers made in the
ordinary course of business consistent with the past practices of the Company
and its Subsidiaries; (xii) Investments in connection with pledges, deposits,
payments or performance bonds made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations; and
(xiii) any Investment in another Person not to exceed in the aggregate $2.0
million at any one time outstanding (measured as of the date made and without
giving effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Prospectus" means this Prospectus.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Subsidiary and Indebtedness of any
Subsidiary that refinances Indebtedness of another Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness, provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of
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any premium required to be paid in connection therewith and plus reasonable fees
and expenses in connection therewith); provided further that Refinancing
Indebtedness shall not include Indebtedness of a Subsidiary which refinances
Indebtedness of the Company.
"Related Business" means the food business and such other business
activities which are incidental or related thereto.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a Person and the Company or a Subsidiary leases it from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreement" means the Credit Agreement dated as of July 1,
1997, among the Company, Holdings, the lenders parties thereto, and The Chase
Manhattan Bank, as administrative agent and CSI, as arranging agent.
"Senior Credit Documents" means the collective reference to the Senior
Credit Agreement, the notes issued pursuant thereto and the Holdings Guaranty,
the Subsidiary Guaranty, the Security Agreement, the Pledge Agreement, the
Collateral Account Agreement and the Patent and Trademark Security Agreement
(each as defined in the Senior Credit Agreement) and each of the mortgages and
other security agreements, guarantees and other instruments and documents
executed and delivered pursuant to any of the foregoing or the Senior Credit
Agreement, in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amounts of available borrowing thereunder provided that such increase in
borrowing is permitted by the covenant described under the caption "--Limitation
on Indebtedness" or adding Subsidiaries of the Company as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement whether by the same or any
other agent, lender or group of lenders.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Series A Indenture" means the Indenture dated as of February 10, 1997
between the Company and Wilmington Trust Company, as Trustee, pursuant to which
the Series A Notes were issued.
"Series A Notes" means the Company's outstanding 9 7/8% Senior Subordinated
Notes due 2007.
"Series C Notes" means the Company's outstanding 9 7/8% Series C Senior
Subordinated Notes due 2007.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
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"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trust Indenture Act" means the Trust Indenture Act of 1939.
"Unsecured Indebtedness" means any Indebtedness of the Company not secured
by a Lien.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of such Person
then outstanding and normally entitled to vote in the election of directors or
managers.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, all of the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or another Wholly-Owned Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will be represented by one
permanent global certificate in definitive, fully registered form (the "Global
Note"). The Global Note will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
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DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, the "Participants") and facilitates
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes to the accounts of its Participants,
thereby eliminating the need for physical transfer and delivery of certificates.
DTC's Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Holders who are not Participants may
beneficially own securities held by or on behalf of the Depository only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants
designated by the Exchange Agent with an interest in the Global Note and (ii)
ownership of the Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that a security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes or to
pledge the Notes as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in the
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Securities, and will not be considered the owners or
Holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in Notes
represented by the Global Note to pledge or transfer such interest to persons or
entities that do not participate in DTC's system or to otherwise take action
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in the Global Note
must rely on the procedures of DTC and, if such holder is not a Participant or
an Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Notes under the
Indenture or the Global Note. The Company understands that under existing
industry practice, in the event the Company requests any action of holders of
Notes or a holder that is an owner of a beneficial interest in the Global Note
desires to take any action that DTC, as the holder of such Global Note, is
entitled to take, DTC would authorize the Participants to take such action and
the Participant would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Notes represented by the Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other
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purposes whatsoever. Consequently, neither the Company nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of interest in the Global Note (including principal, premium,
if any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Global Note as shown
on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of interests in the Global Note will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the request of DTC or the
Trustee upon the occurrence and continuation of an Event of Default, then, upon
surrender by DTC of its Global Note, Certificated Securities will be issued to
each person that DTC identifies as the beneficial owner of the Notes represented
by the Global Note. Upon any such issuance, the Trustee is required to register
such Certificated Securities in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
DESCRIPTION OF OTHER NOTES
The Other Notes were issued to refinance certain bank indebtedness and to
pay related fees and expenses arising from the purchase of the MRS.
BUTTERWORTH'S syrup and pancake mix business on December 31, 1996. The terms and
conditions of the Other Notes include those stated in the Series A Indenture.
Such terms (including interest rate, maturity, redemption provisions, covenants
and defaults) are substantially similar to the terms of the Notes offered
hereby. However, under the provisions of the Indentures, in the event of an
Asset Disposition by the Company, the proceeds of the Asset Disposition will be
applied to repurchase the Other Notes prior to any repurchase of the Notes. See
"Description of Notes--Certain Covenants--Limitation on Asset Sales."
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the opinion of White & Case, special tax
counsel to the Company, as to the material U.S. federal income tax consequences
relating to the purchase, ownership and disposition of the Notes. This
discussion is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Regulations promulgated thereunder and
judicial and administrative interpretations thereof, all as in effect as of the
date hereof and all of which are subject to change (possibly on a retroactive
basis) or different interpretation. The opinion of White & Case, is not binding
on the Internal Revenue Service (the "Service") and there can be no assurance
that the Service will not challenge one or more of the tax consequences
described herein, and the Company has not obtained, nor does it intend to
obtain, a ruling from the Service with respect to the U.S. federal income tax
consequences of the Offering. This discussion does not purport to address all
aspects of U.S. federal income taxation that may be relevant to particular
holders in light of their personal circumstances, the U.S. federal income tax
consequences to certain types of holders subject to special treatment under the
Code (for example, life insurance companies, tax exempt organizations, financial
institutions, dealers in securities or currencies, holders subject to the
alternative minimum tax, holders holding Notes as a part of a "hedging" or
"conversion" or "integrated" transaction or a "straddle", or holders with a
"functional currency" other than the U.S. dollar) or the effect of any
applicable U.S. federal estate and gift tax laws or state, local or foreign tax
laws. Finally, this discussion assumes that all Notes will be held as "capital
assets" within the meaning of Section 1221 of the Code. INVESTORS CONSIDERING
THE PURCHASE OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISOR TO DETERMINE
THEIR PARTICULAR TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE NOTES UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND OTHER TAX LAWS.
PAYMENT OF INTEREST
The stated interest on the Notes will be includable in a U.S. Holder's gross
income as ordinary income for U.S. federal income tax purposes at the time it is
paid or accrued in accordance with the U.S. Holder's method of tax accounting.
The Notes will not have original issue discount. As used herein, a "U.S. Holder"
of a Note means a beneficial owner of Notes that is (i) a citizen or resident of
the United States or any political subdivision thereof, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of its source or
(iv) a trust if (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) a U.S. fiduciary has
the authority to control all substantial decisions of the trust.
CONTINGENT PAYMENTS
As more fully described below in "Old Exchange and Registration Rights
Agreement," in the event of a Registration Default, the Company will be required
to pay additional amounts to a U.S. Holder of the Notes as liquidated damages
(the "Contingent Payments"). Under the Treasury Regulations regarding contingent
payment debt instruments, any payment subject to a remote or incidental
contingency, as of the issue date, (i.e., there is a remote likelihood that the
payment will be required or the potential amount of the payment is insignificant
relative to the remaining payments on the debt instrument) is not considered a
contingent payment and is ignored for purposes of computing original issue
discount accruals. The Company intends to take the position that the Contingent
Payments are subject to either a remote or incidental contingency. Provided that
the Contingent Payments are subject to a remote or incidental contingency, a
U.S. Holder of a Note will be required to report any Contingent Payments as
interest income for U.S. federal income tax purposes only at the time of any
such payment.
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EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a material modification of the terms of the Notes. Since
such a determination is factual in nature, no opinion can be rendered on this
issue. Provided that the exchange pursuant to the Exchange Offer does not
constitute a material modification of the terms of the Notes, such exchange will
not constitute an exchange for U.S. federal income tax purposes, such exchange
will have no U.S. federal income tax consequences to U.S. Holders of Notes, the
holding period of the New Notes will include the holding period of the Notes,
and the basis of the New Notes will be the same as the basis of the Notes
immediately before the exchange.
PURCHASES OF NOTES AT OTHER THAN ORIGINAL ISSUE PRICE
The foregoing does not discuss special rules which may affect the treatment
of a U.S. Holder that acquires Notes other than at par, including those
provisions of the Code relating to the treatment of "market discount," and
"amortizable bond premium." Any such purchaser should consult its tax advisor as
to the consequences to him of the acquisition, ownership, and disposition of
Notes.
SALE OR REDEMPTION
A U.S. Holder of a Note who disposes of such Note in a taxable sale,
exchange, redemption or other disposition will recognize gain or loss equal to
the difference between (i) the amount of cash plus the fair market value of any
property received for such Note (other than cash or property received in payment
of accrued and unpaid interest) and (ii) the U.S. Holder's adjusted tax basis in
such Note. Such gain or loss will be capital gain or loss and will be long-term
if the Note has been held for more than eighteen months at the time of sale,
exchange, redemption or other disposition. Any portion of the amount realized on
the sale or other disposition of a Note that represents accrued but unpaid
interest will be treated as a payment of such interest. Under current law, net
long-term capital gains of individuals are taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING
Under the Code, a U.S. Holder of Notes may be subject to "backup
withholding" at a 31% rate with respect to interest payments or gross proceeds
from the disposition of Notes. This withholding applies if the U.S. Holder (i)
fails to furnish to the payor the U.S. Holder's social security or other
taxpayer identification number ("TIN") within a reasonable time after the
request thereof, (ii) furnishes an incorrect TIN, (iii) is notified by the
Service that it has failed to properly report payments of interest or dividends,
or (iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct number and
that it is not subject to backup withholding. Any amount withheld from a payment
to a U.S. Holder under the backup withholding rules is allowable as a credit
against such U.S. Holder's federal income tax liability, provided that the
required information is furnished to the Service, and if backup withholding
results in an overpayment of taxes, a refund may be obtained from the Service.
Corporations and certain other entities described in the Code and Treasury
Regulations are exempt from such withholding if their exempt status is properly
established. U.S. Holders of Notes should consult their tax advisors as to their
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
These backup withholding tax and information reporting rules currently are
under review by the U.S. Treasury Department and proposed U.S. Treasury
Regulations issued on April 15, 1996 would modify certain of such rules
generally with respect to payments made after December 31, 1997. Accordingly,
the application of such rules to the Notes could be changed.
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OLD NOTES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Pursuant to the Exchange and Registration Rights Agreement, the Company
agreed to (i) file with the Commission on or prior to 60 days after the Issue
Date a registration statement on an appropriate form under the Securities Act
(the "Exchange Offer Registration Statement") relating to a registered exchange
offer (the "Exchange Offer") for the New Notes under the Securities Act and (ii)
use its best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 150 days after the Issue
Date. As soon as practicable after the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the holders of the Old Notes
who are not prohibited by any law or policy of the Commission from participating
in the Exchange Offer the opportunity to exchange their Notes for an issue of a
new series of notes, identical in all material respects to the Old Notes (except
that the New Notes will not contain terms with respect to transfer restrictions,
registration rights and liquidated damages) that would be registered under the
Securities Act. The Company will keep the Exchange Offer open for not less than
30 days (or longer, if required by law) after the date notice of the Exchange
Offer is mailed to the holders of the Old Notes. If (i) applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer as contemplated thereby or (ii) for any other reason
the Exchange Offer is not consummated within 180 days after the Issue Date or
(iii) any holder either (A) is not eligible to participate in the Exchange Offer
or (B) participates in the Exchange Offer and does not receive freely
transferrable New Notes in exchange for tendered Old Notes, the Company will
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") to cover resales of Transfer Restricted Securities by such holders
who satisfy certain conditions relating to, among other things, the provision of
information in connection with the Shelf Registration Statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each Old Note until (i)
the date on which such Note has been exchanged for a freely transferable New
Note in the Exchange Offer, (ii) the date on which such Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.
The Company will use its best efforts to have the Exchange Offer
Registration Statement and, if applicable, a Shelf Registration Statement (each
an "Exchange Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its best efforts to consummate the Exchange
Offer as promptly as practicable, but in any event prior to 180 days after the
Issue Date. If applicable, the Company will use its best efforts to keep the
Shelf Registration Statement effective for a period of three years after the
Issue Date, subject to certain exceptions, including suspending the
effectiveness thereof for certain valid business reasons. If (i) the applicable
Exchange Registration Statement is not filed with the Commission on or prior to
60 days after the Issue Date, (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
within 150 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 45 days after
publication of the change in law or interpretation), (iii) the Exchange Offer is
not consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 150 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 45 days after publication of the change in
law or interpretation), but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 60 days by an additional Exchange Registration Statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), the Company will generally be obligated to pay
liquidated
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damages to each holder of Transfer Restricted Securities, during the period of
such Exchange Registration Default, in an amount equal to $0.192 per week per
$1,000 principal amount of the Notes constituting Transfer Restricted Securities
held by such holder until the applicable Exchange Registration Statement is
filed or declared effective, the Exchange Offer is consummated or the Shelf
Registration Statement again becomes effective, as the case may be; provided,
however, no liquidated damages shall be payable for a Registration Default under
clause (iii) above if a Shelf Registration Statement covering resales of the
Transfer Restricted Securities for which the Exchange Offer was intended shall
have been declared effective. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Notes on semi-annual
payment dates which correspond to interest payment dates for the Notes.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 90 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such New
Notes and (ii) shall pay all expenses incident to the Exchange Offer (including
the expenses of one counsel to the holders of the Notes) and will indemnify
certain holders of the Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Old Notes that wishes to exchange such Notes for New Notes in
the Exchange Offer will be required to make certain representations, including
representations that (i) any New Notes to be received by it will be acquired in
the ordinary course of its business, (ii) it has no arrangement with any person
to participate in the distribution of the New Notes and (iii) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company or
Holdings or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If a holder is not a broker-dealer, it will be required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the New
Notes. If a holder is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market
making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
Holders of the Old Notes will be required to make certain representations to
the Company (as described above) in order to participate in the Exchange Offer,
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth in the preceding paragraphs. A holder who sells Old Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Exchange and Registration Rights Agreement which
are applicable to such a holder (including certain indemnification obligations).
For so long as the Notes are outstanding, the Company will continue to
provide to holders of the Old Notes and to prospective purchasers of the Old
Notes the information required by paragraph (d)(4) of Rule 144A under the
Securities Act ("Rule 144A"). The Company will provide a copy of the Exchange
and Registration Rights Agreement to prospective purchasers of Old Notes
identified to the Company by the Initial Purchasers upon request.
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only and is qualified in its entirety by reference to all
provisions of the Exchange and Registration Rights Agreement.
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PLAN OF DISTRIBUTION
Based on interpretations by the Commission set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business, and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such New Notes; provided that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such New Notes. To date, the
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Old Notes to
the Initial Purchasers) with the Prospectus, contained in the Exchange Offer
Registration Statement. Pursuant to the Exchange and Registration Rights
Agreement, the Company has agreed to permit Participating Broker-Dealers to use
this Prospectus in connection with the resale of such New Notes. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus, and any amendment or supplement to this Prospectus, available
to any broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer--Purpose and Effect of the
Exchange Offer." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Exchange and Registration Rights Agreement.
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LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by White & Case, New York, New York.
EXPERTS
The balance sheet of MBW Foods Inc. as of December 31, 1996 included in this
Prospectus has been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statement of assets to be acquired of Mrs. Butterworth's Business as of
December 31, 1995 and 1996 and the statements of operations of Mrs.
Butterworth's Business for each of the three years in the period ended December
31, 1996 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The statement of assets to be acquired of the Log Cabin Syrup Business (the
"Business"), a component of Kraft Foods, Inc. as of December 28, 1996 and
December 30, 1995, and the statements of operations of the Business for the
years ended December 28, 1996, December 30, 1995 and December 31, 1994, included
in this Prospectus, have been so included in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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GLOSSARY
<TABLE>
<S> <C>
Additional Assets........................ Description of Notes--Certain Definitions
Adjusted Eurodollar Rate................. Description of Senior Credit Facilities
Affiliate................................ Description of Notes--Certain Definitions
Affiliate Transaction.................... Description of Notes--Certain Covenants
Agent's Message.......................... The Exchange Offer--Procedures for Tendering
Applicable Eurodollar Rate Margin........ Description of Senior Credit Facilities
Applicable Premium....................... Description of Notes--Optional Redemption
Asset Disposition........................ Description of Notes--Certain Definitions
ATOP..................................... Prospectus Summary--The Exchange Offer
Attributable Indebtedness................ Description of Notes--Certain Definitions
Average Life............................. Description of Notes--Certain Definitions
Bank Indebtedness........................ Description of Notes--Certain Definitions
bankruptcy provisions.................... Description of Notes--Events of Default
Base Rate................................ Description of Senior Credit Facilities
beneficial ownership..................... Security Ownership
Blockage Notice.......................... Description of Notes--Ranking
Board of Directors....................... Description of Notes--Certain Definitions
Book-Entry Confirmation.................. The Exchange Offer--Procedures for Tendering
Book-Entry Transfer Facility............. The Exchange Offer--Procedures for Tendering
Business................................. Plan of Distribution--Experts
Business Day............................. Description of Notes--Certain Definitions
Capital Stock............................ Description of Notes--Certain Definitions
Capitalized Lease Obligations............ Description of Notes--Certain Definitions
Cash Equivalents......................... Description of Notes--Certain Definitions
CD&R..................................... Management--Directors and Executive Officers
Change of Control........................ Description of Notes--Change of Control
Chase Manhattan.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Code..................................... Description of Notes--Certain Definitions
Collateral Account Agreement............. Collateral Account Agreement means the
Collateral Account Agreement executed and
delivered by Company and The Chase Manhattan
Bank, as administrative agent, on December 31,
1996, substantially in the form of EXHIBIT XVIII
annexed to the Senior Credit Agreement, pursuant
to which Company may pledge cash to The Chase
Manhattan Bank, as administrative agent, to
secure the obligations of Company to reimburse
issuing lenders under the Senior Credit
Agreement for payments made under one or more
letters of credit under the Senior Credit
Agreement as such Collateral Account Agreement
may hereafter be amended, restated, supplemented
or otherwise modified from time to time.
Commission............................... Cover
Company.................................. Cover
Conopco.................................. Prospectus Summary
Consolidated Cash Flow................... Description of Notes--Certain Definitions
Consolidated Coverage Ratio.............. Description of Notes--Certain Definitions
</TABLE>
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<TABLE>
<S> <C>
Consolidated Excess Cash Flow............ Consolidated Excess Cash Flow means, for any
period, an amount (if positive) equal to (i) the
sum, without duplication, of the amounts for
such period of (a) consolidated EBITDA under the
Senior Credit Agreement, (b) to the extent
deducted from consolidated EBITDA under the
Senior Credit Agreement by virtue of clause
(ii)(b) of the definition thereof, extraordinary
and unusual cash gains, and (c) the consolidated
working capital adjustment under the Senior
Credit Agreement MINUS (ii) the sum, without
duplication, of the amounts for such period of
(a) voluntary and scheduled cash repayments of
consolidated total debt under the Senior Credit
Agreement (excluding repayments of revolving
loans under the Senior Credit Agreement except
to the extent the revolving loan commitments
under the Senior Credit Agreement are
permanently reduced in connection with such
repayments), (b) consolidated capital
expenditures under the Senior Credit Agreement
(net of any proceeds of any related financing
with respect to such expenditures), (c)
expenditures made in connection with any
permitted acquisition under the Senior Credit
Agreement pursuant to subsection 7.7(vii) of the
Senior Credit Agreement (net of any proceeds of
any related financing with respect to such
acquisitions), including without limitation
transaction fees paid in cash to the MDC
Entities and/or Dartford and/or Fenway in
connection with such acquisitions, so long as
such transaction fees are paid in accordance
with the terms of the MDC Advisory Services
Agreement, the Dartford Management Services
Agreement and the Fenway Agreement, (d)
consolidated interest expense, under the Senior
Credit Agreement, (e) to the extent added back
to consolidated EBITDA under the Senior Credit
Agreement by virtue of clause (i)(b)(9) of the
definition thereof, extraordinary and unusual
cash losses, (f) to the extent added back to
consolidated EBITDA under the Senior Credit
Agreement by virtue of clause (i)(b)(7) of the
definition thereof, non-recurring charges paid
in cash incurred prior to June 30, 1998, and (g)
the provision for current taxes based on income
of Holdings and its subsidiaries and payable in
cash with respect to such period.
Consolidated Interest Expense............ Description of Notes--Certain Definitions
Consolidated Net Income.................. Description of Notes--Certain Definitions
Consolidated Net Worth................... Description of Notes--Certain Definitions
Contingent Payments...................... Certain United States Federal Income Tax
Considerations -Contingent Payments
covenant defeasance...................... Description of Notes--Defeasance
cross acceleration provision............. Description of Notes--Events of Default
</TABLE>
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<TABLE>
<S> <C>
CSI...................................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Currency Agreement....................... Description of Notes--Certain Definitions
Dartford................................. Prospectus Summary--The Company
Dartford Acquisition..................... Dartford Acquisition means any transaction in
which the Company, MBW Holdings Inc. (the
Company's parent) or MBW LLC (the parent of
Holdings) or any direct or indirect subsidiary
of MBW LLC consummates an acquisition of the
stock or assets of another entity (including,
without limitation, by way of merger or
consolidation), enters into a joint venture with
another entity, or effects any similar
investment or business combination during the
term under the Dartford Management Services
Agreement.
Dartford Acquisition Price............... Dartford Acquisition Price means the sum of (A)
the cash purchase price (including any
installment payments), (B) the value of any
equity securities issued to the seller in
connection with the acquisition under the
Dartford Management Services Agreement, (C) the
face value of any promissory note or other debt
instrument issued to the seller in connection
with such acquisition under the Dartford
Management Services Agreement, (D) the amount of
any liabilities assumed by the MBW LLC group in
connection with such acquisition (under the
Dartford Management Services Agreement (other
than ordinary course of business trade
payables).
Dartford Management Services Agreement... Certain Related Transactions--Dartford
Management Services Agreement
Default.................................. Description of Notes--Certain Definitions
defeasance trust......................... Description of Notes--Defeasance
Designated Senior Indebtedness........... Description of Notes--Certain Definitions
disposition.............................. Description of Notes--Certain Definitions
Disqualified Stock....................... Description of Notes--Certain Definitions
DTC...................................... The Exchange Offer--Procedures for Tendering
EBITDA................................... EBITDA means net income before interest, taxes,
depreciation and amortization and is presented
because the Company believes it is a useful
measurement and it is commonly used by certain
investors and analysts to analyze and compare,
on the basis of operating performance, and to
determine a company's ability to service and
incur debt. EBITDA should not be considered in
isolation from or as a substitute for net
income, cash flows from operating activities or
other consolidated income or cash flow statement
data prepared in accordance with generally
accepted accounting principles or as a measure
of profitability or liquidity. EBITDA presented
for the Company may not be comparable to
similarly titled measures reported by other
companies.
EDGAR.................................... Available Information
</TABLE>
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<TABLE>
<S> <C>
Eligible Institution..................... The Exchange Offer--Procedures for Tendering
Equity Investors......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Equity Offering.......................... Description of Notes--Certain Definitions
Event of Default (Indenture)............. Description of Notes--Event of Default
Exchange Act............................. Available Information
Exchange and Registration Rights......... Cover
Agreements
Exchange Offer........................... Cover
Exchange Offer Registration Statement.... Old Notes Exchange and Registration Rights
Agreements
Exchange Registration Statement.......... Old Notes Exchange and Registration Rights
Agreements
Excluded Products........................ The Acquisitions, Financing and Related
Transactions
Expiration Date.......................... Cover
Expiration Date.......................... The Exchange Offer--Expiration Date; Extensions;
Amendments
FDA...................................... Business--Certain Legal and Regulatory Matters--
Public Health
Fenway................................... Prospectus Summary--The Company
Fenway Agreement......................... Certain Related Transactions--Fenway Agreement
Fenway Acquisition....................... Fenway Acquisition means any transaction in
which during the term under the Fenway Agreement
the Company, Holdings or MBW LLC either (i)
consummates an acquisition of the stock or
assets of another entity (including, without
limitation, by way of merger or consolidation),
enters into a joint venture with another entity,
or effects any similar investment or business
combination
Fenway Acquisition Price................. Fenway Acquisition Price means the sum of (A)
the cash purchase price (including any
installment payments), (B) the value of any
equity securities issued to the seller in
connection with the acquisition under the Fenway
Agreement, (C) the face value of any promissory
note or other debt instrument issued to the
seller in connection with such acquisition under
the Fenway Agreement, (D) the amount of any
liabilities assumed by the MBW LLC group in
connection with such acquisition under the
Fenway Agreement (other than ordinary course of
business trade payables).
Ferraro Employment Agreement............. Management--Executive Compensation
Flavor Supply Agreement.................. The Acquisitions--The MBW Acquisition
GAAP..................................... Description of Notes--Certain Definitions
Global Note.............................. Description of Notes--Book-Entry; Delivery and
Form
Governmental Authority................... Description of Notes--Certain Definitions
Guarantee................................ Description of Notes--Certain Definitions
Guarantors............................... Description of Senior Credit Facilities
Holdings................................. Cover
Holdings Guaranty........................ Holdings Guaranty means the Holdings Guaranty
executed and delivered by Holdings on December
31, 1996 , substantially in the form of EXHIBIT
VIII to the
</TABLE>
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<TABLE>
<S> <C>
Senior Credit Agreement, as such Holdings
Guaranty may thereafter be amended, restated,
supplemented or otherwise modified from time to
time.
Incur.................................... Description of Notes--Certain Definitions
Indebtedness............................. Description of Notes--Certain Definitions
Indentures............................... The Series A Indenture and the Series C
Indenture, collectively.
Indirect Participants.................... Description of Notes--Book-Entry; Delivery and
Form
Initial Purchasers....................... Cover
Interest Rate Agreement.................. Description of Notes--Certain Definitions
Investment............................... Description of Notes--Certain Definitions
Issue Date............................... Description of Notes--Certain Definitions
judgement default provision.............. Description of Notes--Events of Default
Kraft.................................... Prospectus Summary
LC Acquisition........................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Acquisition Closing Date.............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Asset Purchase Agreement.............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
LC Business.............................. Prospectus Summary
LC Co-Pack Agreement..................... The Acquisitions--The LC Acquisition
LC Excluded Products Co-Pack Agreement... The Acquisitions--The LC Acquisition
LC Transition Services Agreement......... The Acquisitions--The LC Acquisition
legal defeasance......................... Description of Notes--Defeasance
Lenders.................................. Description of Senior Credit Facilities
Letter of Transmittal.................... Cover
Lien..................................... Description of Notes--Certain Definitions
Management Services Agreement............ Description of Notes--Certain Definitions
MBW Acquisition.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MBW Acquisition Closing Date............. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MBW Asset Purchase Agreement............. The Acquisitions--The MBW Acquisition
MBW Co-Pack Agreement.................... The Acquisitions--The MBW Acquisition
MBW Predecessor.......................... Prospectus Summary
MBW Transitions Services Agreement....... The Acquisitions--The MBW Acquisition
MBW Common LLC Securities................ Security Ownership
MBW LLC.................................. Cover
MBW Refinancing.......................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
MDC...................................... Prospectus Summary--The Company
MDC Acquisition.......................... MDC Acquisition means any transaction in which
the Company, Holdings (the Company's parent) or
MBW LLC (the parent of Holdings) or any direct
or indirect subsidiary of MBW LLC consummates an
acquisition of the stock or assets of another
entity (including, without limitation, by way of
merger or consolidation), enters into a joint
venture with another entity, or effects any
similar investment or business combination
during the term under the MDC Advisory Services
Agreement
</TABLE>
108
<PAGE>
<TABLE>
<S> <C>
MDC Entities............................. McCown De Leeuw & Co. III, L.P., a California
limited partnership, McCown De Leeuw & Co. III
(Europe), L.P., a Bermuda limited partnership,
McCown De Leeuw & Co. III (Asia), L.P., a
Bermuda limited partnership and Gamma Fund LLC,
a California limited liability company,
collectively.
MDC Acquisition Price.................... MDC Acquisition Price means the sum of (A) the
cash purchase price (including any installment
payments), (B) the value of any equity
securities issued to the seller in connection
with the acquisition under the MDC Advisory
Services Agreement, (C) the face value of any
promissory note or other debt instrument issued
to the seller in connection with such
acquisition under the MDC Advisory Services
Agreement, (D) the amount of any liabilities
assumed by the MBW LLC group in connection with
such acquisition under the MDC Advisory Services
Agreement (other than ordinary course of
business trade payables).
MDC Advisory Services Agreement.......... Certain Related Transactions--MDC Advisory
Services Agreement
MDC Management........................... Certain Related Transactions--MDC Advisory
Services Agreement
MDC III.................................. Security Ownership
MDC IIIA................................. Security Ownership
Mintz Employment Agreement............... Management--Executive Compensation
Net Available Cash....................... Description of Notes--Certain Definitions
Net Cash Proceeds........................ Description of Notes--Certain Definitions
New Note Issue Date...................... Prospectus Summary--The Exchange Offer
New Notes................................ Cover
Note Guarantee........................... Description of Notes--Certain Definitions
Note Guarantor........................... Description of Notes--Certain Definitions
Notes.................................... Cover
Officer.................................. Description of Notes--Certain Definitions
Officers' Certificate.................... Description of Notes--Certain Definitions
Old Notes................................ Cover
Opinion of Counsel.......................
Other Notes.............................. Cover
parent corporation....................... Description of Notes--Change of Control
Participants............................. Description of Notes--Book-Entry; Delivery and
Form
Participating Broker-Dealers............. Plan of Distribution
Patent and Trademark Security Patent and Trademark Security Agreement means
Agreement.............................. the Patent and Trademark Security Agreement
entered into by and among Company, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of the date of
the Senior Credit Agreement, substantially in
the form of EXHIBIT XI annexed to the Senior
Credit Agreement, as such Patent and Trademark
Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified
from time to time.
</TABLE>
109
<PAGE>
<TABLE>
<S> <C>
pay the Notes............................ Description of Notes--Ranking
Payment Blockage Period.................. Description of Notes--Ranking
Permitted Holders........................ Description of Notes--Certain Definitions
Permitted Investment..................... Description of Notes--Certain Definitions
Person................................... Description of Notes--Certain Definitions
Pledge Agreement......................... Pledge Agreement means that certain Pledge
Agreement by and among Company, Holdings, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of the date of
the Senior Credit Agreement and substantially in
the form of EXHIBIT IX annexed to the Senior
Credit Agreement, as such Pledge Agreement may
be amended, restated, supplemented or otherwise
modified from time to time.
Preferred Stock.......................... Description of Notes--Certain Definitions
principal................................ Description of Notes--Certain Definitions
Pro Forma Financial Statements........... Pro Forma Financial Information
Prospectus............................... Cover
Quest.................................... The Acquisitions--The MBW Acquisition
Red Wing................................. Prospectus Summary--The Company
Red Wing Co-Pack Agreement............... Prospectus Summary--The Company
Redemption Date.......................... Description of Notes--Optional Redemption
refinanced............................... Description of Notes--Certain Definitions
refinances............................... Description of Notes--Certain Definitions
Refinancing Indebtedness................. Description of Notes--Certain Definitions
Registration Default..................... Old Notes Exchange and Registration Rights
Agreements
Registration Statement................... Available Information
Related Business......................... Description of Notes--Certain Definitions
Representative........................... Description of Notes--Certain Definitions
Restricted Payment....................... Description of Notes--Certain Covenants
Revolving Facility....................... Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Rule 144A................................ Old Notes Exchange and Registration Rights
Agreements
Sale/Leaseback Transaction............... Description of Notes--Certain Definitions
SEC...................................... Description of Notes--Certain Definitions
Secured Indebtedness..................... Description of Notes--Certain Definitions
Securities Act........................... Cover
Security Agreement....................... Security Agreement means the Security Agreement
entered into by and among Company, Holdings, the
subsidiary guarantors under the Senior Credit
Agreement and The Chase Manhattan Bank, as
administrative agent, dated as of December 31,
1996 and substantially in the form of EXHIBIT X
annexed to the Senior Credit Agreement, as such
Security Agreement may be amended, restated,
supplemented or otherwise modified from time to
time.
Senior Credit Agreement.................. Description of Notes--Certain Definitions
Senior Credit Documents.................. Description of Notes--Certain Definitions
</TABLE>
110
<PAGE>
<TABLE>
<S> <C>
Senior Credit Facilities................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Senior Indebtedness...................... Description of Notes--Ranking
Senior Subordinated Indebtedness......... Description of Notes--Certain Definitions
Series A Notes........................... Cover
Series A Exchange and Registration Rights
Agreement.............................. Cover
Series A Indenture....................... Description of Notes--General
Series A Notes Initial Purchaser......... Cover
Series A Notes Offering.................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Series C Exchange and Registration Rights
Agreement.............................. Cover
Series C Indenture....................... Description of Notes--General
Series C Notes Initial Purchasers........ Cover
Series C Notes Offering.................. Prospectus Summary--The Acquisitions, Financings
and Related Transactions
Service.................................. Certain United States Federal Income Tax
Considerations
Shelf Registration Statement............. The Exchange Offer--Purpose and Effect of the
Exchange Offer
Shelf Registration Statement............. Old Notes Exchange and Registration Rights
Agreements
Significant Subsidiary................... Description of Notes--Certain Definitions
SKU...................................... Business--Products and Markets
specified corporation.................... Description of Notes--Change of Control
Stated Maturity.......................... Description of Notes--Certain Definitions
Subordinated Obligation.................. Description of Notes--Certain Definitions
Subsidiary............................... Description of Notes--Certain Definitions
Subsidiary Guaranty...................... Subsidiary Guaranty means the Subsidiary
Guaranty, substantially in the form of EXHIBIT
VII annexed to the Senior Credit Agreement,
executed and delivered by each subsidiary
guarantor from time to time after December 31,
1996 pursuant to subsection 6.9 of the Senior
Credit Agreement, as such Subsidiary Guaranty
may be amended, restated, supplemented or
otherwise modified from time to time.
Successor Company........................ Description of Notes--Certain Covenants
Temporary Cash Investments............... Description of Notes--Certain Definitions
Term Facility............................ Prospectus Summary--The Acquisitions, Financings
and Related Transactions
TIA...................................... The Exchange Offer--Certain Conditions to the
Exchange Offer
TIN...................................... Certain United States Federal Income Tax
Considerations--Backup Withholding
Trade Payables........................... Description of Notes--Certain Definitions
Transactions............................. Prospectus Summary--Summary Pro Forma Financial
Data
Transfer Restricted Securities........... Old Notes Exchange and Registration Rights
Agreements
Treasury Rate............................ Description of Notes--Optional Redemption
</TABLE>
111
<PAGE>
<TABLE>
<S> <C>
Trustee.................................. Description of Notes--General
Unilever................................. Prospectus Summary
U.S. Government Obligations.............. Description of Notes--Certain Definitions
U.S. Holder.............................. Certain United States Federal Income Tax
Considerations--Payment of Interest
Van de Kamp's............................ Prospectus Summary--The Company
VDB...................................... The Acquisition--Co-Pack Agreement
Voting Stock............................. Description of Notes--Certain Definitions
Wholly-Owned Subsidiary.................. Description of Notes--Certain Definitions
Willett Employment Agreement............. Management--Executive Compensation
Windmill................................. Management--Ownership and Management
Windy Hill............................... Management--Ownership and Management
Wyndham.................................. Management--Ownership and Management
</TABLE>
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
MBW FOODS INC.
Report of Independent Accountants........................................................................ F-2
Balance Sheet as of December 31, 1996 and as of June 28, 1997 (unaudited)................................ F-3
Statement of Operations for the six months ended June 28, 1997 (unaudited)............................... F-4
Statement of Cash Flows for the six months ended June 28, 1997 (unaudited)............................... F-5
Notes to Financial Statements............................................................................ F-6
MRS. BUTTERWORTH'S BUSINESS, A COMPONENT OF CONOPCO, INC.
Report of Independent Accountants........................................................................ F-10
Statement of Assets to be Acquired as of December 31, 1995 and 1996...................................... F-11
Statement of Operations for the years ended December 31, 1994, 1995 and 1996 and for the six months ended
June 30, 1996 (unaudited).............................................................................. F-12
Notes to Financial Statements............................................................................ F-13
LOG CABIN BUSINESS, A COMPONENT OF KRAFT FOODS, INC.
Report of Independent Accountants........................................................................ F-17
Statements of Assets to be Acquired as of December 30, 1995 and December 28, 1996........................ F-18
Statement of Operations for the years ended December 31, 1994, December 30, 1995 and December 28, 1996... F-19
Notes to Financial Statements............................................................................ F-20
Statement of Operations for the six months ended June 29, 1996 (unaudited) and June 28, 1997
(unaudited)............................................................................................ F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MBW Foods, Inc.
In our opinion, the accompanying balance sheet of MBW Foods, Inc. (a
wholly-owned subsidiary of MBW Investors LLC) presents fairly, in all material
respects, the financial position of the Company at December 31, 1996, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Company's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit of this statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Francisco, California
March 28, 1997
F-2
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
-------------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Cash................................................................................ $ 8,666 $ 12,642
Accounts receivable, net of allowance of $42 at June 28, 1997....................... 480 5,716
Accounts receivable--other.......................................................... -- 1,722
Inventories (Note 3)................................................................ 1,182 1,698
Prepaid expenses.................................................................... 9 142
-------------- -----------
Total current assets.......................................................... 10,337 21,920
Machinery and equipment, net........................................................ 5,206 5,448
Goodwill and other intangible assets, net (Note 4).................................. 111,358 109,807
Other assets........................................................................ 3,995 6,888
-------------- -----------
Total assets.................................................................. $ 130,896 $ 144,063
-------------- -----------
-------------- -----------
LIABILITIES:
Accrued expenses.................................................................... $ 2,736 $ 10,523
Non-current deferred tax liabilitiy................................................. -- 35
-------------- -----------
Total current liabilities..................................................... 2,736 10,558
Long-term debt (Note 5)............................................................. 95,000 --
Senior subordinated notes........................................................... -- 100,000
-------------- -----------
Total liabilities............................................................. 97,736 110,558
Stockholder's equity:
Common stock, no par value, 3,000 shares authorized, 1,000 shares issued and
outstanding..................................................................... 33,270 33,270
Promissory notes (Note 6)......................................................... (110) (110)
Retained earnings................................................................. -- 345
-------------- -----------
Total stockholder's equity.................................................... 33,160 33,505
-------------- -----------
Total liabilities and stockholder's equity.................................... $ 130,896 $ 144,063
-------------- -----------
-------------- -----------
</TABLE>
See Notes to the balance sheet.
F-3
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 28, 1997
---------------------
<S> <C>
Net sales.................................................................................. $ 42,891
Cost of products sold...................................................................... 14,271
--------
Gross profit............................................................................. 28,620
Brokerage, distribution and market expenses:
Brokerage and distribution............................................................... 4,699
Trade promotions......................................................................... 7,074
Consumer marketing....................................................................... 4,367
--------
Total brokerage, distribution and marketing expenses..................................... 16,140
Selling, general and administrative expenses............................................... 2,328
Transition costs........................................................................... 324
Amortization of goodwill and other intangibles............................................. 1,658
--------
Operating profit......................................................................... 8,170
Amortization of deferred financing fees.................................................... 2,502
Interest expense, net...................................................................... 5,093
--------
Income before income taxes............................................................... 575
Provision for income taxes................................................................. 230
--------
Net income............................................................................... $ 345
--------
--------
</TABLE>
F-4
<PAGE>
MBW FOODS INC.
(A WHOLLY-OWNED SUBSIDIARY OF MBW INVESTORS LLC)
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 28, 1997
---------------------
<S> <C>
Cash flows from operating activities:
Net income............................................................................... $ 345
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization.......................................................... 4,419
Deferred income taxes.................................................................. (515)
Change in assets and liabilities:
Increase in accounts receivable...................................................... (6,959)
Increase in inventories.............................................................. (516)
Increase in prepaid expenses......................................................... (133)
Increase in accrued expenses......................................................... 7,787
Increase in net current deferred tax liability....................................... 550
----------
Net cash used in operating activities...................................................... 4,978
Cash flows from investing activities:
Additions to property, plant and equipment............................................... (524)
Additions to other assets................................................................ (420)
Increase in intangibles acquired......................................................... (107)
----------
Net cash used in investing activities...................................................... (1,051)
----------
Cash flows from financing activities:
Proceeds from long term borrowings....................................................... 100,000
Payment of borrowings.................................................................... (95,000)
Debt issuance costs...................................................................... (4,951)
----------
Net cash provided by financing activities.................................................. 49
----------
Decrease in cash and cash equivalents...................................................... 3,976
Cash and cash equivalents, beginning of period............................................. 8,666
----------
Cash cash equivalents, end of period....................................................... $ 12,642
----------
----------
</TABLE>
F-5
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1--THE COMPANY
ORGANIZATION
MBW Foods Inc. (the "Company"), a newly formed Delaware corporation, is a
privately held food company. The Company commenced operations on December 31,
1996, when it acquired the Mrs. Butterworth's syrup and pancake business from
Conopco, Inc., a subsidiary of Unilever United States, Inc. ("Conopco"). The
Company is a wholly-owned subsidiary of MBW Holdings Inc. ("Holdings"), also a
Delaware corporation. Holdings is wholly-owned by MBW Investors LLC ("MBW LLC"),
a Delaware limited liability company. The Company was initially capitalized with
a capital infusion from Holdings, which was contributed by MBW LLC, and senior
secured debt and senior subordinated debt (Note 5).
After the close of business on December 31, 1996, the Company acquired
substantially all the assets of Mrs. Butterworth's syrup and pancake business
(the "Business") from Conopco. The Company acquired the inventories,
manufacturing equipment and intangible assets of the Business for a purchase
price of $114.1 million. In due course, the Company will relocate the
manufacturing equipment from Conopco's facility.
The acquisition was accounted for by the purchase method of accounting. The
allocation of the purchase price has not been finalized; however, any changes
are not expected to be material. The purchase agreement contains customary
representations, warranties and covenants by Conopco and the Company. The
acquisition was financed by (i) an equity capital contribution from Holdings of
approximately $33.2 million, (ii) $45 million of loans borrowed under a senior
secured credit facility (Note 5), and (iii) $50 million of loans borrowed under
a senior subordinated credit facility (Note 5).
The cost to acquire the Business has been allocated to tangible and
intangible aspects acquired as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash paid to acquire Business................................................. $ 114,100
Other acquisition costs....................................................... 3,646
--------------
117,746
Costs assigned to tangible assets............................................. (6,388)
--------------
Costs attributable to intangible assets....................................... $ 111,358
--------------
--------------
</TABLE>
OPERATIONS
The Company produces and markets syrup and pancake mix products that are
sold across the United States. The products are manufactured under co-packing
agreements with Conopco and a third party. The principal trademark under which
products are sold is Mrs. Butterworth's-Registered Trademark-.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statement conform to generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities.
Actual amounts could differ from these estimates and assumptions. The Company
uses the accrual basis of accounting in the preparation of its financial
statements.
F-6
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in December. The balance
sheet at December 31, 1996 reflects the acquisition of the Business as of 11:59
p.m. on that date.
CASH
The Company considers all highly liquid financial instruments with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method. Inventories include the
cost of raw materials, packaging and supplies, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and consists of machinery
and equipment. Depreciation is computed using the straight-line method over the
estimated useful lives of the individual assets of ten years. As of December 31,
1996, there was no accumulated depreciation.
INTANGIBLE ASSETS
Intangible assets include goodwill, the Mrs.
Butterworth's-Registered Trademark- trademark and various other identifiable
intangible assets purchased by the Company. Goodwill and the trademark are
amortized over forty years using the straight-line method. Other intangible
assets are amortized using the straight-line method over periods ranging from
five to twenty years. As of December 31, 1996, there was no accumulated
amortization.
OTHER ASSETS
Other assets consist primarily of deferred loan acquisition costs. Deferred
loan costs will be amortized using the straight-line method over the terms of
the related debt. As of December 31, 1996, there was no accumulated
amortization.
ADVERTISING (UNAUDITED)
Advertising costs are expensed as incurred. Advertising expense for the six
months ended June 28, 1997 was $513,431.
INTERIM FINANCIAL DATA (UNAUDITED)
The interim financial data as of June 30, 1997 and for the six months ended
June 30, 1997 is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim period.
F-7
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- INVENTORIES
Inventories consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Raw materials, packaging and supplies............................................... $ 523
Finished goods...................................................................... 659
---------
$ 1,182
---------
---------
</TABLE>
NOTE 4 -- GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangible assets consist of the following at December
31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Goodwill......................................................................... $ 64,518
Trademarks....................................................................... 44,500
Other intangibles................................................................ 2,340
-----------
$ 111,358
-----------
-----------
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Senior Secured Debt
Senior secured revolving debt; interest rate of 9.50% at December 31, 1996;
principal due in quarterly installments through December 15, 2001; floating
interest rate at the prime rate plus 1.25% or alternatively, the one, three or
six month Eurodollar rate plus 2.50% payable quarterly or at the termination of
the Eurodollar contract interest period.......................................... $ 30,000
Senior secured term debt; interest rate of 10.00% at December 31, 1996; principal
due in quarterly installments through December 15, 2002; floating interest rate
at the prime rate plus 1.75% or alternatively, the one, three or six month
Eurodollar rate plus 3.00% payable quarterly or at the termination of the
Eurodollar contract interest period.............................................. 15,000
Senior Subordinated Note
Senior subordinated note; interest rate of 12.75% at December 31, 1996; floating
interest rate at the prime rate plus (i) 4.50% through June 29, 1997, (ii) 5.50%
for the period June 30, 1997 through September 29, 1997, and (iii) 6.00% for the
period September 30, 1997 through maturity....................................... 50,000
---------
Total long-term debt......................................................... $ 95,000
---------
---------
</TABLE>
F-8
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT (CONTINUED)
SENIOR SECURED DEBT
On December 31, 1996, the Company and Holdings entered into a Credit
Agreement (the "Agreement") with several banks for $15 million of senior secured
term debt and a $45 million revolving credit facility. At December 31, 1996, the
Company had an outstanding balance of $30 million under the revolver. The
proceeds from the senior secured term debt, a $30 million draw down of the
revolving credit facility along with a senior subordinated note and contributed
equity capital were used to acquire the Business from Conopco, pay fees and
expenses and fund working capital. The debt is guaranteed by Holdings.
The unused borrowing availability was $15 million at December 31, 1996. The
Agreement requires a commitment fee of 0.50% per annum payable quarterly on the
unused portion of the revolving credit facility. The borrowing availability
increased to $60 million upon payment of the $15 million senior secured term
debt.
The Agreement includes restrictive covenants which limit additional
borrowing, cash dividends, and capital expenditures, while also requiring the
Company to maintain certain financial ratios. The Agreement contains optional
prepayment provisions with no premium. Substantially all the assets of the
Company are pledged as collateral for the debt.
SENIOR SUBORDINATED NOTE
On December 31, 1996, the Company issued a $50 million senior subordinated
note (the "Note") to a bank. The Company can prepay portions of the outstanding
balance of the Note without incurring a premium. The Note includes restrictive
covenants which limit cash dividends, loans and investments and capital
expenditures while also requiring the Company to maintain certain financial
ratios.
See subsequent event discussion at Note 7.
NOTE 6--RELATED PARTY TRANSACTIONS
The Company paid certain members of MBW LLC fees totaling $1.5 million as of
December 31, 1996. The fees were paid for services provided in identifying,
negotiating and consummating the Company's acquisition. The fees are included in
the costs of the acquisition.
On December 31, 1996, Mr. Thomas J. Ferraro, the President of the Company
and Mr. C. Gary Willett, the Executive Vice President of the Company, executed
promissory notes in favor of the Company in exchange for monies borrowed to
assist in the capitalization of their limited liability company interests held
with Investors. The promissory notes mature December 31, 1999 with required
annual payments. Interest is due and payable quarterly at the rate of 8.00% per
annum. The aggregate balance outstanding on the promissory notes as of December
31, 1996 was $110,000. This amount has been recorded as a reduction to common
stock.
NOTE 7--SUBSEQUENT EVENTS
SUBORDINATED DEBT OFFERING
On February 10, 1997, the Company completed a private offering of 9 7/8%
Senior Subordinated Notes due in 2007, with proceeds to the Company totaling
approximately $97 million. These proceeds
F-9
<PAGE>
MBW FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--SUBSEQUENT EVENTS (CONTINUED)
were primarily used to retire the $45 million of senior secured debt and the $50
million senior subordinated note. The repayment of the debt did not result in
any gain or loss as the Company's revolving credit facility remains available.
ACQUISITION (UNAUDITED)
On July 1, 1997, the Company acquired substantially all of the assets of the
Log Cabin syrup business from Kraft Foods, Inc. for a cash purchase price of
$220 million and $8.8 million of fees and expenses. Financing for the
acquisition consisted of (a) $28.3 million of additional equity capital provided
by investors; (b) $40.0 million of term loans and $46.0 million of revolving
loans borrowed under an Amended and Restated Credit Agreement (the "Amended
Agreement"), dated July 1, 1997; (c) $102.5 million in proceeds received from a
private offering of 9 7/8% Senior Subordinated Notes due in 2007; and (d) $12.0
million of cash on hand at the Company.
The Amended Agreement provides for a secured Term Facility in a principal
amount of $40.0 million and a secured Revolving Facility providing for revolving
loans and letters of credit not to exceed $60.0 million (collectively, the
"Credit Facilities"). The letters of credit may not exceed $5.0 million of the
outstanding principal on the Revolving Facility. The Term Facility will have a
final maturity of December 31, 2003, and will be amortized in quarterly payments
of $1.125 million through December 31, 1999 with such quarterly payments
increasing annually in the amount of $250,000 per payment for each year
thereafter until the final maturity date. The Revolving Facility will be
available at any time through the final maturity date on December 31, 2003.
At the Company's option the interest rate for the Credit Facilities will be
either the Eurodollar Rate plus a margin of 2.25% or a Base Rate plus a margin
of 1.25%. The Base Rate is the higher of the Federal Funds Effective Rate plus a
margin of .5% or the Prime Rate for the Revolving Facility, and the higher of
the Federal Funds Effective Rate plus a margin of .5%, the Prime Rate or the
secondary market rate for certificates of deposit plus a margin of 1% for the
Term Facility. In addition, the Company must pay an annual fee equal to .5% on
the undrawn portion of the Revolving Facility and an annual fee equal to the
Eurodollar Rate on the face amount of all outstanding letters of credit.
The Credit Facilities contain a number of covenants that, among other
things, restrict the ability of the Company to incur additional indebtedness,
pay dividends, and enter into leases. In addition, the Company is required to
comply with specified ratios. The Credit Facilities are secured by first
priority equity interests in all capital stock of the Company and the tangible
and intangible assets of the Company.
COMPANY NAME CHANGE (UNAUDITED)
On June 11, 1997, the Company changed its name to Aurora Foods Inc.
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
CONOPCO, Inc.
We have audited the accompanying statement of assets to be acquired as of
December 31, 1995 and 1996 and the statement of operations for the years ended
December 31, 1994, 1995 and 1996 of Mrs. Butterworth's Business, a component of
CONOPCO, Inc. (the "Business"). These financial statements are the
responsibility of CONOPCO, Inc.'s management. Our responsibility is to express
an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the assets to
be acquired and the results of operations of the Business pursuant to the
purchase agreement between CONOPCO, Inc. and MBW Acquisition Corp. (the "Buyer")
as described in Note 1 and are not intended to be a complete presentation of the
Business's financial position and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be acquired of the Business as of
December 31, 1996 and the results of its operations for the years ended December
31, 1994, 1995 and 1996, pursuant to the purchase agreement referred to in Note
1, in conformity with generally accepted accounting principles.
Price Waterhouse LLP
San Francisco, California
March 14, 1997
F-11
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENT OF ASSETS TO BE ACQUIRED
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Inventories.................................................................................. $ 1,445 $ 829
Machinery and equipment, net of accumulated depreciation
of $1,553 and $1,791........................................................................ 2,619 2,774
--------- ---------
Total assets............................................................................. $ 4,064 $ 3,603
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- --------- SIX MONTHS
ENDED
JUNE 30, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales..................................................... $ 96,729 $ 91,302 $ 89,541 $ 44,507
Costs and expenses:
Cost of products sold....................................... 29,930 27,743 28,955 13,793
Brokerage and distribution.................................. 8,662 7,583 8,140 4,776
Trade promotions............................................ 21,911 19,380 17,672 8,697
Consumer marketing.......................................... 15,297 13,291 10,835 6,140
Selling, general and administrative......................... 6,829 6,120 6,753 3,376
--------- --------- --------- --------------
Total costs and expenses................................ 82,629 74,117 72,355 36,782
--------- --------- --------- --------------
Net sales less direct and allocated expenses before
taxes................................................. 14,100 17,185 17,186 7,725
Provision for income taxes.................................... 5,429 6,616 6,616 2,974
--------- --------- --------- --------------
Net sales less direct and allocated expenses............ $ 8,671 $ 10,569 $ 10,570 $ 4,751
--------- --------- --------- --------------
--------- --------- --------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
In December 1996, CONOPCO, Inc. ("CONOPCO" or the "Company"), a subsidiary
of Unilever United States, Inc., entered into an Asset Purchase Agreement (the
"Agreement") with MBW Acquisition Corp., the predecessor of MBW Foods Inc. (the
"Buyer"). The Agreement provides for the sale of certain assets of CONOPCO
pertaining to its Mrs. Butterworth's Business (the "Business") and the
assumption of certain liabilities relating to future commitments, as defined
(see Note 8). The Business was operated as part of Van den Bergh Foods Company
("Van den Bergh"), a division of the Company. The Business's products, which are
distributed on a national basis, consist of syrup and pancake mix. A significant
portion of the Business's net sales are with major retailers.
The sale was consummated on December 31, 1996, after the close of business
but before the end of the business day. Under the terms of the Agreement,
CONOPCO, Inc. sold to the Buyer certain assets exclusively used in the Business,
as defined in the Agreement, and retains the manufacturing plants, employees and
the retained liabilities, as defined in the Agreement, of the Business.
Throughout the periods covered by the financial statements, the Business's
operations were conducted and accounted for as part of the Company. These
financial statements have been carved out from the Company's historical
accounting records.
Under the Company's centralized cash management system, cash requirements of
the Business were generally provided directly by the Company and cash generated
by the Business was generally remitted directly to the Company. Transaction
systems (e.g., payroll, employee benefits, accounts payable) used to record and
account for cash disbursements were provided by centralized company
organizations outside the defined scope of the Business. Most of these corporate
systems are not designed to track assets/liabilities and receipts/payments on a
business specific basis. Given these constraints and the fact that only certain
assets of the Business were sold, statements of financial position and cash
flows could not be prepared.
The manufacturing and distribution operations of the Business are conducted
at sites where other Company manufacturing and distribution operations not
included in the Business are present. In addition, certain non-manufacturing
operations of the Business share facilities and space with other Company
operations. At these shared sites, only the assets of the Business (inventories
and machinery and equipment) are included in the statement of assets to be
acquired. The Statement of Assets to be Acquired is as of the close of business
on December 31, 1996, immediately prior to the sale.
Net sales in the accompanying statement of operations represent net sales
directly attributable to the Business. Costs and expenses in the accompanying
statement of operations represent direct and allocated costs and expenses
related to the Business. Costs for certain functions and services performed by
centralized Company organizations outside the defined scope of the Business have
been allocated to the Business based on usage or sales of the Business, as
appropriate, compared to total Van Den Bergh usage or sales. The results of
operations include expense allocations for (1) costs for administrative
functions and services performed on behalf of the Business by centralized staff
groups within the Company, (2) research and development expense and (3)
CONOPCO's general corporate expenses including pension and certain other
postretirement benefits costs (see Notes 2, 3 and 5 for a
F-14
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS (CONTINUED)
description of the allocation methodologies employed). CONOPCO maintains all
debt and notes payable on a consolidated basis to fund and manage all of its
operations. Debt and related interest expense were not allocated to the
Business.
All of the allocations and estimates in the statements of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or future results of the Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME RECOGNITION. Sales and related cost of products sold are included in
income and expense, respectively, when products are shipped to the customer.
INVENTORIES. Inventories are priced at the lower of cost or market with cost
determined by the last-in, first-out (LIFO) method.
MACHINERY AND EQUIPMENT (M&E). M&E is stated at historical cost. Alterations
and major overhauls which extend the lives or increase the capacity of M&E are
capitalized. The amounts for property disposals are removed from M&E and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
DEPRECIATION. Van den Bergh calculates depreciation using the straight-line
method over the useful lives of its property and M&E. Depreciation provided in
costs and expenses is allocated to the Business based on sales of the Business
compared to total Van den Bergh sales.
COST OF PRODUCTS SOLD. Cost of products sold includes direct costs of
materials, labor, and overhead and allocated costs for facilities, functions and
services used by the Business at shared sites. Overhead allocations are based on
estimated time spent by employees, relative use of facilities, estimated
consumption of common supplies, and sales of the Business compared to total Van
den Bergh sales.
BROKERAGE AND DISTRIBUTION. Brokerage and distribution includes costs of the
outside brokerage network and outbound freight.
TRADE PROMOTIONS. Trade promotions represents promotional incentives offered
to retailers.
CONSUMER MARKETING. Consumer marketing is comprised of all costs associated
with advertising coupons. Advertising expense is accrued as incurred. Production
costs are expensed on the initial use of the advertisement.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
consists solely of allocated selling, administrative and research and
development expenses. The Business is allocated these expenses based on sales of
the Business compared to total Van den Bergh sales.
INCOME TAXES. The taxable income of the Business was included in the tax
returns of CONOPCO. As such, separate income tax returns were not prepared or
filed for the Business. The provision for income
F-15
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
taxes included in the accompanying statement of operations has been determined
based upon statutory rates applied to pre-tax income.
PENSIONS. The Company has noncontributory defined benefit plans covering
substantially all U.S. employees, including the employees of the Business. The
benefits for these plans are based primarily on employees' years of service and
employees' compensation during the last years of employment. It is the Company's
policy to fund at least the minimum amounts required by the Employee Retirement
Income Security Act of 1974. The Company maintains profit-sharing and savings
plans for full-time employees who meet certain eligibility requirements. The
costs allocated to the Business relative to the aforementioned plans are based
on sales of the Business.
OTHER POST RETIREMENT BENEFITS. The Company provides certain health care and
life insurance benefits (post retirement benefits) to substantially all eligible
retired U.S. employees and their dependents. These benefits are accounted for as
they are earned by active employees. The post retirement costs allocated to the
Business are based on sales of the Business.
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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Also, as
discussed in Note 1, these financial statements include allocations and
estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity or
future results of the Business.
INTERIM FINANCIAL DATA (UNAUDITED). The interim financial data for the six
months ended June 30, 1996 is unaudited; however, in the opinion of the Company,
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
period.
3. RELATED PARTY TRANSACTIONS
The statement of operations include significant allocations from other
Company organizations involving functions and services (such as finance and
accounting, management informations systems, research and development, legal,
human resources and purchasing) that were provided to the Business by
centralized CONOPCO organizations outside the defined scope of the Business. The
costs of these functions and services have been allocated to the Business using
methods that CONOPCO's management believes are reasonable. Such allocations are
not necessarily indicative of the costs that would have been incurred if the
Business had been a separate entity. Total cost of products sold includes
$2,656, $3,026 and $2,990 in allocated costs for the years ended December 31,
1996, 1995 and 1994, respectively. Selling, general and administrative expenses
include $6,753, $6,120 and $6,829 of allocated costs for the years ended
December 31, 1996, 1995 and 1994, respectively.
F-16
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
4. PROVISION FOR INCOME TAXES
Taxes computed at the U.S. statutory rates are summarized below:
<TABLE>
<CAPTION>
AMOUNT % AMOUNT % AMOUNT %
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996
-------------------- -------------------- --------------------
Federal.......................................... $ 4,794 34.0 $ 5,843 34.0 $ 5,843 34.0
State (net of federal tax benefit)............... 635 4.5 773 4.5 773 4.5
--------- --- --------- --- --------- ---
Provision for income taxes....................... $ 5,429 38.5 $ 6,616 38.5 $ 6,616 38.5
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
5. INVENTORIES
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Raw materials, packaging and supplies............................ $ 269 $ 301
Finished products................................................ 1,317 631
--------- ---------
1,586 932
Adjustment to LIFO basis......................................... (141) (103)
--------- ---------
$ 1,445 $ 829
--------- ---------
--------- ---------
</TABLE>
The Company's application of LIFO is not attributable to individual business
units. Accordingly, the results of applying LIFO have been allocated to the
Business based on relative inventory values. Management believes such
allocations are reasonable, but may not necessarily reflect the cost that would
have been incurred if LIFO had been applied on a business specific basis.
6. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to certain lawsuits and claims with
respect to matters such as product liability and other actions arising in the
normal course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of CONOPCO.
In the normal course of its operations, the Business has informal agreements
with two suppliers to provide the Business with its glass bottle requirements.
These informal agreements contain no specified duration and are subject to price
adjustments. If these agreements were to terminate, the Company expects that the
Business would acquire any on-hand inventory of the suppliers.
7. CASH FLOW INFORMATION
The Company's cash flow information for the years ended December 31, 1994,
1995 and 1996 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Capital expenditures................................................ $ 21 $ 64 $ 470
Depreciation........................................................ 215 311 277
Change in inventory................................................. 935 (634) 654
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Kraft Foods, Inc.
We have audited the accompanying statements of assets to be acquired of the
Log Cabin Syrup Business (the "Business"), a component of Kraft Foods, Inc. as
of December 28, 1996 and December 30, 1995, and the statements of operations of
the Business for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994. These financial statements are the responsibility of Kraft
Foods, Inc.'s management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those statements require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements were prepared to present assets to be
acquired and the results of operations of the Business pursuant to the asset
purchase agreement between Kraft Foods, Inc. and MBW Foods, Inc. as described in
Note 1 and are not intended to be a complete presentation of the Business's
financial position and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be acquired of the Business as of
December 28, 1996 and December 30, 1995 and the results of its operations for
the years ended December 28, 1996, December 30, 1995 and December 31, 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
August 20, 1997
F-18
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENTS OF ASSETS TO BE ACQUIRED
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Inventories.................................................................. $ 6,661 $ 6,717
Machinery and equipment, net of accumulated depreciation of $2,415 and
$2,099, respectively....................................................... 8,976 8,238
-------- --------
Total assets........................................................... $ 15,637 $ 14,955
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales......................................................... $ 115,894 $ 106,330 $ 104,466
Costs and expenses:
Cost of products sold........................................... 35,254 35,804 36,237
Freight and distribution........................................ 7,553 7,620 7,099
Trade promotions................................................ 20,898 23,239 21,355
Consumer marketing.............................................. 7,940 5,478 3,994
Selling, general and administrative............................. 7,863 7,738 7,388
Amortization of goodwill........................................ 1,350 1,350 1,350
-------------- -------------- --------------
Total costs and expenses.................................... 80,858 81,229 77,423
-------------- -------------- --------------
Net sales less direct and allocated expenses
before taxes.................................................... 35,036 25,101 27,043
Provision for income taxes........................................ 14,391 10,461 11,229
-------------- -------------- --------------
Net sales less direct and allocated expenses................ $ 20,645 $ 14,640 $ 15,814
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
On May 7, 1997, Kraft Foods, Inc. ("Kraft" or the "Company"), entered into
an Asset Purchase Agreement (the "Agreement") with MBW Foods Inc. (the "Buyer").
The Agreement provides for the sale of certain assets of Kraft pertaining to its
Log Cabin Syrup Business (the "Business"). Under the terms of the Agreement,
Kraft Foods, Inc. will sell to the Buyer certain assets (inventory and machinery
and equipment) used in the Business, as defined in the Agreement, and retains
the manufacturing plants, employees and certain liabilities, as defined in the
Agreement, of the Business. The sale was consummated on July 1, 1997.
The Business's products, which are distributed on an international basis,
consist of retail and foodservice syrup products. A significant portion of the
Business's net sales are with major retailers. The accompanying financial
statements represent the results of operations and assets to be acquired of the
Business in the United States and Canada, including export sales, but
specifically excluding the Business in Mexico and the manufacture and sale of
syrups under the Kraft brand name pursuant to a distribution agreement with
Alliant Foodservice, a former indirect wholly-owned subsidiary of Kraft.
Throughout the periods covered by the financial statements, the Business's
operations were conducted and accounted for as part of the Company. These
financial statements have been carved out from the Company's historical
accounting records.
The manufacturing and distribution operations of the Business are conducted
at sites where other Company manufacturing and distribution operations not
included in the Business are present. In addition, certain nonmanufacturing
operations of the Business share facilities and space with other Company
operations. At these shared sites, only the assets of the Business (inventories
and machinery and equipment) are included in the statements of assets to be
acquired.
Under the Company's centralized cash management system, cash requirements of
the Business were generally provided directly by the Company and cash generated
by the Business was generally remitted directly to the Company. Transaction
systems (e.g., payroll, employee benefits, accounts payable) used to record and
account for cash disbursements were provided by centralized Kraft organizations
outside the defined scope of the Business. Most of these corporate systems are
not designed to track assets/liabilities and receipts/payments on a business
specific basis. Given these constraints and since only certain assets of the
Business were sold, statements of financial position and cash flows could not be
prepared.
Net sales in the accompanying statements of operations represent net sales
directly attributable to the Business. Costs and expenses in the accompanying
statements of operations represent direct and allocated costs and expenses
related to the Business. Costs for certain functions and services performed by
centralized Company organizations outside the defined scope of the Business have
been allocated to the Business based on usage or sales of the Business, as
appropriate, compared to total usage or sales. The results of operations include
expense allocations for (1) selling costs for sales and customer service
functions and services performed on behalf of the Business by the centralized
sales group within the Company, (2) fixed manufacturing and distribution costs
of the facilities that produce and store the products of the Business, (3)
research and development expense, (4) administrative costs of the marketing
division responsible for the Business, including finance and accounting, and (5)
certain Kraft marketing and corporate expenses attributable to the Business,
including human resources,
F-21
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS (CONTINUED)
systems, legal, and risk management (see Notes 2 and 4 for a description of the
allocation methodologies employed). Kraft maintains all debt and notes payable
on a consolidated basis to fund and manage all of its operations. Debt and
related interest expense were not allocated to the Business.
The statements of operations of the Business exclude allocations of certain
expenses, primarily related to certain Kraft general corporate expenses.
Expenses not allocated include, but are not limited to, general overhead costs
related to corporate accounting, human resources, legal, systems, and risk
management.
Total cost of products sold includes $2,398, $2,401, and $2,091 in allocated
costs for the years ended December 28, 1996, December 30, 1995 and December 31,
1994, respectively. Freight and distribution expenses include $2,369, $2,597 and
$2,801 of allocated costs for the years ended December 28, 1996, December 30,
1995 and December 31, 1994, respectively. Selling, general and administrative
expenses include $7,388, $7,738 and $7,863 of allocated costs for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994, respectively.
All of the allocations and estimates in the statements of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Business
had been operated as a separate entity or the future operating results of the
Business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL PERIODS
The Business's fiscal year consists of 52 or 53 weeks, ending on the last
Saturday in December. The year ending December 31, 1994 consisted of 53 weeks.
Each of the years ended December 30, 1995 and December 28, 1996 consisted of 52
weeks.
INCOME RECOGNITION
Sales and related cost of products sold are included in income and expense,
respectively, when products are shipped to the customer.
INVENTORIES
Finished goods inventories are directly attributable to the Business. Raw
materials, packaging and supplies have been allocated to the Business on the
basis of usage during the preceding year. Inventories are priced at the lower of
cost or market with cost determined on a last-in, first-out (LIFO) basis.
Certain distribution and fixed costs have been included in inventory in
accordance with the Uniform Capitalization Rules under the Tax Reform Act of
1986 ("UNICAP") rules.
F-22
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MACHINERY AND EQUIPMENT
Machinery and equipment in the accompanying statements of assets to be
acquired (the "M&E") is stated at historical cost, net of accumulated
depreciation directly related to that machinery and equipment. Alterations and
major overhauls which extend the lives or increase the capacity of the M&E are
capitalized. The amounts for property disposals are removed from the M&E and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
Depreciation is calculated using the straight-line method over the useful
lives of the M&E. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the M&E is directly attributable to
the Business. Depreciation expense provided in costs and expenses in the
accompanying statements of operations for the shared facilities is allocated to
the Business based on usage or occupancy of the Business compared to total usage
or occupancy.
COST OF PRODUCTS SOLD
Cost of products sold includes direct costs of materials, labor and overhead
and allocated costs for facilities, functions and services used by the Business
at shared sites. Overhead allocations are based on estimated time spent by
employees, relative use of facilities, estimated consumption of common supplies,
and sales of the Business compared to total Kraft sales.
FREIGHT AND DISTRIBUTION
Freight and distribution expenses include direct outbound freight and direct
and allocated costs related to the warehousing of products of the Business and
are included in cost of products sold.
TRADE PROMOTIONS
Trade promotions are directly attributable to the Business and represent
promotional incentives offered to retailers, including both performance and
non-performance trade deals.
CONSUMER MARKETING
Consumer marketing is directly attributable to the Business and consists
primarily of advertising and coupons. Advertising and promotional costs are
generally expensed as incurred. Production costs are expensed on the initial use
of the advertisement or the initial drop of the coupons. Advertising expense was
$361, $23 and $1,594 for the years ended December 28, 1996, December 30, 1995
and December 31, 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative consists solely of allocated selling,
administrative and research and development expenses. The Business has allocated
these expenses based on various measures relevant to the expense being
allocated.
F-23
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION OF GOODWILL
Goodwill consists of an estimate of goodwill allocable to the Business
arising from Philip Morris's acquisition of General Foods, Inc. in 1985.
Goodwill is amortized over 40 years using the straight-line method.
INCOME TAXES
The taxable income of the Business was included in the tax returns of Philip
Morris. As such, separate income tax returns were not prepared or filed for the
Business. The provisions for income taxes included in the accompanying
statements of operations have been determined on a separate company basis. No
deferred income taxes have been attributed to the Business.
PENSIONS
The Company has noncontributory defined benefit plans covering substantially
all U.S. employees, including the employees of the Business. The benefits for
these plans are based primarily on employees' years of service and employees'
compensation during the last years of employment. It is the Company's policy to
fund at least the minimum amounts required by the Employee Retirement Income
Security Act of 1974. The Company maintains profit-sharing and savings plans for
full-time employees who meet certain eligibility requirements. The service and
interest costs allocated to the Business relative to the aforementioned plans
are based on pensionable earnings of employees directly attributable or
allocated to the Business.
OTHER POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits
(postretirement benefits) to substantially all eligible retired U.S. employees
and their dependents. These benefits are accounted for as they are earned by
active employees. The postretirement costs allocated to the Business are based
on headcount of employees directly attributable or allocated to the Business.
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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Also, as
discussed in Note 1, these financial statements include allocations and
estimates that are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity or
the future results of the Business.
F-24
<PAGE>
LOG CABIN SYRUP BUSINESS
(A COMPONENT OF KRAFT FOODS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
3. PROVISION FOR INCOME TAXES
The provisions for income taxes for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal.................................................... $ 9,242 $ 8,610 $ 11,844
State...................................................... 1,987 1,851 2,547
--------- --------- ---------
Provision for income taxes................................. $ 11,229 $ 10,461 $ 14,391
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Business's effective income tax rate differed from the U.S. federal
statutory rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal.................................................... 35.0% 35.0% 35.0%
State (net of federal tax benefit)......................... 4.8 4.8 4.7
Goodwill amortization...................................... 1.7 1.9 1.4
--------- --------- ---------
Provision for income taxes................................. 41.5% 41.7% 41.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Raw materials, packaging and supplies.................................... $ 2,846 $ 2,455
Finished products........................................................ 4,186 5,223
--------- ---------
7,032 7,678
Adjustment to LIFO basis................................................. (315) 1,017
--------- ---------
$ 6,717 $ 6,661
--------- ---------
--------- ---------
</TABLE>
The Company's application of LIFO is not attributable to individual product
lines. Accordingly, the results of applying LIFO have been allocated to the
Business based on sales of the Business compared to total sales. Management
believes such allocations are reasonable, but may not necessarily reflect the
cost that would have been incurred if LIFO had been applied on a business
specific basis.
5. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to certain lawsuits and claims with
respect to matters such as product liability and other actions arising in the
normal course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of Kraft.
6. CASH FLOW INFORMATION
The Business had capital expenditures of $500, $1,200 and $800, for the
years ended December 28, 1996, December 30, 1995 and December 31, 1994.
F-25
<PAGE>
LOG CABIN SYRUP BUSINESS
(PART OF KRAFT FOODS, INC.)
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND JUNE 28, 1997
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
SIX MONTHS ENDED
--------------------
<CAPTION>
JUNE 29, JUNE 28,
1996 1997
--------- ---------
<S> <C> <C>
Net Sales.................................................................................. $ 51,509 $ 51,222
Costs and Expenses
Cost of products sold.................................................................... 16,269 18,067
Brokerage and distribution............................................................... 3,589 3,239
Trade promotions......................................................................... 10,452 9,457
Consumer marketing....................................................................... 3,789 597
Selling, general and administrative...................................................... 3,802 3,637
Amortization of goodwill................................................................. 675 675
--------- ---------
Total costs and expenses................................................................... 38,576 35,672
--------- ---------
Net sales less direct and allocated expenses before taxes.................................. 12,933 15,550
Provision for income taxes................................................................. 5,303 6,376
--------- ---------
Net sales less direct and allocated expenses............................................... $ 7,630 $ 9,174
--------- ---------
--------- ---------
</TABLE>
F-26
<PAGE>
NO PERSON HAS BEEN AUTHORIZED HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Available Information................. iii
<S> <C>
Capitalized Terms..................... iii
Prospectus Summary.................... 1
Risk Factors.......................... 13
The Acquisitions...................... 19
Use of Proceeds of the New Notes...... 22
Capitalization........................ 22
The Exchange Offer.................... 23
Selected Historical Financial
Data--The Company and MBW
Predeccessor........................ 31
Selected Historical Financial Data--LC
Business............................ 32
Pro Forma Financial Information....... 33
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 43
Business.............................. 50
Management............................ 59
Security Ownership.................... 64
Certain Related Transactions.......... 66
Description of Senior Credit
Facilities.......................... 69
Description of Notes.................. 72
Description of Other Notes............ 97
Certain United States Federal Income
Tax Considerations.................. 98
Old Notes Exchange and Registration
Rights Agreement.................... 100
Plan of Distribution.................. 102
Legal Matters......................... 103
Experts............................... 103
Glossary.............................. 104
Index to Financial Statements......... F-1
</TABLE>
AURORA FOODS INC.
OFFER TO EXCHANGE
9 7/8% SERIES D SENIOR
SUBORDINATED NOTES
DUE 2007
FOR ALL OUTSTANDING
9 7/8% SERIES C SENIOR
SUBORDINATED NOTES
DUE 2007
---------------------
PROSPECTUS
---------------------
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Company provides that no director
shall be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director except
for those breaches and acts or omissions with respect to which the General
Corporation Law of the State of Delaware expressly provides that the Certificate
of Incorporation shall not eliminate or limit such personal liability of
directors.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's bylaws,
disinterested director vote, stockholder vote, agreement or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Purchase Agreement dated February 5, 1997 by and between the Company and Chase Securities Inc.
*1.2 Purchase Agreement dated June 18, 1997 by and between the Company, Chase Securities Inc. and
Credit Suisse First Boston Corporation.
*2.1 Asset Purchase Agreement dated as of December 18, 1996, by and between MBW Foods Inc. (as
successor-in-interest to MBW Acquisition Corp.) and Conopco, Inc., as amended.
*2.2 Asset Purchase Agreement dated as of May 7, 1997 by and between the Company and Kraft Foods, Inc.
*3.1 Certificate of Incorporation of the Company, as amended to date, filed with the Secretary of State
of the State of Delaware on November 21, 1996.
*3.2 Amended and Restated By-laws of the Company.
*4.1 Indenture dated as of February 10, 1997, by and between the Company and Wilmington Trust Company
(the "Indenture").
*4.2 Specimen Certificate of 9 7/8% Series A Senior Subordinated Note due 2007 (included in Exhibit 4.1
hereto).
*4.3 Specimen Certificate of 9 7/8% Series B Senior Subordinated Note due 2007 (included in Exhibit 4.1
hereto).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
*4.4 Form of Note Guarantee to be issued by future subsidiaries of the Company pursuant to the Series A
Indenture (included in Exhibit 4.1 hereto).
<C> <S>
*4.5 Exchange and Registration Rights Agreement dated as of February 10, 1997, by and between the
Company and Chase Securities Inc.
*4.6 Indenture dated as of July 1, 1997 by and between the Company and Wilmington Trust Company (the
"Series C Indenture").
*4.7 Specimen Certificate of 9 7/8% Series C Senior Subordinated Note due 2007 (included in Exhibit 4.6
hereto).
*4.8 Form of Note Guarantee to be issued by future subsidiaries of the Company pursuant to the Series C
Indenture (included in Exhibit 4.6 hereto).
*4.9 Exchange and Registration Rights Agreement dated as of July 1, 1997 by and between the Company,
Chase Securities Inc. and Credit Suisse First Boston Corporation.
**5.1 Opinion of White & Case regarding the legality of the New Notes.
**8.1 Opinion of White & case regarding certain tax matters.
*10.1 Management Services Agreement, dated as of December 31, 1996, by and between the Company and
Dartford Partnership L.L.C.
*10.2 Advisory Services Agreement, dated as of December 31, 1996, by and between the Company and MDC
Management Company III, L.P.
*10.3 Agreement dated as of December 31, 1996, by and between MBW Foods Inc. and Fenway Partners, Inc.
*10.4 Amended and Restated Credit Agreement, dated as of July 1, 1997, by and among the Company, Aurora
Holdings Inc., as Guarantor, the Lenders listed therein, The Chase Manhattan Bank, as
Administrative Agent, Chase Securities Inc., as Arranging Agent and Exhibits thereto.
*10.5 Employment Agreement, dated as of December 31, 1996, by and between the Company and Thomas J.
Ferraro.
*10.6 Employment Agreement, dated as of December 31, 1996, by and between the Company and C. Gary
Willett.
*10.7 Co-Pack Agreement, dated as of December 31, 1996, by and between the Company and Van den Bergh
Foods Company.
*10.8 Flavor Supply Agreement, dated as of December 31, 1996, by and between the Company and Quest
International Flavors & Food Ingredients Company.
*10.9 Transition Services Agreement, dated as of December 31, 1996, by and between the Company and
Conopco, Inc.
*10.10 Shared Technology Licensing Agreement, dated as of December 31, 1996, by and between the Company
and Conopco, Inc.
*10.11 Amended & Restated Limited Liability Company Agreement of MBW Investors LLC, dated as of December
31, 1996.
10.12 Employment Agreement, dated as of January 20, 1997, by and between the Company and Alan Mintz.
*10.13 Transitional Co-Pack Agreement, dated as of July 1, 1997, by and between the Company and Kraft
Foods, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
*10.14 Transition Services Agreement, dated as of July 1, 1997, by and between the Company and Kraft
Foods, Inc.
<C> <S>
*10.15 Excluded Business Co-Pack Agreement, dated as of July 1, 1997, by and between the Company and
Kraft Foods, Inc.
10.16 Red Wing Co-Pack Agreement, dated as of June 9, 1997 by and between the Company and The Red Wing
Company, Inc.
10.17 Employment Agreement, dated as of June 16, 1997, by and between the Company and Dirk C. Grizzle.
12.1 Statement re computation of ratios.
*21.1 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
**23.2 Consent of White & Case (contained in the opinion filed as Exhibit 5.1 hereto).
**23.3 Consent of White & Case (contained in Exhibit 8.1 hereto).
23.4 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (see page II-4).
*25.1 Series B Notes--Statement of eligibility of trustee.
25.2 Series D Notes--Statement of eligibility of trustee.
99.1 Form of Letter of Transmittal for Series B Notes.
*99.2 Form of Notice of Guaranteed Delivery for Series B Notes.
*99.3 Series B Notes--Letter to Brokers.
*99.4 Series B Notes--Letter to Clients.
*99.5 Series B Notes--Instructions to Registered Holder and/or Book Entry Transfer Participant from
Beneficial Owner.
*99.6 Guidelines for Certificate of Taxpayer Identification Number on substitute Form W-9.
99.7 Form of Letter of Transmittal for Series D Notes.
99.8 Form of Notice of Guaranteed Delivery for Series D Notes.
99.9 Series D Notes--Letter to Brokers.
99.10 Series D Notes--Letter to Clients.
99.11 Series D Notes--Instructions to Registered Holder and/or Book Entry Transfer Participant from
Beneficial Owner.
</TABLE>
- ------------------------
* previously filed
** to be filed by amendment
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a
II-3
<PAGE>
claim of indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by its is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of post-effective amendment any of
the securitites being registered which remain unsold at the termination of the
offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on August 21, 1997.
<TABLE>
<S> <C> <C>
MBW FOODS INC.
By: *
------------------------------------------
James B. Ardrey
EXECUTIVE VICE PRESIDENT
AND DIRECTOR
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes James B. Ardrey and Tyler T. Zachem, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 2
to this Registration Statement has been signed by the following persons in the
capacities indicated on August 21, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
*
-------------------------------------------- Director and President
Thomas J. Ferraro (Principal Executive Officer)
/S/ DIRK C. GRIZZLE
-------------------------------------------- Chief Financial Officer
Dirk C. Grizzle (Principal Financial and Accounting Officer)
*
-------------------------------------------- Director and Executive Vice President
Ray Chung
*
-------------------------------------------- Chairman of the Board of Directors
Ian R. Wilson
*
-------------------------------------------- Director and Executive Vice President
James B. Ardrey
*
-------------------------------------------- Director
David E. De Leeuw
*
-------------------------------------------- Director
Charles Ayres
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
/S/ TYLER T. ZACHEM
-------------------------------------------- Director
Tyler T. Zachem
<S> <C>
*
-------------------------------------------- Director
Peter Lamm
*
-------------------------------------------- Director
Richard C. Dresdale
*
-------------------------------------------- Executive Vice President
C. Gary Willett
*
-------------------------------------------- Vice President and Secretary
M. Laurie Cummings
*By: /S/ TYLER T. ZACHEM
---------------------------------------
Tyler T. Zachem
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 20, 1997, by and between MBW
FOODS INC. (the "Company"), a Delaware corporation, and ALAN MINTZ (the
"Employee").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Company desires to employ the Employee and the Employee desires to accept
employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. The term of this Agreement shall commence on the
date hereof and shall continue in effect through January 20, 1998, unless
earlier terminated pursuant to Section 6 below (the "Term); provided that six
months after the date hereof, the Term of this Agreement shall be
automatically extended for an additional day and each day thereafter the Term
shall be automatically extended by a day so that the Term remaining under the
Agreement shall remain at 6-months.
3. Duties: Extent of Services: Office and Location.
(a) Duties. During the Term, the Employee shall serve as a Vice-President
of Sales of the Company and shall report to and carry out the lawful
directions of the President of the Company. The Employee shall perform the
duties, undertake the responsibilities and exercise the authority reasonably
required of such an employee of the Company, and shall have such other powers
and perform such additional executive duties as may be assigned to him from
time to time by the President of the Company.
(b) Extent of Services. Except for illness and permitted vacation
periods, during the Term the Employee shall (i) devote his full time and
attention during normal business hours to the businesses of the Company and
its subsidiaries and Affiliates (as defined herein); (ii) use his best
efforts to promote the interests of the Company and its subsidiaries and
Affiliates; (iii) discharge such executive and administrative duties not
inconsistent with his position as may
<PAGE>
be assigned to him by the President; and (iv) serve, without additional
compensation, as a director or officer of any subsidiary of the Company if
elected as such.
(e) Office and Location. Employee shall initially perform services for
the Company from an office located in his home in the Atlanta, Georgia
metropolitan area. The Company shall provide to Employee equipment reasonably
necessary to conduct business on behalf of the Company from his home office.
Following each acquisition of additional assets by the Company (or its
subsidiaries and Affiliates), the Chairman and President of the Company shall
review with the Employee whether the Company's Vice-President of Sales should
be located at the Company's corporate headquarters. If, after such review,
the Company determines that the Vice-President of Sales should be located at
the Company's corporate headquarters, the Employee shall have the option to
relocate to the Company's headquarters and retain the position of
Vice-President of Sales. If, however, the Employee does not desire to
relocate to the Company's corporate headquarters, the Employee's position
within the Company shall be changed to a second level area sales/broker
manager position and Employee may continue to be based in the Atlanta,
Georgia metropolitan area. In the event of such change in position and
responsibility, the Employee's Base Salary (as hereinafter defined) shall
remain at its then current level and the Employee shall not receive any
additional Class D Units (as such term is defined in the Amended and Restated
Limited Liability Agreement of MBW Investors LLC, dated as of December 31,
1996 (the "LLC Agreement")). In addition, following any such change in
position and responsibility, Employee's bonus package shall be determined in
accordance bonus' applicable to persons employed at second level sales
positions within the Company and shall not be determined in accordance with
the provisions of Sections 4(b) and 4(c) of this Agreement.
4. Compensation.
(a) Base Salary. In consideration of the services rendered by the
Employee hereunder and provided that the Employee has substantially performed
all of his obligations provided for herein, the Company will pay to the
Employee a base salary (the "Base Salary") at the rate of $120,000 per year
during the Term. Employee's Base Salary will be increased to no less than One
Hundred Forty Thousand Dollars ($140,000) per year commencing upon that date
when Employee assumes increased responsibilities as determined, in good
faith, by the President or the Board. In addition, the Base Salary may be
increased from time to time in an amount mutually agreed to by the Employee
and the Company to reflect the performance of the Employee and additional
responsibilities undertaken by the Employee. The Base Salary shall be paid in
accordance with the Company's normal payroll practice.
(b) Base Bonus. For so long as the Employee is the Vice-President of
Sales of the Company, the Company shall pay the Employee a bonus with respect
to each fiscal year or portion thereof during the Term in accordance with the
following provisions:
2
<PAGE>
(i) If the Financial Results of the Company for a fiscal year during
the Term are at least 90% but less than 95% of the EBITDA Target for such
year, Employee shall be paid an amount equal to 20% of so much of his Base
Salary as was paid with respect to such year.
(ii) If the Financial Results of the Company for a fiscal year
during the Term are at least 95% but less than 100% of the EBITDA Target
for such year, Employee shall be paid an amount equal to 30% of so much of
his Base Salary as was paid with respect to such year.
(iii) If the Financial Results of the Company for a fiscal year
equal or exceed 100% of the EBITDA Target for such year, Employee shall be
paid an amount equal to 40% of so much of his Base Salary as was paid with
respect to such year.
(c) Supplemental Bonus. In addition to the Base Bonus, if any, to which
the Employee may be entitled under clauses (i), (ii) or (iii) of Section
4(b), for so long as the Employee is the Vice-President of Sales of the
Company, the Company shall pay the Employee a bonus with respect to such
fiscal year or portion thereof during the Term in accordance with the
following provisions:
(i) If the Financial Results of the Company for a fiscal year
during the Term are at least 105%, but less than 110% of the EBITDA Target
for such year, Employee shall be paid an amount equal to 5% of so much of
his Base Salary as was paid with respect to such year.
(ii) If the Financial Results of the Company for a fiscal year
during the Term are at least 110%, but less than 115% of the EBITDA Target
for such year, Employee shall be paid an amount equal to 10% of so much of
his Base Salary as was paid with respect to such year.
(iii) If the Financial Results of the Company for a fiscal year
during the Term are at least 115% but less than 120% of the EBITDA Target
for such year, Employee shall be paid an amount equal to 15% of so much of
his Base Salary as was paid with respect to such year.
(iv) If the Financial Results of the Company for a fiscal year
during the Term equal or exceed 120% of the EBITDA Target for such year, the
Employee shall be paid an amount equal to 20% of so much of his Base Salary
as was paid with respect to such year.
3
<PAGE>
(d) For the purpose of this Agreement (1) the term "EBITDA Target" shall
mean the Company's projected earnings before interest, taxes, depreciation
and amortization, as contained in the Company's annual budget which is
approved by the Board of Directors of the Company (the "Board") (without
reference to any adjustments or revision, upwards or downwards, to such
projected earnings which are subsequently approved by the Board as part of
any subsequent revision to such annual budget), (2) the term "Financial
Results" shall mean the Company's annual financial results reflected in the
Company's annual audited financial statements and (3) the Company's 1997
fiscal year shall be deemed to have begun on December 31, 1996.
(e) Any bonus due under Section 4(b) and (c) shall be paid to the
Employee within 30 days of the publication of the Company's annual audited
financial statements for the relevant year.
(f) Employee shall be entitled to receive a bonus (if any) with respect
to a fiscal year during the Term pursuant to the terms of Section 4(b) and
(c) of this Agreement if the Employee shall be employed by the Company on the
last day of such fiscal year. Such entitlement shall not thereafter be
affected by the subsequent termination of Employee's employment with the
Company pursuant to any provision of Section 6 of this Agreement.
5. Other Employee Benefits.
(a) During the Term, the Employee shall be entitled (i) to vacation time
in accordance with the Company's policy from time to time in effect; (ii) to
participate in all employee insurance and other fringe benefit programs,
including, without limitation, life, health, dental and accident insurance
plans and long term disability now or hereafter maintained by the Company for
senior executive or other salaried personnel for which the Employee is
eligible; and (iii) to participate in a pension plan with terms similar to
those applicable to executives of the Company.
(b) During the Term, the Employee shall be entitled to a monthly auto
allowance of $800.00 to cover all costs associated with the ownership,
maintenance, repair and insurance for such vehicle. The Employee shall
maintain general liability insurance against any and all claims for personal
injury and property damage arising out of the operation or use of the
automobile by the Employee during the course of Employee's performance of
services on behalf of the Company. Such insurance shall have limits of
liability for injuries to any number of persons in any one accident or
occurrence or for damage to property in any one accident or occurrence in
amounts reasonably acceptable to the Company. The Employee shall have the
Company named as an additional insured under such policy of insurance. The
Employee shall provide to the Company appropriate and acceptable evidence of
his compliance with the provisions of this paragraph, such as certificates of
insurance or copies of the policies. Such certificates or policies shall
provide that such insurance will not be cancelled or materially amended
unless fifteen (15)
4
<PAGE>
days prior to written notice of such cancellation or amendment is given to
the Company. The automobile utilized by Employee shall be a make and model
appropriate for the position held by the Employee. In the event the Employee
relocates to the Company's corporate headquarters in Columbus, Ohio, the
Employee shall not be entitled to a monthly auto allowance; provided,
however, that the automobile allowance amount that had been payable to
Employee prior to such relocation will be added to his then-current Base
Salary pursuant to Section 4(a) above.
(c) As of the date hereof, MBW Investors LLC will issue to Employee 12
Class D Units. Employee understands that these Class D Units are part of an
aggregate of 100 Class D Units issued or to be issued to operating management
of the Company. Employee understands that, in the discretion of the Chairman
of MBW Investors LLC, additional Class D Units may be issued to Employee.
Employee further understands that, as provided in the LLC Agreement, Class D
Units in addition to the initial 100 Class D Units may be issued by MBW
Investors LLC to other persons. Employee agrees to execute such documents as
may be required or reasonably requested by the Company or MBW Investors LLC
in connection with the issuance of Class D Units to Employee.
(d) It is contemplated that Employee shall have the opportunity to
purchase certain Class A Units (as defined in the LLC Agreement) of MBW
Investors LLC. It is also contemplated any such purchase of Class A Units
would be subject to a minimum investment of $25,000 with the maximum
investment to be determined by MBW Investors LLC. It is further contemplated
that the Company would loan to the Employee up to $75,000 for the purpose of
purchasing Class A Units and that any such loan would be repaid over a three
year period with interest paid quarterly. Employee understands, however, that
the timing and the terms and conditions of the opportunity, if any, to
purchase Class A Units shall be solely determined in the discretion of MBW
Investors LLC.
6. Termination Provisions.
(a) Termination for Cause. The President or the Board may terminate the
Employee's employment hereunder for Cause, as hereinafter defined,
immediately upon written notice to the Employee. For purposes of this
Agreement, "Cause" shall mean (i) embezzlement, theft or other
misappropriation of any property of the Company or any Affiliate, (ii) gross
or willful misconduct resulting in substantial loss to the Company or any
Affiliate or substantial damage to the reputation of the Company or any
Affiliate, (iii) any act involving moral turpitude which results in a
conviction for a felony involving moral turpitude, fraud or
misrepresentation, (iv) gross neglect of his assigned duties to the Company
or any Affiliate, (v) gross breach of his fiduciary obligations to the
Company or any Affiliate, or (vi) any chemical dependence which materially
affects the performance of his duties and responsibilities to the Company or
any Affiliate; provided that in the case of the misconduct set forth in
clauses (iv) and (vi) above, such misconduct shall continue for a period of
30 days following written notice thereof by the
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Company to the Employee. During the Term, the Employee shall be entitled to
only one such notice and right to cure for any single act or event. If the
Employee's employment is terminated for Cause, the Employee shall be entitled
to receive only the unpaid portion of the Base Salary then in effect which
has accrued to the date of termination, any other payments generally
available to departing employees of the Company (such as unused vacation and
personal days) and any bonus pursuant to Section 4 for the preceding fiscal
year which has not been paid as of the date of such termination. The Employee
shall not be entitled to receive any severance payment with respect to such
termination.
(b) Termination By Reason of Permanent Disability. If at any time during
the Term the Employee has been unable, as a result of physical or mental
illness or incapacity, to perform his duties hereunder for a period of four
consecutive months or for an aggregate of more than six months in any twelve
month period (a "Permanent Disability"), the Employee's employment hereunder
may be terminated by the President or the Board upon thirty days' written
notice to the Employee. If the Employee's employment is terminated by reason
of Permanent Disability, the Employee shall be entitled to receive only the
unpaid portion of the Base Salary then in effect which has accrued to the
date of termination, plus any other payments generally available to departing
employees of the Company (such as unused vacation and personal days), plus
any bonus pursuant to Section 4 for the preceding fiscal year which has not
been paid as of the date of such termination, plus an amount equal to six
months of Employee's Base Salary.
(c) Termination By Reason of Death. The Employee's employment hereunder
shall automatically terminate on the date of his death. If the Employee's
employment is so terminated by his death, the Company shall pay to the
Employee's estate in addition to the unpaid portion of the Base Salary then
in effect through date of Employee's death plus an amount equal to six months
of Employee's Base Salary, plus any other payments generally available to
departing employees of the Company (such as unused vacation and personal
days), plus any bonus pursuant to Section 4 for the preceding fiscal year
which has not been paid as of the date of the Employee's death. Such amount
shall be paid within thirty days after the date of his death if a personal
representative has been appointed by the end of such thirty day period or, if
a personal representative has not been appointed by the end of such thirty
day period, promptly after a personal representative has been appointed.
(d) Termination Without Cause. The President or the Board may terminate
the Employee's employment hereunder at any time for any reason without Cause
in which case the Employee shall be entitled to receive an amount (the
"Severance Amount") equal to the Base Salary the Employee would have been
entitled to receive through the end of the then current Term (without giving
effect to any future extension pursuant to Section 2 hereof). The Severance
Amount shall be in lieu of any other severance payment to which Employee may
be otherwise entitled under any other severance plan maintained by the
Company. The Severance Amount shall be paid within 30 days of such
termination. In addition, the Employee shall be entitled to receive
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<PAGE>
any other payments generally available to departing employees of the Company
(such as unused vacation and personal days), plus any bonus pursuant to
Section 4 for the preceding fiscal year which has not been paid as of the
date of such termination, plus, to the extent the Company achieves the
required percentage of the EBITDA Target for the fiscal year in which such
termination occurs.
(e) Termination by Employee. Notwithstanding any other provisions of
this Agreement, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term for any of the following reasons: (i) a material breach by the Company
of any provision of this Agreement that remains uncorrected for 30 days
following written notice of such breach by Employee to the Company or (ii)
for any other reason whatsoever, in the sole discretion of the Employee, upon
90 days prior written notice to the Company. If the Employee terminates his
employment with the Company pursuant to clause (i) of this Section 6(e), the
Employee shall be entitled to receive the Severance Amount plus any other
payments generally available to departing employees of the Company (such as
unused vacation and personal days), plus any bonus pursuant to Section 4 for
the preceding fiscal year which has not been paid as of the date of such
termination. If the Employee terminates his employment with the Company
pursuant to clause (ii) of this Section 6(e), the Employee shall be entitled
to receive the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination plus any other payments generally
available to departing employees of the Company (such as unused vacation and
personal days), plus any bonus pursuant to Section 4 for the preceding fiscal
year which has not been paid as of the date of such termination.
7. Covenants of the Employee
(a) Non-Competition. Until the later of (x) the first anniversary of
the date of the termination of the Employee's employment hereunder and (y)
the end of the then current Term in effect on the date of such termination,
the Employee shall not, directly or indirectly, be associated with any entity
which competes with the Company or any of its Affiliates that are
subsidiaries of MBW Investors LLC or for which the Employee renders
substantial services and whose primary business is, or personally engage in,
the same or similar grocery product line of business of the Company or any of
its Affiliates, whether as a director, officer, employee, agent, consultant,
partner, owner, independent contractor or otherwise. Notwithstanding the
foregoing, in the event the termination of the Employee's employment is
pursuant to Section 6(d) or 6(e)(1) of this Agreement, the duration of the
non-competition covenant shall extend only for a period of six months after
the date of termination of the Employee's employment. For the purpose of
this Agreement, the term "Affiliate" means, with respect to the Company, any
person or entity which, directly or indirectly, controls, is controlled by or
under common control with the Company, with "control" to be based on the
ownership of 50% or more of the voting securities (or their equivalent) of a
particular entity.
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(b) Non-Solicitation of Employees of the Employer. Until the later of
(x) the first anniversary of the date of the termination of the employment of
the Employee hereunder and (y) the end of the then current Term in effect on
the date of such termination, the Employee shall not, and shall cause each
business or entity with which he shall become associated in any capacity not
to, solicit for employment or employ any person who is then, or who was at
any time after the date four months prior to the date of such termination,
employed in a professional or managerial position by the Company, its
subsidiaries or Affiliates.
(c) Confidentiality. The Employee agrees and acknowledges that the
Confidentiality Information (as hereinafter defined) of the Company and its
subsidiaries and affiliates, is valuable, special and unique to their
business; that much business depends on such Confidential Information; and
that the Company wishes to protect such Confidential Information by keeping
it confidential for the use and benefit of the Company and its subsidiaries
and Affiliates. Based on the foregoing, the Employee agrees to undertake
the following obligations with respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and Affiliates;
(ii) the Employee agrees that, except as required by applicable
law or as authorized in writing by the Board, he will not at any time during
or after the termination of his employment hereunder, disclose, directly or
indirectly, any Confidential Information of the Company or any of its
subsidiaries or Affiliates;
(iii) the Employee agrees to take all reasonable steps necessary,
or reasonably requested by the Company, to ensure that all Confidential
Information is kept confidential for the use and benefit of the Company and
its subsidiaries and Affiliates; and
(iv) the Employee agrees that, upon termination of his employment
hereunder or at any other time the Company may in writing so request, he will
promptly deliver to the Company all materials constituting Confidential
Information (including all copies thereof) that are in his possession or
under his control. The Employee further agrees, that if requested by the
Company, to return any Confidential Information pursuant to this subparagraph
(iv), he will not make or retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 7, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or Affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment
with the Company that is (A) not generally known in any industry in which the
Company or any of its subsidiaries or Affiliates is nor may become engaged or
(B) not
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publicly available. Confidential Information includes, but is not limited
to, any and all Information developed by or for the Company or any of its
subsidiaries or Affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices,
plans for development of products, services or expansion into new areas or
markets, internal operations, and any trade secrets and proprietary
information of any type owned by the Company or any of its subsidiaries or
Affiliates, together with all written, graphic and other materials relating
to all or any part of the same.
8. Successors: Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a merger, consolidation or sale of all or substantially all
of the business or assets of the Company. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and
assigns.
(b) The Employee. Neither this Agreement nor any right or interest
hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; PROVIDED,
HOWEVER, that nothing in this Section b shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives
of the Employee or his estate from assigning any rights hereunder to
distributees, legatees, beneficiaries, testamentary trustees or other legal
heirs of the Employee.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return
receipt requested, or delivery by overnight courier addressed as follows:
(i) If to the Company:
MBW Foods Inc.
Community Corporate Center
445 Hutchinson Avenue
Columbus, OH 43235
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with a copy to:
MBW Investors LLC
c/o Dartford Partnership, L.L.C.
801 MOntgomery Street
Suite 400
San Francisco, CA 94133
with a copy to:
McCown DeLoeuw & Co.
101 East 52nd Street, 31st Floor
New York, NY 10022
Attention: Charles Ayres
(ii) If to the Employee:
8005 Spalding Hills
Atlanta, GA 30350
or, in each case, at such other address as may from time to time be specified
to the other party in a notice similarly given.
10. Governing Law Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the State of Ohio applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of
the parties to this Agreement or any dispute arising out of this Agreement or
any matter related hereto may be brought in the courts of the State of Ohio
or in the United States District Court for the southern District of Ohio,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement.
The foregoing consent to jurisdiction shall not be deemed to confer rights on
any person other than the respective parties to this Agreement.
11. Expenses. If a dispute arises out of or related to this Agreement,
if either party to the Agreement brings legal action to enforce the terms of
the Agreement, the party who prevails in such legal action, whether plaintiff
or defendant, in addition to the remedy or relief obtained in such legal
action, shall be entitled to recover his or its expenses incurred in such
legal action, including without limitation, court costs and attorneys fees.
A party shall be deemed to
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have prevailed in such a legal action if such action is concluded pursuant to
a court order or final judgment in favor of such party which is not subject
to appeal, a settlement agreement or dismissal of the principal claims.
12. Entire Agreement. This Agreement contains the entire agreement of
the parties and their Affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and
understandings, written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons, property or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall remain
valid and enforceable to the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees that
the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 7 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests
of the Company and its subsidiaries and Affiliates and that a breach of any
of the terms of such covenants and obligations will cause the Company
irreparable injury for which adequate remedies at law are not available.
Therefore the Employee agrees that the Company shall be entitled to an
injunction, restraining order, or other equitable relief from any court of
competent jurisdiction, restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies under
this Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required
to deduct under applicable law.
16. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument. The headings contained in this Agreement are for reference
purposes only and shall not affect in any the way the meaning or
interpretation of this Agreement.
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17. Survival. The Covenants set forth in Sections 4(f), 6 and 7 of
this Agreement shall survive and shall continue to be binding upon the
parties notwithstanding the termination of this Agreement for any reason
whatsoever. The Covenants set forth in Section 7 of this Agreement shall be
deemed and construed as separate agreements independent of any other
provision of this Agreement. The existence of any claim or cause of action
by the Employee against Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company of
any or all covenants.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first written above.
MBW FOODS INC.
By: /s/ Thomas J. Ferraro
--------------------------------
Title: President
/s/ ALAN MINTZ
--------------------------------
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PRODUCTION AGREEMENT
This Production Agreement (the "Agreement") is made as of the 9th day of
June, 1997, by and between MBW Foods, Inc., a Delaware corporation ("Buyer"),
and The Red Wing Company, Inc., a Delaware corporation ("Producer").
WITNESSETH
WHEREAS, Buyer possesses formulas and processes for the manufacture of
certain food products described in Schedule A hereto (the "Products");
WHEREAS, Producer is engaged in the business of manufacturing and mixing
food products, including food products similar to the Products;
WHEREAS, Producer has facilities and expertise for the production of the
Products; and
WHEREAS, Buyer and Producer desire to define and develop a business
relationship whereby Producer will manufacture and sell, and Buyer will
purchase, the Products subject to the terms and conditions set forth herein.
NOW THEREFORE, for mutual and adequate consideration, Producer and Buyer
agree as follows:
1. TERM. Unless earlier terminated in accordance with Section 22 hereof, this
Agreement shall commence on the date hereof (the "Commencement Date") and
shall end on the fifth anniversary of the Commencement Date (the "Original
Term") and shall be subject to automatic renewal for additional consecutive
one year terms (the "Renewal Term or Terms") unless a decision is made by
either party not to renew. Any decision not to renew shall be submitted in
writing by the party making such decision no later than one-hundred eighty
(180) days prior to the expiration of the Original Term or any Renewal
Term. The "Agreement Term" shall mean the Original Term, and if this
Agreement is renewed, the Renewal Term or Terms.
2. PRODUCTION FACILITIES. The Products will be manufactured at Producer's
facilities located at San Jose, California (the "San Jose Plant"),
Streator, Illinois (the "Streator Plant") and any other plant location of
Producer as is approved in advance by Buyer, which approval shall not be
unreasonably withheld (each, an "Approved Facility").
3. PRODUCTS. Subject to the terms and conditions of this Agreement, Producer
agrees to manufacture and sell to Buyer, and Buyer agrees to purchase from
the Producer, the Products as set forth on Schedule A
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in such quantities and at such Approved Facilities as shall be determined
from time to time in the sole judgment of Buyer. Notwithstanding the
foregoing, Buyer agrees that (i) during the first year of the Original Term
(with the first year being measured from the Commencement Date to the day
immediately preceding the first anniversary of the Commencement Date), Buyer
shall order at least one million five hundred thousand equivalent cases of
Products from the Producer (with an equivalent case being equal to 288
ounces of the Products) and (ii) during each year of the Original Term
thereafter, Buyer shall order at least two million five hundred thousand
equivalent cases of Products from the Producer. IF, DURING ANY SUCH YEAR
OF THE ORIGINAL TERM, BUYER SHALL FAIL TO ORDER AT LEAST SUCH NUMBER OF
EQUIVALENT CASES OF PRODUCTS FROM THE PRODUCER, THE SOLE AND EXCLUSIVE
REMEDY FOR PRODUCER FOR SUCH FAILURE SHALL BE THAT, FOR EACH YEAR IN WHICH
THE BUYER FAILS TO ORDER AT LEAST SUCH NUMBER OF EQUIVALENT CASES OF
PRODUCTS FROM THE PRODUCER, AN ADDITIONAL ONE HUNDRED EIGHTY DAYS SHALL BE
ADDED TO THE ORIGINAL TWO YEAR PERIOD SET FORTH IN Section 22(B) OF THIS
AGREEMENT BEFORE THE BUYER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT
PURSUANT TO SECTION 22(B).
4. MANUFACTURING STANDARDS. Producer agrees to manufacture each of the
Products in accordance with Buyer's specifications, quality control
standards and other procedures that are contained in the Operating Manual
that has been delivered to Producer and that shall be deemed to be a part
hereof as Schedule B (the "Specifications"), which may be modified from
time to time in the sole judgment of Buyer upon thirty days prior written
notice to the Producer; provided, however, in the event any such
modifications to the Specifications result in any change in the cost to
produce the Products, the price for the Products shall be adjusted upward
or downward, as the case may be, to cover the change in the cost to produce
the Products. Upon written notification from Buyer to the Producer
modifying the Specifications, Schedule B shall be deemed amended by such
modification. Buyer agrees to promptly supply Producer with all formulas,
operating techniques, manufacturing procedures and other technical
information necessary and appropriate for the manufacture of the Products;
provided, however, that Producer understands that Buyer is relying upon
Producer's expertise in suggesting to Buyer and implementing the
appropriate procedures for the manufacture of the Products.
5. GRANT OF LICENSE. Subject to the terms and conditions of this Agreement,
Buyer hereby grants to Producer, who accepts the same, a non-exclusive,
non-assignable, indivisible and royalty-free right and license to
manufacture and sell the Products to Buyer exclusively. The
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license includes the right to use the Specifications and any other technical
know-how, formulas, manufacturing processes, and other technical and
confidential information useful or necessary for the manufacture of the
Products. This license will remain in effect until the expiration or other
termination of this Agreement and may not be assigned, transferred
(including any transfer by operation of law), subcontracted or sublicensed
to any third party (other than, in the case of a sublicense or subcontract,
to a wholly-owned subsidiary of the Producer) without the prior written
consent of Buyer, which consent may be withheld in the sole discretion of
Buyer. In the event Producer enters into any sublicense or subcontract
with a wholly-owned subsidiary of Producer, Producer shall be responsible
for all acts and omissions of its wholly-owned subsidiary.
6. CONFIDENTIAL INFORMATION.
a. For the purpose of this Agreement, "Confidential Information" shall
mean all written information related to the Products and all formulas,
manufacturing processes, data, know-how, technical and non-technical
materials, and product samples and specifications (including the
Specifications) which Buyer has disclosed to Producer prior to this
Agreement or which Buyer may disclose to Producer pursuant to or in
connection with this Agreement, and all pricing information with
respect to the Products, all written financial information,
manufacturing processes, data, know-how, technical and non-technical
materials which Producer has disclosed to Buyer prior to this
Agreement or which Producer may disclose to Buyer pursuant to or in
connection with this Agreement.
b. Notwithstanding the foregoing, Confidential Information shall not
include any information which the non-disclosing party can demonstrate
by reasonable evidence: (i) is or becomes public knowledge through no
fault or omission of the non-disclosing party; (ii) is lawfully
obtained by the non-disclosing party from a third party under no
obligation of confidentiality concerning such information; (iii) was,
at the time of receipt, otherwise known to the non-disclosing party
without restrictions as to use or disclosure; or (iv) is developed
independently by the non-disclosing party and without reliance upon
the Confidential Information disclosed hereunder. The burden of
proving any such exceptions to the definition of Confidential
Information will reside with the non-disclosing party.
c. The non-disclosing party agrees to hold all Confidential Information
of the disclosing party in confidence and not to
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<PAGE>
disclose any Confidential Information to any third party except (i)
those with a need to know in order to assist in the manufacture of the
Products, (ii) as may be required by law; or (iii) to accountants,
attorneys, bankers and other professional advisors of a party. The
non-disclosing party agrees not to make any use of the Confidential
Information except as provided herein.
d. The non-disclosing party agrees that its directors, officers,
employees, agents and other representatives who have access to the
Confidential Information of the disclosing party will be made aware of
the obligations of confidentiality and non-use set forth in Section 6
of this Agreement and will be bound to abide by these obligations. The
non-disclosing party agrees that it shall be responsible for any
breach of the obligations of confidentiality or non-use by any person
to whom such information is disclosed by the non-disclosing party.
e. The Confidential Information of the disclosing party shall remain the
exclusive property of the disclosing party, and the non-disclosing
party acquires no interest in or rights thereto under this Agreement
or otherwise. Upon termination of this Agreement, or at any time upon
the disclosing party's request, the non-disclosing party shall, at its
sole option, either promptly return all tangible forms of Confidential
Information of the disclosing party (including copies) to the
disclosing party then in the non-disclosing party's possession or
under its control or destroy such Confidential Information and deliver
a certificate to the disclosing party certifying such destruction.
Upon termination of this Agreement, to the extent that any document
prepared by or on behalf of the non-disclosing party incorporates any
Confidential Information of the disclosing party, the non-disclosing
party shall destroy such documentation and deliver a certificate to
the disclosing party certifying such destruction.
f. The non-disclosing party shall be liable to the disclosing party for
all direct and incidental damages (including, without limitation,
reasonable attorneys fees) incurred as a result of the breach of the
confidentiality and/or non-use provisions of Section 6 of this
Agreement by the non-disclosing party. The non-disclosing party also
acknowledges and agrees that, in the event of such a breach, such
Damages may not be an adequate remedy and that the disclosing party
shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach.
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g. The non-disclosing party acknowledges that the Confidential
Information disclosed or to be disclosed by the disclosing party
represents the disclosing party's valuable property, which is intended
to be maintained in perpetuity as trade secret property. Accordingly,
the confidentiality and non-use obligations of Section 6 of this
Agreement shall be continuing in nature and shall survive termination
of this Agreement.
7. SALE AND PURCHASE OF PRODUCTS.
a. The terms and conditions contained in this Agreement shall be
effective for all Products sold by the Producer to the Buyer during
the Agreement Term. During the Agreement Term, Producer agrees to
manufacture and sell the Products to Buyer against the Monthly
Production Request (as such term is hereinafter defined in Section 10
of this Agreement) of the Buyer, which request shall be deemed to be a
production purchase order. During the Agreement Term, Producer
agrees to deliver the Products manufactured and sold to Buyer against
shipping orders of Buyer. Except as otherwise set forth in this
Agreement, each contract for the purchase and sale of the Products
shall be initiated hereunder by Buyer's issuance to Producer of a
production purchase order and delivery of such Products shall be
initiated against shipping orders of the Buyer. Unless Buyer
otherwise agrees in writing, ALL PRODUCTION PURCHASE ORDERS AND
SHIPPING ORDERS ARE EXPRESSLY LIMITED TO THE TERMS HEREOF AND ANY
ADDITIONAL OR DIFFERENT TERMS ARE OBJECTED TO WITHOUT FURTHER
NOTIFICATION BY PRODUCER AND BUYER. Shipping orders shall be issued
to the Producer at least five (5) business days prior to the requested
shipping date. If the quantity of the particular Product requested in
such shipping order for delivery in a calendar month, when added
together with all other shipping orders for such particular Product
for delivery in the same calendar month, is not in excess of the
quantity for such Product as set forth in the then current Monthly
Production Request, such shipping order for such Product shall be
deemed accepted without any further act of the Producer. If the
quantity of the particular Product requested in such shipping order
for delivery in a calendar month, when added together with all other
shipping orders for such particular Product for delivery in the same
calendar month, is in excess of the quantity for such Product as set
forth in the then current Monthly Production Request, such shipping
order shall be deemed accepted to the extent that such quantities are
not in excess of the then current Monthly Production Request for such
Product and, with respect to the
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remaining quantities, shall be accepted or rejected by Producer in
writing within five (5) business days of the issuance of the shipping
order to the Producer. If the Producer shall not have otherwise
notified the Buyer within five (5) business days of the issuance of
such shipping order, the order shall be deemed accepted in full by
Producer and, to the extent the quantities are in excess of the then
current Monthly Production Request for such Product, shall be deemed
to be a production purchase order with respect to such excess
quantities. Producer shall use its best efforts to deliver all
quantities of Products ordered by Buyer pursuant to any shipping order.
This Agreement and all orders issued pursuant hereto shall be deemed a
series of installments and shall be deemed to constitute a single
contract between Producer and Buyer. The parties recognize that
the demands and convenience of business operations may make it
necessary or desirable for Buyer to transmit, and Producer to
accept, production purchase orders and shipping purchase orders
by telecopier or by electronic data interchange (in each case
with reasonable confirmation procedures in place).
b. Time and quantity shall be of the essence in any shipping order.
Unless otherwise specified, delivery times specified are the times of
delivery of the Products at an Approved Facility as designated by
Buyer. Producer shall inform Buyer immediately of any occurrence
which will or is expected to result in any delivery at any time or in
any quantity not specified in any shipping order and also of
corrective measures which Producer has taken, or will take, to
minimize the effect of such occurrence. Buyer, in addition to all
other remedies available to it in law or in equity, shall have the
right to cancel any shipping order or part thereof if delivery is not
made within the time specified or in the quantities ordered.
c. If, for any reason other than a Force Majeure Event (as hereinafter
defined in Section 19), Producer is unable to produce from an Approved
Facility the amount of the Monthly Production Request for any
particular line of Product that the Monthly Production Request
contemplates being produced from such Approved Facility, Producer
shall produce the amount at another Approved Facility of the Producer,
including, if approved by the Buyer (which approval shall not be
unreasonably withheld) facilities of the Producer that are not
currently Approved Facilities (each, a "Substitute Facility"). The
price charged to the Buyer for the Product produced at the Substitute
Facility shall be the unit price that would have been charged to Buyer
had such Product been produced at the Approved Facility. In addition,
in
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the event Producer is required to produce Products at a Substitute
Facility, Producer shall reimburse Buyer for all incidental damages
(e.g., additional shipping charges) incurred by Buyer as a result the
Products being produced at a Substitute Facility.
8. PRICES, PAYMENT TERMS AND DELIVERY.
a. The initial unit purchase prices of the Products shall be as specified
in the pricing schedule attached hereto as Schedule C. During the
Agreement Term, the unit purchase prices for the Products shall be
subject to change (both upward and downward) based upon market
fluctuations in the cost of the components that form the line item
"Raw Materials", "Packaging Materials", "Direct Labor", "Variable
Overhead" and "Factory Fixed" as set forth in Schedule C. Producer
agrees that it shall not effect any change in the purchase price of
the Products as a result of a change in the price of corn syrup except
upon reasonable prior written notice from the Producer to the Buyer.
Producer further agrees that, if Producer believes a change in the
Factory Fixed cost component of the purchase price for the Products is
warranted, Producer shall notify Buyer in writing of such requested
change and identify with reasonable specificity the basis for the
price change of the Products not less than thirty, nor more than
sixty, days prior to an anniversary of the Commencement Date.
Producer further agrees that the Factory Fixed cost component shall
not be requested to be changed more than one time a year. Prior to
implementing any change in the Factory Fixed cost component, Buyer and
Producer shall mutually agree on such change; provided, however, that
in the event Buyer and Producer do not mutually agree on such change,
the parties nevertheless intend to be bound by this Agreement, and any
such change in the Factory Fixed cost component shall be reasonable
(as construed in accordance with Section 1302.18(A) of the Ohio
Revised Code). Any change in the Factory Fixed cost component shall
be effective as of the applicable anniversary of the Commencement
Date. In the event of any price change (including a price change as a
result of a change in the price of corn syrup), upon request of Buyer,
Producer shall promptly identify with reasonable specificity the basis
for the price change of the Products. Upon request of Buyer, Producer
shall promptly supply Buyer with copies of documentation supporting
such price change and the methodology used by Producer to determine
the price change. The parties intend for the price of the Products to
be the Producer's cost of
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manufacturing the Products plus a tolling fee that is included within
the line item "Factory Fixed" as set forth in Schedule C.
b. In all cases under this Agreement, Producer shall use its best efforts
to obtain the lowest and best prices and/or rates for all raw
materials and packaging materials used in the production of the
Products.
c. In the event Buyer of a price change to the Products, Buyer may
suggest to the Producer for its consideration reasonably acceptable
alternate sources in order to lessen a price increase or enhance a
price decrease.
d. Except as specifically provided elsewhere in this Agreement, Producer
warrants that the unit purchase prices for the Products as determined
in accordance with this Section 8 shall be complete, and no additional
charges of any kind shall be added without Buyer's express written
consent.
e. Delivery of the Products set forth in or with reference to each
shipping order shall be F.O.B. Buyer's carrier at the loading dock of
an Approved Facility or any Substitute Facility of the Producer.
f. Producer shall submit an invoice to the Buyer on Monday of each week
for the Products produced by the Producer during the preceding week.
Terms of payment for each invoice will be net twenty-five (25) days
from the date of invoice. The invoice will reference item code and
Product name, number of cases, unit price per case, the Approved
Facility or the Substitute Facility, as the case may be, and amount
due.
g. Invoices for payment shall be sent to:
MBW Foods, Inc.
445 Hutchinson Avenue
Suite 960
Columbus, OH 43235
Payments shall be sent to:
SunTrust Bank
P.O. Box 4418
Atlanta Georgia 30302
For credit to: The Red Wing Company, Inc.
Account Number 8801079982
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h. Producer warrants and covenants that all units of the Product
delivered to Buyer shall be free from any security interest, lien or
other encumbrance of any person, corporation, partnership,
governmental body or other entity.
9. RAW MATERIALS AND PACKAGING MATERIALS.
a. Unless otherwise set forth herein, Producer shall be responsible for
ordering and paying for all raw materials, packaging materials and
supplies to be utilized in producing the Products (including ordering
of the labels, flavors and miscellaneous packaging, if any).
b. Producer shall use its best efforts to maintain an adequate inventory
of raw materials, packaging materials and supplies necessary to meet
production requirements at each Approved Facility.
c. Packaging materials and other items of inventory that are tailored for
the Products will be used by the Producer only for the Products.
Producer shall not maintain excessive levels of such inventory at any
Approved Facility. Upon request, the Buyer shall be provided with
access to all records concerning such inventory at each Approved
Facility
d. At least annually, Producer shall discuss with Buyer strategic issues
concerning purchasing of raw materials and packaging materials for the
Products.
10. PRODUCTION SCHEDULE.
a. Buyer will provide Producer, on or about the fifteenth day of each
month during the Agreement Term, with a rolling three month production
forecast (the "Forecasted Quantities of Products") for the next three
calendar months. The purpose of the Forecasted Quantities of Products
is to provide the Producer with Buyer's good faith estimate of
production needs in order to allow Producer to plan for ordering raw
materials, packaging materials and supplies (including labels, flavors
and miscellaneous packaging, if any) and to plan for Product
production.
b. On or before the fifteenth day of each month during the Agreement
Term, Buyer will provide Producer with a written production request
for the delivery of Products during the next calendar month (the
"Monthly Production Request"), which (i)
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until such time as the Approved Facilities are both producing the
Products, such Monthly Production Request shall not for any
particular calendar month exceed such number of cases of Products
as Producer shall in good faith advise Buyer that it is capable
of producing based on its capacity limitations and (ii) after such
time as the Approved Facilities are both producing the Products,
such Monthly Production Request shall not for any particular
calendar month exceed in the aggregate 350,000 equivalent cases
of Products. Producer shall be obligated to deliver
to Buyer the quantities of the Products set forth in each Monthly
Production Request. By the last day of each calendar month, Buyer
shall be obligated to purchase and take delivery of the Products in
quantities that are not less than the quantities as are set forth in
the Monthly Production Request for such calendar month. Producer
shall in good faith schedule the timing and volume of the production
of the Products over the course of each month (with the intention
being that Buyer shall not receive invoices for the production of
Products substantially in advance of the shipping orders for the
Products), and Buyer shall in good faith place shipping orders over
the course of each month in a manner generally consistent with its
past practices in an orderly fashion so that the shipping orders will
exhaust the Monthly Production Request (with the intention being that
Producer shall not have unreasonable day to day increases in the level
of inventory of the finished Products during a month).
11. INVENTORY OF FINISHED PRODUCTS.
a. With respect to each Approved Facility, Producer agrees to maintain at
all times during the Agreement Term, either on the floor at such
Approved Facility or in outside warehousing facilities maintained by
the Producer, an inventory of finished Products in quantities equal to
at least ten (10) days of the average quantities of such Products
sold to Buyer during the preceding sixty (60) days for immediate
shipment.
12. SHIPMENT AND PALLET EXCHANGE.
a. Unless otherwise mutually agreed in writing, the Products will be
shipped in pallet quantities on conventional pallets or, at Buyer's
cost and expense, Chep pallets. Producer and Buyer agree to observe a
conventional pallet exchange procedure pursuant to which Buyer will
return to Producer one (1) conventional pallet for each conventional
pallet received by Buyer. If Buyer fails to return to Producer
conventional pallets on a one-for-one basis, Buyer shall pay Producer
$5.00 for each conventional pallet Buyer has failed to return within
twenty-five (25) days of date of invoice for such pallets. If Buyer
has delivered to Producer more conventional pallets than the number of
conventional pallets received by Buyer, Producer shall credit against
the purchase price for the Products $5.00 for each conventional pallet
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Buyer has returned to Producer in excess of the number of
conventional pallets received by the Buyer. Buyer and Producer shall
establish reasonable procedures in order to comply with the terms of
the pallet exchange program.
b. Shipment of Products shall be made directly by Buyer using its owned
or contracted carriers. Title and risk of loss for the Products shall
pass to Buyer at the time of delivery of possession of the Products to
the carrier by Producer.
c. Buyer shall be responsible for transportation costs for the Products
from an Approved Facility or outside warehousing facilities maintained
by the Producer to the warehouse or other destination designated by
Buyer.
13. MANUFACTURING EQUIPMENT OF BUYER.
a. Buyer shall supply to Producer, deliver and install, at no cost to the
Producer, certain existing equipment of the Buyer identified in
Schedule D (the "Manufacturing Equipment") that is used in the
production of the Products for installation in the Approved Facility
identified on Schedule D. Buyer shall use its bests efforts to ensure
that the delivery and installation of the equipment at an Approved
Facility shall be completed no later than the dates set forth on
Schedule D, subject to any Force Majeure Events. Except as disclosed
to Producer at the time of the removal of the Manufacturing Equipment
from their current locations, Buyer represents and warrants that the
Manufacturing Equipment is, or shall be, after delivery and
installation at the Approved Facilities, in good operating condition
and repair (reasonable wear and tear excepted) and suitable for its
intended purpose.
b. Buyer shall control, and be responsible for all costs related to, the
removal, packaging, moving and reinstallation of the Manufacturing
Equipment to the designated Approved Facility for such equipment.
Buyer shall retain title to all of the Manufacturing Equipment.
c. In the event Buyer and Producer jointly agree in writing that any
additional manufacturing equipment is needed to manufacture the
Products at an Approved Facility under this Agreement, Buyer
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shall be responsible for all costs related to the purchase, delivery
and installation of such additional equipment. Such additional
equipment shall become part of the Manufacturing Equipment, the title
to which shall be retained by Buyer.
d. In the event that any of the Manufacturing Equipment (whether or not
such equipment is existing as of the Commencement Date) requires
extraordinary repairs in the nature of major overhauls and/or major
upgrades during the Agreement Term, the Buyer shall control, and be
responsible for all costs related to, such extraordinary repairs.
e. Producer shall control, and be responsible for all costs related to,
all ordinary and routine maintenance and repair of the Manufacturing
Equipment during the Agreement Term. In the ordinary course of
business, Producer shall maintain and repair such Manufacturing
Equipment so that such equipment is, and remains, in substantially the
same condition as when installed at the Approved Facilities by Buyer,
reasonable wear and tear and damage by unavoidable casualty excepted.
f. Producer agrees that the Manufacturing Equipment shall only be used by
Producer in connection with the production of the Products on behalf
of Buyer. Producer agrees that it shall not use such equipment for
any other purpose.
14. MANUFACTURING EQUIPMENT OF THE PRODUCER
a. Producer agrees that certain manufacturing equipment owned and used by
Producer at its San Jose Facility, which equipment is identified on
Schedule E (the "Producer Manufacturing Equipment"), shall be used in
connection with the production of some of the Products at such
Approved Facility.
b. Buyer agrees to reimburse Producer for all costs associated with
retrofitting the Producer Manufacturing Equipment so as to enable the
Producer to utilize such equipment in the production of Products.
Producer shall have title to all retrofitted pieces of equipment;
provided Buyer shall have title to any change parts which are needed
solely for the production of the Products. Schedule E sets forth an
estimate of the costs to retrofit certain Producer Manufacturing
Equipment but shall not be deemed to limit Buyer's obligation to
reimburse Producer for all costs associated with the retrofitting.
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c. Buyer understands and agrees that the Producer Manufacturing Equipment
will not be used solely to produce the Products, but will also be used
by Producer to produce other products, including, but not limited to,
Producer's spaghetti sauce and ketchups.
d. In the event that any of the Producer Manufacturing Equipment (whether
or not such equipment is existing as of the Commencement Date)
requires extraordinary repairs in the nature of major overhauls and/or
major upgrades during the Agreement Term, the Producer shall control,
and be responsible for all costs related to, such extraordinary
repairs.
e. Producer shall control, and be responsible for all costs related to,
all ordinary and routine maintenance and repair of the Producer
Manufacturing Equipment during the Agreement Term. In the ordinary
course of business, Producer shall maintain and repair such Producer
Manufacturing Equipment so that such equipment is, and remains, in
good operating condition and repair and suitable for its intended
purpose.
15. ADDITION TO THE STREATOR FACILITY.
a. In consideration for the Buyer entering into this Agreement, Producer
has agreed to construct an addition to its Streator Facility (the
"Streator Addition"). The estimated costs of the Streator Addition
are attached hereto as Schedule F.
b. The Producer shall control, and be responsible for all costs related
to, the construction of the Streator Addition. Title to the Streator
Addition shall be in the name of Producer. The Producer agrees to
commence construction of the Streator Addition as soon as possible and
agrees that it will use its best efforts to ensure that the
construction of the Streator Addition will be completed no later than
December 31, 1997, subject to any Force Majeure Events.
c. During the Agreement Term, the Streator Addition shall not be used to
store or produce any other products, unless such storage or production
does not materially disrupt or interfere with the production and
storage of Products at the Streator Addition.
d. In consideration for the Producer constructing the Streator Addition,
during the Agreement Term, Buyer agrees to pay an additional charge on
each case of the Products produced at any Approved Facility or
Substitute Facility in the amount set forth
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in Schedule C up to an aggregate amount that is the lesser of (i) the
actual construction cost of the Streator Addition or (ii) the
estimated cost of the Streator Addition as set forth on Schedule F.
On a quarterly basis, the Producer shall provide to Buyer an
itemized account of the number of cases for each particular line
of the Product purchased by Buyer from each Approved Facility and
any Substitute Facility and the aggregate amount of the additional
charge paid by Buyer to Producer relating to the Streator Addition.
e. If on the anniversary date of the Commencement Date each year, the
aggregate amount of the building amortization charge on each case of
Products sold during such year is less than $240,000, Buyer shall pay
to Producer the difference between the aggregate amount of the
building amortization charge and $240,000, which amount shall be paid
within ten (10) days of the anniversary date of the Commencement Date.
16 WARRANTIES OF PRODUCER REGARDING QUALITY OF PRODUCT AND CONFORMANCE TO
SPECIFICATIONS.
a. Producer agrees and warrants to Buyer that Producer has and will
adhere to all laws, regulations, orders, ordinances and industry
standards relating to Producer's manufacture, packaging, labeling and
sale of the Products, including those specifically relating to the
manufacture and packaging of foodstuffs and the Federal Food, Drug and
Cosmetic Act; that each unit of the Products will meet the
Specifications therefor and, upon delivery to Buyer, will be free of
all defects of manufacture, handling, packaging and processing.
b. Producer warrants that it has obtained, or prior to the time it
commences production of the Products will have obtained, any
governmental approvals required in connection with the production and
sale of the Products, and will furnish copies or other evidence
satisfactory to Buyer of all such approvals upon the request of Buyer.
c. Producer warrants that all raw materials and packaging materials for
the manufacturing and packaging of the Products will be sampled and
tested by Producer in accordance with its obligations under this
Agreement, including those contained in Section 17 of this Agreement.
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d. At Producer's request, Buyer shall make reasonable amounts of each
allegedly defective or nonconforming unit of the Product available for
Producer's inspection or shall, if so directed by Producer, return, at
Producer's cost and expense, each such unit of the Product to an
Approved Facility of the Producer.
e. In the event of Producer's breach of the covenants or warranties set
forth in this Section 16, Producer shall, at Buyer's option, either
(i) replace the defective or nonconforming units of the Product at
Producer's sole cost and expense and deliver the replacement units of
the Product to Buyer within 20 days, or (ii) permit Buyer, at
Producer's sole cost and expense, to return the defective or
nonconforming units of the Product and, if payment therefor has
already been made, credit the price thereof to Buyer, together with
all incidental damages incurred by Buyer in connection with such
return. Buyer shall have no obligation to accept delivery or take
possession of any defective or nonconforming Product from Producer.
The remedies of Buyer set forth in this Section 16(e) for breach of
any of the warranties and covenants in Section 16 by Producer are the
sole and exclusive remedies of Buyer for any such breach by Producer.
f. THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES EXCEPT THAT OF TITLE, WHETHER WRITTEN, ORAL OR IMPLIED, IN
FACT OR IN LAW (INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
17. QUALITY ASSURANCE INSPECTIONS AND TESTING
a. Representatives of Buyer shall have the right to inspect, at
reasonable times and upon prior notice, the Approved Facilities and to
observe its procedures prior to and during the period of
manufacturing, packaging, storing and handling the Products. Producer
reserves the right to guide such inspections in order to protect the
confidential nature of other products being manufactured by Producer.
b. Producer shall be responsible for routine quality assurance of the
Products at the time of manufacture and, in the fulfillment of such
obligations, shall apply quality assurance tests, procedures and
methods in accordance with the Specifications.
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18. INSPECTIONS, ACCEPTANCE AND RETURNS.
a. Product not rejected within thirty (30) days after title passes to
Buyer will be deemed accepted by Buyer. If, after any inspection,
Buyer attempts to reject any Product, Buyer shall specify all claimed
non-conformity in a notice of rejection sent to Producer. Product
rejected by Buyer shall be returned in substantially the same
condition as when title passed to Buyer. Nothing contained in this
Agreement shall relieve in any way Producer from the obligation of
testing, inspection and quality control.
19. FORCE MAJEURE; PRODUCTION AT SUBSTITUTE FACILITIES
a. In the event of strikes; war; civil insurrection; riots; thefts;
inability to obtain necessary labor, materials, components, fuel or
transportation; changes in the Specifications; fire; flood;
earthquake; or other act of God or other cause beyond the control of
the parties hereto which renders it impracticable for either party to
comply with the terms of this Agreement (a "Force Majeure Event"),
except as otherwise set forth herein, no liability for non-compliance
caused thereby during the continuance thereof will exist or arise
under this Agreement.
b. If a Force Majeure Event occurs, the party who is unable to perform
as a result of such event shall immediately notify the other party,
which other party may suspend its obligations hereunder for a period
equal to the Force Majeure Event. In addition, if, within 90 days
after the occurrence of the Force Majeure Event, the party who was
unable to perform as a result of such event is still unable to perform
in accordance with this Agreement, the other party may terminate this
Agreement upon written notice to the party who is unable to perform in
accordance with this Agreement.
c. If a Force Majeure Event occurs, the party who is unable to perform as
a result of such event agrees that it shall use its best efforts to
eliminate the cause of such event or otherwise take actions so that it
is able to perform under this Agreement as promptly as is reasonably
practicable. Notwithstanding the foregoing, if a Force Majeure Event
prevents Producer from performing any of its obligations hereunder and
such Force Majeure Event could be cured by Producer incurring
additional costs (e.g., if there were a strike and the strike could be
resolved by Producer's meeting the demands of its employees), Producer
shall have no obligation to cure such Force Majeure Event by the
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incurrence of additional costs in connection with the production of
the Products unless Buyer agrees to pay such additional costs.
d. If a Force Majeure Event occurs that directly affects fewer than all
of the Approved Facilities of the Producer (e.g., a fire at only one
of the Approved Facilities), Producer agrees that, if, as a result of
the Force Majeure Event, Producer is unable to produce from an
Approved Facility the amount of the Monthly Production Request for any
particular line of Product that the Monthly Production Request
contemplates being produced from such Approved Facility, Producer
shall use its best efforts to produce the amount at a Substitute
Facility in a manner that is consistent with its obligations to other
customers. The price charged to the Buyer for the Product produced at
the Substitute Facility shall be the unit price for producing such
Product at the Substitute Facility.
e. If a Force Majeure Event occurs that directly affects fewer than all
of the Approved Facilities of the Producer, Producer agrees that, in
the event that the transfer of production of Products to a Substitute
Facility creates production capacity problems at the Substitute
Facility, Producer shall in good faith take reasonable steps to meet
the production requirements of the Buyer under this Agreement in a
manner consistent with Producer's obligations to other customers. In
addition, Producer agrees that, in the event of a production capacity
problem at a Substitute Facility as a result of a Force Majeure Event
that directly affects fewer than all of the Approved Facilities of the
Producer, Producer shall fairly and in good faith allocate production
capacity at the Substitute Facility among Buyer and other customers
who have outstanding production contracts with Producer.
20. INDEMNIFICATION.
a. Producer will indemnify and hold harmless Buyer and its
representatives, stockholders, controlling persons, and affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to
the Buyer Indemnified Persons, the amount of, any loss, liability,
claim, damage, cost and expense (including costs of investigation and
defense and reasonable attorneys' fees), (collectively, "Damages"),
incurred by the Buyer Indemnified Persons involving a third-party
claim arising, directly or indirectly, from or in connection with any
injury (including death) to person
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or property to the extent proximately caused by the Producer's breach
of this Agreement, negligence or willful misconduct.
The remedies provided in this Section 20(a) will not be exclusive of
or limit any other remedies that may be available to Buyer or Buyer
Indemnified Persons.
b. Buyer will indemnify and hold harmless the Producer and its
representatives, stockholders, controlling persons and affiliates
(collectively, the "Producer Indemnified Persons") for, and will pay
to the Producer Indemnified Persons, the amount of any Damages
incurred by the Producer Indemnified Persons involving a third-party
claim arising, directly or indirectly, from or in connection with any
injury (including death) to person or property to the extent
proximately caused by the Buyer's breach of this Agreement,
negligence or willful misconduct.
The remedies provided in this Section 20(b) will not be exclusive of
or limit any other remedies that may be available to Producer or the
Producer Indemnified Persons.
c. Promptly after receipt by an indemnified party under Section 20(a) or
20(b) of notice of the commencement of any proceeding against it, such
indemnified party will, if a claim is to be made against an
indemnifying party under any such Section, give written notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
d. If any proceeding referred to in Section 20(c) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it
wishes (unless (i) the indemnifying party is also a party to such
proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party
of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the
defense of such proceeding with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party
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of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this
Section 20 for any fees of other counsel or any other expenses with
respect to the defense of such proceeding subsequently incurred by the
indemnified party in connection with the defense of such proceeding.
If the indemnifying party assumes the defense of a proceeding, (i) no
compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent (which
consent shall not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of legal requirements or any
violation of the rights of any person and no effect on any other
claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (ii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying
party of the commencement of any proceeding and the indemnifying party
does not, within ten days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume
the defense of such proceeding, the indemnifying party will be bound
by any determination made in such proceeding or any compromise or
settlement effected by the indemnified party.
e. Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a proceeding
may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend, compromise,
or settle such proceeding, but the indemnifying party will not be
conclusively bound by any determination of a proceeding so defended or
any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
21. INSURANCE. During the Agreement Term, Producer agrees to maintain insurance
against public liability which may arise out of, relate to or be caused by
the Products insurance in an amount of not less than $2 million per
occurrence. Producer will maintain at all times during the Agreement Term
product liability insurance in an amount of not less than $5 million per
occurrence. In addition, Producer shall maintain liability umbrella
coverage of not less than $5 million. Producer shall deliver to Buyer
certificates of insurance issued by the insurance
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carriers adding the Buyer as an additional insured on all such policies.
Each such certificate shall provide that such insurance shall not be
canceled without fifteen days prior written notice to the Buyer.
22. TERMINATION.
a. If either party shall breach any of the provisions of this Agreement
and such breach shall continue for a period of thirty (30) days after
the receipt of written notice specifying the breach to such party, or
should either party (i) file or have filed against it a bankruptcy
petition (which, in the case of a petition filed against a party, is
not thereafter dismissed within sixty days after the filing of the
petition against the party) or (ii) enter into any type of proceeding
under and pursuant to the insolvency or receivership laws of any state
or (iii) make a general assignment for the benefit of creditors or
(iv) a Force Majeure Event occurs that gives rise to a right of
termination under Section 19, then, and in any such events, the other
party shall have the right to terminate this Agreement by giving
written notice to that effect to such party, with termination becoming
effective upon the date set forth therein. If this Agreement is
terminated as a result of a breach of any of the provisions of this
Agreement by Buyer or as a result of the occurrence of an event
identified in clause (i), (ii), (iii) or (iv) of this Section 22(a),
Buyer shall pay to Producer, in addition to any other remedies or
damages available to Producer at law or equity, within thirty days
after such termination, the unpaid balance of the amount that Buyer
would have paid pursuant to Section 15(d) of this Agreement for the
Streator Addition.
b. Subject to the provisions of Section 3 of this Agreement, on and after
the second anniversary of the Commencement Date, Buyer may terminate
this Agreement entirely, or terminate the Agreement as it relates to
production of Products at a particular Approved Facility, at any time
upon one hundred eighty days prior written notice to the Producer. If
the Buyer terminates this Agreement entirely pursuant to this Section
22(b), within thirty days after such termination, Buyer shall pay to
Producer as a termination fee the unpaid balance of the amount that
Buyer would have paid pursuant to Section 15(d) of this Agreement for
the Streator Addition.
c. The termination of this Agreement shall not relieve either party of
any obligation or liability accrued prior to termination, or rescind
or give rise to any right to rescind anything done by either party
prior to such termination. The termination of this
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Agreement shall not in any way affect the confidentiality and non-use
obligations under Section 6 of this Agreement or any other obligations
which are expressly stated herein to be continuing or are by their
nature continuing.
d. Upon the effective date of a complete termination of this Agreement:
(i) The license provided for in Section 5 shall terminate.
(ii) Producer shall:
(a) cease any use of the Confidential Information of Buyer;
(b) return to Buyer or destroy all tangible forms of the
Confidential Information of Buyer;
(c) make available for purchase by the Buyer at Producer's cost
all packaging materials and other items of inventory that,
pursuant to Section 9(c), are tailored exclusively for the
Products;
(d) return to Buyer, at Buyer's sole cost and expense, all of
Manufacturing Equipment installed in any of the Approved
Facilities and provide access during normal business hours
to any representatives of Buyer to any such facilities for
the removal of such equipment from the facilities of the
Producer; and
(e) make available for delivery to Buyer any finished Product
inventory maintained by Producer.
(iii) Buyer shall:
(a) within ten days after such termination, purchase at
Producer's cost all packaging materials and other items of
inventory that, pursuant to Section 9(c), are tailored
exclusively for the Products and that are in good and usable
condition;
(b) within thirty days after such termination, remove at Buyer's
cost and expense, all of Manufacturing Equipment installed
in any of the Approved Facilities and repair all damage
caused to any of the
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<PAGE>
Approved Facilities in connection with the removal of such
equipment;
(c) within ten days after such termination, purchase any
finished Product inventory maintained by Producer;
(d) cease any use of the Confidential Information of Producer;
and
(e) return to Producer or destroy all tangible forms of the
Confidential Information of Producer.
.
(iv) Producer shall make conforming deliveries under the terms of this
Agreement for any then-outstanding Orders; and
(v) All sums owed Producer by Buyer shall become immediately due and
payable.
23. MISCELLANEOUS.
a. Notice. Notices permitted or requested to be given hereunder shall be
in writing and shall be deemed effective, if given by registered or
certified mail, postage prepaid, ten (10) days after deposit thereof
with the appropriate postal authorities, if given by nationally
recognized express courier which provides a receipt of delivery, on
the date delivery is completed, and if given by confirmed telecopier,
on the date of transmittal, and in all cases addressed to:
It to Producer: The Red Wing Company, Inc.
196 Newton Street
Fredonia, New York 14063
Attention: Gene Bailen, President
Facsimile: (716) 679-7702
If to Buyer: MBW Foods, Inc.
445 Hutchinson Avenue
Suite 960
Columbus, Ohio 43235
Attention: Thomas J. Ferraro
Facsimile: (614) 436-6655
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<PAGE>
b. Assignment. Neither party shall assign this Agreement without the
prior written consent of the other party; provided, however, that
either party may assign this Agreement without the written consent of
the other party in connection with the sale of all or substantially
all of the assets of such assigning party.
c. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties and supersedes all prior or
contemporaneous agreements and understandings whether written, oral or
implied between Buyer and Producer or their affiliates with respect to
the subject matter hereto.
d. Amendment. Except for any Specifications that are furnished by Buyer
to Producer from time to time after the date hereof, and which shall
become a part of this Agreement, this Agreement may not be amended,
superseded or altered except by an instrument in writing duly executed
and delivered on behalf of each of the parties hereto.
e. Waiver. No failure or delay on the part of either party hereto to
exercise any right, privilege or power under this Agreement shall
operate as a waiver or relinquishment thereof; nor shall any single or
partial exercise by either party preclude any other or further
exercise thereof, or the exercise of any other right, privilege or
power.
f. Severability. The provisions of this Agreement are separate and
divisible and if any court of competent jurisdiction shall determine
any provision of this Agreement to be void and/or unenforceable, the
remaining provision or provisions shall be construed as if the void
and/or unenforceable provision or provisions were not included in the
Agreement.
g. Non-Exclusive Agreement. This Agreement is not an exclusive agreement
and Buyer may, without limitation, manufacture the Products itself or
may enter into an agreement with other parties for the manufacture of
such Products.
h. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio.
i. Independent Contractors. The parties are independent contractors.
Nothing contained herein shall be deemed to create the relationship of
partnership or joint venture between the
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<PAGE>
parties. Neither party shall have the right to incur any obligation
to third parties which shall be binding upon the other.
24. LIMITATION OF LIABILITY FOR CONSEQUENTIAL DAMAGES. Except as may arise
pursuant to the indemnification provided by Section 20 of this Agreement,
neither party shall be liable for consequential damages (including lost
profits or lost revenues) of any kind resulting from a breach of this
Agreement by a party.
25. RIGHT OF FIRST OPPORTUNITY. Buyer hereby agrees that, during the Agreement
Term, Buyer shall provide Producer with a right of first opportunity to bid
or otherwise quote Buyer for the production of any products owned,
developed or acquired by Buyer that are not currently set forth on Schedule
A and that are within the production or packing expertise of Producer,
including, without limitation, any products from the Log Cabin line of
products in the event such products are acquired by Buyer. Buyer shall
also provide Producer with the first opportunity to produce Products on the
terms and conditions set forth in this Agreement that may be in excess of
the 350,000 equivalent case cap that is set forth in Section 10(b) of this
Agreement. Producer shall promptly respond to any request from Buyer for
a bid or quote on any such products or to produce Products in excess of the
Monthly Production Request cap set forth in Section 10(b) of this
Agreement.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their respective duly authorized representative to be effective as
of the date first set forth above.
MBW FOODS, INC. THE RED WING COMPANY, INC.
("Buyer") ("Producer")
By /s/ Thomas J. Ferraro By /s/ Eugene W. Bailen
---------------------- ---------------------
Its President Its President
---------------------- ----------------------
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<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 16, 1997, by and between AURORA
FOODS INC. (the "Company"), a Delaware corporation, and Dirk C. Grizzle (the
"Employee").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Company desires to employ the Employee and the Employee desires to accept
employment by the company,
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. The term of this Agreement shall commence on or
before June 30, 1997 hereof and shall continue in effect through June 30, 1998,
unless earlier terminated pursuant to Section 6 below (the "Term"); provided
that (I) on the first anniversary of the date hereof, the Term of this Agreement
shall be automatically extended for an additional 6-month period and each day
thereafter the Term shall be automatically extended by a day so that the Term
remaining under the Agreement shall remain at 6 months.
3. Duties; Extent of Services; Office and Location.
(a) Duties. During the Term, the Employee shall serve as Chief
Financial Officer of the Company and shall report to and carry out the lawful
directions of the President of the Company. The Employee shall perform the
duties, undertake the responsibilities and exercise the authority reasonably
required of such an employee of the Company, and shall have such other powers
and perform such additional executive duties as may be assigned to him from time
to time by the President of the Company.
(b) Extent of Services. Except for illness and permitted vacation
periods, during the Term the Employee shall (I) devote his full time and
attention during normal business hours to the businesses of the Company and its
subsidiaries and Affiliates (as defined herein); (ii) use his best efforts to
promote the interests of the Company and its subsidiaries and Affiliates; (iii)
discharge such executive and administrative duties not inconsistent with his
position as may be assigned to him by the President; and (iv) serve, without
additional compensation, as a director or officer of any subsidiary of the
Company if elected as such.
<PAGE>
EXHIBIT 10.17
Page 2
(c) Office and Location. Employee shall perform services for the
Company from the Company's corporate headquarters.
4. Compensation.
(a) Base Salary. In consideration of the services rendered by the
Employee hereunder and provided that the Employee has substantially performed
all of his obligations provided for herein, the Company will pay to the Employee
a base salary (the "Base Salary") at the rate of $120,000 per year during the
Term. The Base Salary may be increased from time to time in the amount mutually
agreed to by the Employee and the Company to reflect the performance of the
Employee and additional responsibilities undertaken by the Employee. The Base
Salary shall be paid in accordance with the Company's normal payroll practice.
(b) Base Bonus. For so long as the Employee is the C.F.O. of the
Company, the Company shall pay the Employee a bonus with respect to each fiscal
year or portion thereof during the Term in accordance with the following
provisions:
(i) If the Financial Results of the Company for a fiscal year
during the Term are at least 90% but less than 95% of the EBITDA Target for such
year, Employee shall be paid an amount equal to 20% of so much of his Base
Salary as was paid with respect to such year.
(ii) If the Financial Results of the Company for a fiscal year
during the Term are at least 95% but less than 100% of the EBITDA Target for
such year, Employee shall be paid an amount equal to 30% of so much of his Base
Salary as was paid with respect to such year.
(iii) If the Financial Results of the Company for a fiscal
year equal or exceed 100% of the EBITDA Target for such year, Employee shall be
paid an amount equal to 40% of so much of his Base Salary as was paid with
respect to such year.
(c) Supplemental Bonus. In addition to the Base Bonus, if any, to
which the Employee may be entitled under clauses (I), (ii) or (iii) of Section
4(b), for so long as the Employee is the C.F.O. of the Company, the Company
shall pay the Employee a bonus with respect to such fiscal year or portion
thereof during the Term in accordance with the following provisions.
(i) If the Financial Results of the Company for a fiscal year
during the Term are at least 105%, but less than 110% of the EBITDA Target for
such year, Employee shall be paid an amount equal to 5% of so much of his Base
Salary as was paid with respect to such year.
2
<PAGE>
EXHIBIT 10.17
Page 3
(ii) If the Financial Results of the Company for a fiscal year
during the Term are at least 110%, but less than 115% of the EBITDA Target for
such year, Employee shall be paid an amount equal to 10% of so much of his Base
Salary as was paid with respect to such year.
(iii) Fi the Financial Results of the Company for a fiscal
year during the Term are at least 115% but less than 120% of the EBITDA Target
for such year, Employee shall be paid an amount equal to 15% of so much of his
Base Salary as was paid with respect to such year.
(iv) If the Financial Results of the Company for a fiscal year
during the Term equal or exceed 120% of the EBITDA Target for such year, the
Employee shall be paid an amount equal to 20% of so much of his Base Salary as
was paid with respect to such year.
(d) For the purpose of this Agreement (1) the term 'EBITDA Target"
shall mean the Company's projected earnings before interest, taxes,
depreciation and amortization, as contained in the Company's annual budget
which is approved by the Board of Directors of the Company (the "Board")
(without reference to any adjustments or revision, upwards or downwards, to
such projected earnings which are subsequently approved by the Board as part
of any subsequent revision to such annual budget), (2) the term 'Financial
Results" shall mean the Company's annual financial results reflected in the
Company's annual audited financial statements and (3) the Company's 1997
fiscal year shall be deemed to have begin on December 31, 1996.
(e) Any bonus due under Section 4(b) and (c) shall be paid to the
Employee within 30 days of the publication of the Company's annual audited
financial statements for the relevant year.
(f) Employee shall be entitled to receive a bonus (if any) with
respect to a fiscal year during the Term pursuant to the terms of Section
4(b) and (c) of this Agreement if the Employee shall be employed by the
Company on the last day of such fiscal year. Such entitlement shall not
thereafter be affected by the subsequent termination of Employee's employment
with the Company pursuant to any provision of Section 6 of this Agreement.
5. Other Employee Benefits.
(a) During the Term, the Employee shall be entitled (I) to vacation
time in accordance with the Company's policy from time to time in effect;
(ii) to participate in all employee insurance and other fringe benefit
programs, including, without limitation, life, health, dental and accident
insurance plans and long term disability now or hereafter maintained by the
Company for senior executive or other salaried personnel for which the
Employee is eligible; and (iii) to participate in a pension plan with terms
similar to those applicable to executives of the Company.
3
<PAGE>
EXHIBIT 10.17
Page 4
(b) As of the date hereof, MBW Investors LLC will issue to Employee 8
Class D Units. Employee understands that these Class D Units are part of an
aggregate of 100 Class D Units issued or to be issued to operating management of
the Company. Employee understands that, in the discretion of the Chairman of
MBW Investors LLC, additional Class D Units may be issued to Employee. Employee
further understands that, as provided in the LLC Agreement, Class D Units in
addition to the initial 100 Class D Units may be issued by MBW Investors LLC to
other persons. Employee agrees to execute such documents as may be required or
reasonable requested by the Company of MBW Investors LLC in connection with the
issuance of Class D Units to Employee.
(c) It is contemplated that Employee shall have the opportunity to
purchase certain Class A Units (as defined in the LLC Agreement) of MBW
Investors LLC. It is also contemplated any such purchase of Class A Units would
be subject to a minimum investment of $25,000 with the maximum investment to be
determined by MBW Investors LLC. It is further contemplated that the Company
would loan to the Employee up to $75,000 for the purpose of purchasing Class A
Units and that any such loan would be repaid over a three year period with
interest paid quarterly. Employee understands, however, that the timing and the
terms and conditions of the opportunity, if any, to purchase Class A Units shall
be solely determined in the discretion of MBW Investors LLC.
6. Termination Provisions.
(a) Termination for Cause. The President or the Board may
terminate the Employee's employment hereunder for Cause, as hereinafter
defined, immediately upon written notice to the Employee. For purposes of
this Agreement, "Cause" shall mean (1) embezzlement, theft or other
misappropriation of any property of the Company or any Affiliate, (ii) gross
or willful misconduct resulting in substantial loss to the Company or any
Affiliate or substantial damage to the reputation of the Company or any
Affiliate, (iii) any act involving moral turpitude which results in a
conviction for a felony involving moral turpitude, fraud or
misrepresentation, (iv) gross neglect of his assigned duties to the Company
or any Affiliate (v) gross breach of his fiduciary obligations to the Company
or any Affiliate, or (vi) any chemical dependence which materially affects
the performance of his duties and responsibilities to the Company or any
Affiliate; provided that in the case of the misconduct set forth in clauses
(iv) and (vi) above, such misconduct shall continue for a period of 30 days
following written notice thereof by the Company to the Employee. During the
Term, the Employee shall be entitled to only one such notice and right to
cure for any single act or event. If the Employee's employment is terminated
for Cause, the Employee shall be entitled to receive only the unpaid portion
of the Base Salary then in effect which has accrued to the date of
termination, any other payments generally available to departing employees of
the Company (such as unused vacation and personal days) and any bonus
pursuant to Section 4 for the preceding fiscal year which has not been paid
as of the date of such termination. The Employee shall not be entitled to
receive any severance
4
<PAGE>
EXHIBIT 10.17
Page 5
payment with respect to such termination.
(b) Termination By Reason of Permanent Disability. If at any time
during the Term the Employee has been unable, as a result of physical or
mental illness or incapacity, to perform his duties hereunder for a period of
four consecutive months or for an aggregate of more than six months in any
twelve month period (a "Permanent Disability"), the Employee's employment
hereunder may be terminated by the President or the Board upon thirty days'
written notice to the Employee. If the Employee's employment is terminated
by reason of Permanent Disability, the Employee shall be entitled to receive
only the unpaid portion of the Base Salary then in effect which has accrued
to the date of termination, plus any other payments generally available to
departing employees of the Company (such as unused vacation and personal
days), plus any bonus pursuant to Section 4 for the preceding fiscal year
which has not been paid as of the date of such termination, plus an amount
equal to six months of Employee's Base Salary.
(c) Termination By Reason of Death. The Employee's employment
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate in addition to the unpaid portion of the Base Salary
then in effect through date of Employee's death plus an amount equal to six
months of Employee's Base Salary plus any other payments generally available
to departing employees of the Company (such as unused vacation and personal
days), plus any bonus pursuant to Section 4 for the preceding fiscal year
which has not been paid as of the date of the Employee's death. Such amount
shall be paid within thirty days after the date of his death if a personal
representative has been appointed by the end of such thirty day period or, if
a personal representative has not bee appointed by the end of such thirty day
period, promptly after a personal representative has been appointed.
(d) Termination Without Cause. The President or the Board may
terminate the Employee's employment hereunder at any time for any reason
without Cause in which case the Employee shall be entitled to receive an
amount (the "Severance Amount") equal to the Base Salary the Employee would
have been entitled to receive through the end of the then current Term
(without giving effect to any future extension pursuant to Section 2 hereof).
The Severance Amount shall be in lieu of any other severance payment to
which Employee may be otherwise entitled under any other severance plan
maintained by the Company. The Severance Amount shall be paid within 30 days
of such termination. In addition, the Employee shall be entitled to receive
any other payments generally available to departing employees of the Company
(such as unused vacation and personal days), plus any bonus pursuant to
Section 4 for the preceding fiscal year which has not been paid as of the
date of such termination, plus, to the extent the Company achieves the
required percentage of the EBITDA Target for the fiscal year in which such
termination occurs.
5
<PAGE>
EXHIBIT 10.17
Page 6
(e) Termination by Employee. Notwithstanding any other provisions
of this Agreement, Employee shall have the right to terminate the employment
relationship under this Agreement at any time prior to the expiration of the
Term for any of the following reasons: (i) a material breach by the Company
of any provision of this Agreement that remains uncorrected for 30 days
following written notice of such breach by Employee to the Company or (ii)
for any other reason whatsoever, in the sole discretion of the Employee, upon
90 days prior written notice to the Company. If the Employee terminates his
employment with the Company pursuant to clause (I) of this Section 6(e), the
Employee shall be entitled to receive the Severance Amount plus any other
payments generally available to departing employees of the Company (such as
unused vacation and personal days), plus any bonus pursuant to Section 4 for
the preceding fiscal year which has not been paid as of the date of such
termination. If the Employee terminates his employment with the Company
pursuant to clause (ii) of this Section 6(e), the Employee shall be entitled
to receive the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination plus any other payments generally
available to departing employees of the Company (such as unused vacation and
personal days), plus any bonus pursuant to Section 4 for the preceding fiscal
year which has not been paid as of the date of such termination.
7. Covenants of the Employee.
(a) Non-Competition. Until the later of (x) the first anniversary
of the date of the termination of the Employee's employment hereunder and (y)
the end of the then current Term in effect on the date of such termination,
the Employee shall not, directly or indirectly, be associated with any entity
which competes with the Company of any of its Affiliates that are
subsidiaries of MBW Investors LLC or for which the Employee renders
substantial services and whose primary business is, or personally engage in,
the same or similar grocery product line of business of the Company or any of
its Affiliates, whether as a director, officer, employee, agent, consultant,
partner, owner, independent contractor or otherwise. For the purpose of this
Agreement, the term "Affiliate" means, with respect to the Company, any
person or entity which, directly or indirectly, controls, is controlled by or
under common control with the Company, with "control" to be based on the
ownership of 50% or more of the voting securities (or their equivalent) of a
particular entity.
(b) Non-Solicitation of Employees of the Employer. Until the later
of (x) the first anniversary of the date of the termination of the employment
of the Employee hereunder and (y) the end of the then current Term in effect
on the date of such termination, the Employee shall not, and shall cause each
business or entity with which he shall become associated in any capacity not
to, solicit for employment or employ any person who is then, or who was at
any time after the date four months prior to the date of such termination,
employed in a professional or managerial position by the Company, its
subsidiaries or Affiliates.
6
<PAGE>
EXHIBIT 10.17
Page 7
(c) Confidentiality. The Employee agrees and acknowledges that the
Confidential Information (as hereinafter defined) of the Company and its
subsidiaries and affiliates, is valuable, special and unique to their
business, that such business depends on such Confidential Information; and
that the Company wishes to protect such Confidential Information by keeping
it confidential for the use and benefit of the Company and its subsidiaries
and Affiliates. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) The Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and Affiliates.
(ii) The Employee agrees that, except as required by applicable
law or as authorized in writing by the Board, he will not at any time during
or after the termination of his employment hereunder, disclose, directly or
indirectly, any Confidential Informat8ion of the Company or any of its
subsidiaries or Affiliates;
(iii) The Employee agrees to take all reasonable steps
necessary, or reasonably required by the Company, to ensure that all
Confidential Information is kept confidential for the use and benefit of the
Company and its subsidiaries and Affiliates; and
(iv) The Employee agrees that, upon termination of his
employment hereunder or at any other time the Company may in writing so
request, he will promptly deliver to the Company all materials constituting
confidential Information (including all copies thereof) that are in his
possession or under his control. The Employee further agrees, that if
requested by the Company, to return any Confidential Information pursuant to
this subparagraph (iv), he will not make or retain any copy or extract from
such materials.
For purposes of paragraph (c) of this Section 7, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or Affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment
with the Company that is (A) not generally known in any industry in which the
Company or any of its subsidiaries or Affiliates is or may become engaged or
(b) not publicly available. Confidential Information includes, but is not
limited to, any and all information developed by or for the Company or any of
its subsidiaries or Affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices,
plans for development of products, services or expansion into new areas or
markets, internal operations, and any trade secrets and proprietary
information of any type owned by the Company or any of its subsidiaries or
Affiliates, together with all written, graphic and other materials relating
to all or any part of the same.
7
<PAGE>
EXHIBIT 10.17
Page 8
8. Successors: Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a merger, consolidation or sale of all or substantially all
of the business or assets of the Company. This Agreement shall be binding
upon and shall inure to the benefit of the Company and its successors and
assigns.
(b) The Employee. Neither this Agreement nor any right or interest
hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 8 shall preclude (I) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives
of the Employee or his estate from assigning any rights hereunder to
distributees, legatees, beneficiaries, testamentary trustees or other legal
heirs of the Employee.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return
receipt requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
AURORA Foods, Inc.
Community Corporate Center
445 Hutchinson Avenue
Columbus, OH 43235
with a copy to:
MBW Investors LLC
c/o Dartford Partnership, L.L.C.
801 Montgomery Suite
Suite 400
San Francisco, CA 94133
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street, 31st Floor
New York, NY 10022
Attention: Charles Ayres
(ii) If to the Employee:
8
<PAGE>
EXHIBIT 10.17
Page 9
1151 Nautilus Place
Westerville, Ohio 43082
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
10. Governing Law: Jurisdiction. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the State of Ohio applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of
the parties to this Agreement or any dispute arising out of this Agreement or
any matter related hereto may be brought in the courts of the State of Ohio
or in the United States District Court for the Southern District of Ohio,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement.
The foregoing consent to jurisdiction shall not be deemed to confer rights on
any person other than the respective parties to this Agreement.
11. Expenses. If a dispute arises out of or related to this Agreement,
if either party to the Agreement brings legal action to enforce the terms of
the Agreement, the party who prevails in such legal action, whether plaintiff
or defendant, in addition to the remedy or relief obtained in such legal
action, shall be entitled to recover his or its expenses incurred in such
legal action, including without limitation, court costs and attorneys fees.
A party shall be deemed to have prevailed in such a legal action if such
action is concluded pursuant to a court order or final judgment in favor of
such party which is not subject to appeal, a settlement agreement or
dismissal of the principal claims.
12. Entire Agreement. This Agreement contains the entire agreement of
the parties and their Affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and
understandings, written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons, property or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall remain
valid and enforceable to the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees that
the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 7 hereof relate to special, unique and extraordinary
matters and are
9
<PAGE>
EXHIBIT 10.17
Page 10
reasonable and necessary to protect the legitimate interests of the Company
and its subsidiaries and Affiliates and that a breach of any of the terms of
such covenants and obligations will cause the Company irreparable injury for
which adequate remedies at law are not available. therefore, the Employee
agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies under
the Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required
to deduct under applicable law.
16. Amendments, Miscellaneous, etc.. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument. The headings contained in the Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
17. Survival. The covenants set forth in Sections 4(f), 6 and 7 of this
Agreement shall survive and shall continue to be binding upon the parties
notwithstanding the termination of this Agreement for any reason whatsoever.
The covenants set forth in Section 7 of this Agreement shall be deemed and
construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by the Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first written above.
AURORA FOODS INC.
By: /s/ Thomas J. Ferraro
--------------------------
Name: Thomas J. Ferraro
Title: President
10
<PAGE>
EXHIBIT 10.17
Page 11
/s/ Dirk C. Grizzle
-------------------------
Dirk C. Grizzle
<PAGE>
EXHIBIT 12.1
AURORA FOODS INC.
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 28,
1996 1997
-------------- --------------
<S> <C> <C>
Company Pro Forma:
Earnings were calculated as follows:
Income before taxes............................................................. $ 4,144 $ 5,933
Add: Fixed charges.............................................................. 27,938 13,970
-------------- --------------
Earnings........................................................................ $ 32,082 $ 19,903
-------------- --------------
-------------- --------------
Fixed charges were calculated as follows:
Interest expense(a)............................................................. $ 27,893 $ 13,947
Portion of rentals attributable to interest..................................... 45 23
-------------- --------------
Fixed charges................................................................... $ 27,938 $ 13,970
-------------- --------------
-------------- --------------
Ratio of earnings to fixed charges................................................ 1.1 1.4
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(a) Interest expense includes commitment fee on revolving facility and
amortization of debt issuance costs.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 (File No. 333-24715) of Aurora Foods Inc. of
our report dated March 28, 1997 relating to the balance sheet of MBW Foods Inc.
and our report dated March 14, 1997 relating to the financial statements of Mrs.
Butterworth's Business, which appear in such Prospectus. We also consent to the
references to us under the headings "Experts" and "Selected Historical Financial
Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP
has not prepared or certified such "Selected Historical Financial Data."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Francisco, California
August 21, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-24715) of our report dated August 20, 1997, on our audits of the
statements of assets to be acquired of the Log Cabin Syrup Business, a component
of Kraft Foods, Inc., as of December 28, 1996 and December 30, 1995, and the
statements of operations for the years ended December 28, 1996, December 30,
1995 and December 31, 1994. We also consent to the reference to our firm under
the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Chicago, Illinois
August 21, 1997
<PAGE>
Exhibit 25.2
Registration No.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
AURORA FOODS INC.
(Exact name of obligor as specified in its charter)
Delaware 13-3921934
(State of incorporation) (I.R.S. employer identification no.)
Community Corporate Center
445 Hutchison Avenue
Columbus, Ohio 43235
(Address of principal executive offices) (Zip Code)
9 7/8% Series D Senior Subordinated Notes due 2007
(Title of the indenture securities)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
Exhibit 25.2
Page 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 18th
day of August, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ James P. Lawler
---------------------------- -----------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
<PAGE>
Exhibit 25.2
Page 3
3
<PAGE>
Exhibit 25.2
Page 4
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Exhibit 25.2
Page 1
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "Wilmington Trust Company" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
<PAGE>
Exhibit 25.2
Page 2
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the United
States or of this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other
2
<PAGE>
Exhibit 25.2
Page 3
persons and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes, vaults and
other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian,
3
<PAGE>
Exhibit 25.2
Page 4
bailee, or in any other trust capacity, it shall not be required to
give bond with surety, but its capital stock shall be taken and held
as security for the performance of the duties devolving upon it by
such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or deeds of
trust or mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such bonds,
as and when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property of
any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
4
<PAGE>
Exhibit 25.2
Page 5
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
5
<PAGE>
Exhibit 25.2
Page 6
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or
6
<PAGE>
Exhibit 25.2
Page 7
other class of stock and whether such dividends shall be cumulative
or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may be
fixed in accordance with the
7
<PAGE>
Exhibit 25.2
Page 8
provisions of section (b) of this Article Fourth, then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other
8
<PAGE>
Exhibit 25.2
Page 9
series of Preferred Stock shall, in each case, be as fixed from time to
time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in section (b) of this Article Fourth and
the consent, by class or series vote or otherwise, of the holders of such
of the series of Preferred Stock as are from time to time outstanding
shall not be required for the issuance by the Board of Directors of any
other series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and rights of such
outstanding series, or any of them; provided, however, that the Board of
Directors may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater proportion
as shall be therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other series of
Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
9
<PAGE>
Exhibit 25.2
Page 10
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations
10
<PAGE>
Exhibit 25.2
Page 11
which are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the
11
<PAGE>
Exhibit 25.2
Page 12
Corporation, and shall have power to authorize the seal of the Corporation
to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
12
<PAGE>
Exhibit 25.2
Page 13
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
13
<PAGE>
Exhibit 25.2
Page 14
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or
14
<PAGE>
Exhibit 25.2
Page 15
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
15
<PAGE>
Exhibit 25.2
Page 16
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
16
<PAGE>
Exhibit 25.2
Page 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
Exhibit 25.2
Page 1
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place
of such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of
any business, but the holders of a small number of shares may adjourn, from
time to time, without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall be entitled
to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
<PAGE>
Exhibit 25.2
Page 2
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
2
<PAGE>
Exhibit 25.2
Page 3
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and
in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of
the Executive Committee or at the call of the Chairman of the Board of
Directors. The majority of its members shall be necessary to constitute a
quorum for the transaction of business. Special meetings of the Executive
Committee may be held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as
the Board of Directors from time to time make.
3
<PAGE>
Exhibit 25.2
Page 4
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be subject to implementation
by Resolutions of the Board of Directors presently existing or hereafter
passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to
the provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall
be determined by any interim Executive Committee acting under this section
that it shall be to the advantage of the Company to resume the conduct and
management of its affairs and business under all of the other provisions of
these By-Laws.
4
<PAGE>
Exhibit 25.2
Page 5
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined
by a majority of its members or at the call of its chairman. A majority of
its members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect
5
<PAGE>
Exhibit 25.2
Page 6
thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
6
<PAGE>
Exhibit 25.2
Page 7
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such
duties as may from time to time be agreed upon between himself and the
President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and
direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of
the Board the President shall have the powers and duties of the Chairman of
the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the
7
<PAGE>
Exhibit 25.2
Page 8
Executive Committee, the Chairman of the Board or the President and by the
officer in charge of the department or division to which they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the
transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at
each regular meeting of the condition of the Company, and perform such other
duties as may be assigned to him from time to time by the Board of Directors
of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only
to the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
8
<PAGE>
Exhibit 25.2
Page 9
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for
9
<PAGE>
Exhibit 25.2
Page 10
the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as though expressly authorized by the Board of
Directors and/or the Executive Committee.
10
<PAGE>
Exhibit 25.2
Page 11
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the
Company for such special services as the Board of Directors may from time to
time determine and shall be paid for such special services so performed
reasonable compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if
11
<PAGE>
Exhibit 25.2
Page 12
it should be ultimately determined that the Director or officer is not
entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of
payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
12
<PAGE>
Exhibit 25.2
Page 13
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: August 18, 1997 By: /s/ James P. Lawler
--------------------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
Exhibit 25.2
Page 1
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state
banking authorities. Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------------------- -----------------
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1997.
------------
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............. 181,744
Interest-bearing balances....................................... 0
Held-to-maturity securities......................................... 445,954
Available-for-sale securities....................................... 767,337
Federal funds sold and securities purchased under agreements
to resell.......................................................... 86,900
Loans and lease financing receivables:
Loans and leases, net of unearned income........................ 3,685,616
LESS: Allowance for loan and lease losses...................... 52,478
LESS: Allocated transfer risk reserve.......................... 0
Loans and leases, net of unearned income, allowance,
and reserve.................................................... 3,633,138
Assets held in trading accounts..................................... 0
Premises and fixed assets (including capitalized leases)............ 94,513
Other real estate owned............................................. 3,702
Investments in unconsolidated subsidiaries and associated companies. 20
Customers' liability to this bank on acceptances outstanding........ 0
Intangible assets................................................... 4,012
Other assets........................................................ 103,524
Total assets........................................................ 5,320,844
<PAGE>
Exhibit 25.2
Page 2
LIABILITIES
Deposits:
In domestic offices............................................. 3,618,174
Noninterest-bearing......................................... 784,267
Interest-bearing............................................ 2,833,907
Federal funds purchased and Securities sold under
agreements to repurchase....................................... 293,862
Demand notes issued to the U.S. Treasury........................ 64,550
Trading liabilities (from Schedule RC-D)........................ 0
Other borrowed money:........................................... ///////
With original maturity of one year or less.................. 774,000
With original maturity of more than one year................ 43,000
Bank's liability on acceptances executed and outstanding........ 0
Subordinated notes and debentures............................... 0
Other liabilities (from Schedule RC-G).......................... 95,672
Total liabilities............................................... 4,889,258
EQUITY CAPITAL
Perpetual preferred stock and related surplus................... 0
Common Stock.................................................... 500
Surplus (exclude all surplus related to preferred stock)........ 62,118
Undivided profits and capital reserves.......................... 371,107
Net unrealized holding gains (losses) on
available-for-sale securities.................................. (2,139)
Total equity capital............................................ 431,586
Total liabilities, limited-life preferred stock,
and equity capital............................................. 5,320,844
Thousands of dollars
2
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
AURORA FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
WILMINGTON TRUST COMPANY
By Registered or
Certified Mail or by
Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn: Jill Rylee Attn: Corporate Trust Operations
Corporate Trust & c/o Harris Trust Co.
Administration Window of New York as Agent
1100 North Market Street 75 Water Street
Rodney Square North New York, NY 10004
Wilmington, DE 19890-0001
By Facsimile:
Wilmington Trust Company
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Jill Rylee
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
Exhibit 99.1
Page 2
The undersigned hereby acknowledges receipt and review of the Prospectus
dated ____________________, 1997 (the "Prospectus") of Aurora Foods Inc. (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"),
which together describe the Company's offer (the "Exchange Offer") to
exchange its 9 7/8% Series B Senior Subordinated Notes due February 15, 2007
(the "New Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which the Prospectus is a part, for a like principal amount of its issued
and outstanding 9 7/8% Senior Subordinated Notes due February 15, 2007 (the
"Old Notes"). Capitalized terms used but not defined herein have the
respective meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date in which the Exchange
Offer is extended. The Company shall notify the holders of the Old Notes of
any extension by oral or written notice prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old Notes either
if original Old Notes are to be forwarded herewith or if delivery of Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer-Book-Entry Transfer."
Holders of Old Notes whose Old Notes are not immediately available, or who
are unable to deliver their Old Notes and all other documents required by
this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, or who are unable to complete the procedure for book-entry
transfer on a timely basis, must tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer-Guaranteed Delivery Procedures." See Instruction 1.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the
<PAGE>
Exhibit 99.1
Page 3
registered Holder. The undersigned has completed, executed and delivered
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer. Holders who wish to tender their
Old Notes must complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
NAME(S) AND ADDRESS(ES) AGGREGATE
OF REGISTERED HOLDER(S), PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) AMOUNT PRINCIPAL
ON OLD NOTES REGISTERED REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS* BY NOTE(S) TENDERED*
- ----------------------------------- ------------------- ---------------- -------------
<S> <C> <C> <C>
- ----------------------------------- ------------------- ---------------- -------------
- ----------------------------------- ------------------- ---------------- -------------
- ----------------------------------- ------------------- ---------------- -------------
- ----------------------------------- ------------------- ---------------- -------------
- ----------------------------------- ------------------- ---------------- -------------
TOTAL
- ----------------------------------- ------------------- ---------------- -------------
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old Notes will
be deemed to have tendered the entire aggregate principal amount
represented by such Old Notes. All tenders must be in integral
multiples of $1,000.
<PAGE>
Exhibit 99.1
Page 4
/ / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS
ONLY):
Name of Tendering Institution:
-----------------------------------------------
Account Number:
--------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS
ONLY):
Name(s) of Registered Holder(s) of Old Notes:
- ----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Window Ticket Number (if available):
---------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
- ----------------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
- ----------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution
of New Notes. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange for Old Notes, it acknowledges that the
Old Notes were acquired as a result
<PAGE>
Exhibit 99.1
Page 5
of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount
of Old Notes indicated above. Subject to and effective upon the acceptance
for exchange of the principal amount of Old Notes tendered in accordance with
this Letter of Transmittal, the undersigned hereby exchanges, assigns and
transfers to the Company all right, title and interest in and to the Old
Notes tendered for exchange hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent, the agent and attorney-in-fact
of the undersigned (with full knowledge that the Exchange Agent also acts as
the agent of the Company in connection with the Exchange Offer) with respect
to the tendered Old Notes with full power of substitution to (i) deliver such
Old Notes, or transfer ownership of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility, to the Company and deliver
all accompanying evidences of transfer and authenticity, and (ii) present
such Old Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer. The power
of attorney granted in this paragraph shall be deemed to be irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old
Notes tendered hereby and to acquire the New Notes issuable upon the exchange
of such tendered Old Notes, and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same
are accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations
<PAGE>
Exhibit 99.1
Page 6
contained in no-action letters issued to third parties by the staff of the
Securities and Exchange Commission (the "Commission") that the New Notes
issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by Holders thereof
(other than any such Holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holders' business and such Holders are not engaging in and do not intend to
engage in a distribution of the New Notes and have no arrangement or
understanding with any person to participate in a distribution of such New
Notes. The undersigned hereby further represent(s) to the Company that (i)
any New Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not the undersigned, (ii) neither the undersigned nor any
such other person is engaging in or intends to engage in a distribution of
the New Notes, (iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, (iv) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Company or, if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, and (v) if the undersigned is a broker-dealer, such person has
acquired the Old Notes as a result of market-making activities or other
trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that the undersigned or such other person is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer
for the purpose of distributing the New Notes (i) the undersigned cannot rely
on the position of the staff of the Commission in certain no-action letters
and, in the absence of an exemption therefrom, must comply
<PAGE>
Exhibit 99.1
Page 7
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the New Notes, in
which case the registration statement must contain the selling security
holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (ii) failure to comply with such
requirements in such instance could result in the undersigned incurring
liability under the Securities Act for which the undersigned is not
indemnified by the Company.
If the undersigned or the person receiving the New Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the
undersigned represents to the Company that the undersigned understands and
acknowledges that the New Notes may not be offered for resale, resold or
otherwise transferred by the undersigned or such other person without
registration under the Securities Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account
books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for
any reason will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption
"The Exchange Offer -- Procedures for Tendering"
<PAGE>
Exhibit 99.1
Page 8
in the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the New Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the New Notes issued
in exchange for the Old Notes accepted for exchange and any Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In
the event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the New Notes issued in exchange
for the Old Notes accepted for exchange in the name(s) of, and return any Old
Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Old Notes from the name of the registered holder(s) thereof if
the Company does not accept for exchange any of the Old Notes so tendered for
exchange.
<PAGE>
Exhibit 99.1
Page 9
SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or New Notes issued in exchange for Old Notes accepted for exchange, are to
be issued in the name of someone other than the undersigned, or (ii) if Old
Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained at the Book-Entry Transfer
Facility. Issue New Notes and/or Old Notes to:
Name(s):
--------------------------------------------------------------------
(Please Type or Print)
Address:
--------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Include Zip Code)
- ----------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
/ / Credit unexchanged Old Notes delivered by book-entry transfer
to the Book-Entry Transfer Facility set forth below:
- ----------------------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
- ------------------------------------------------- ----------------------
Date
- ------------------------------------------------- ----------------------
Date
Area Code and Telephone Number:
--------------------------------------------
The above lines must be signed by the registered Holder(s) of Old Notes
as name(s) appear(s) on the Old Notes or on a security position listing, or
by person(s)
<PAGE>
Exhibit 99.1
Page 10
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or representative capacity, then such
person must (i) set forth his or her full title below and (ii) unless waived
by the Company, submit evidence satisfactory to the Company of such person's
authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.
Name(s):
-----------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
(Include Zip Code)
<PAGE>
Exhibit 99.1
Page 11
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
- --------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 19
---------------- ---
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
New Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver New Notes and/or Old Notes to:
Name:
---------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Include Zip Code)
- ---------------------------------------------------------------------------
(Tax Identification or Social Security No.)
<PAGE>
Exhibit 99.1
Page 12
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry
Transfer Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of
this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the Holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received
or confirmed by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In
all cases, sufficient time should be allowed to assure delivery to the
Exchange Agent before the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who
cannot deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
or (c) who are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers Inc. or a commercial bank or a trust
company having an office or correspondent in the United States (an "Eligible
Institution"); (ii) prior to the Expiration Date, the Exchange Agent must
have received from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder of the Old
Notes, the registration number(s) of such Old Notes and the principal amount
of Old Notes tendered,
<PAGE>
Exhibit 99.1
Page 13
stating that the tender is being made thereby and guaranteeing that, within
three (3) New York Stock Exchange, Inc. ("NYSE") trading days after the
Expiration Date, this Letter of Transmittal (or facsimile hereof) together
with the Old Notes (or a Book-Entry Confirmation) in proper form for
transfer, must be received by the Exchange Agent within three (3) NYSE
trading days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Old Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, and all other documents required
by this Letter are received by the Exchange Agent within three (3) NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a
Notice of Guaranteed Delivery will be sent to Holders who wish to tender
their Old Notes according to the guaranteed delivery procedures set forth
above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial Holder of Old Notes who is not
the registered Holder and who wishes to tender should arrange with the
registered Holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal
and delivering his Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such Holder's name or obtain a
properly completed bond power from the registered Holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of
any Old Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the box entitled "Description of Old
Notes" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Old Notes is not tendered,
then Old Notes for the principal amount of Old
<PAGE>
Exhibit 99.1
Page 14
Notes not tendered and New Notes issued in exchange for any Old Notes
accepted will be sent to the Holder at his or her registered address, unless
a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Medallion Guarantee of Signatures. If this Letter of
Transmittal (or facsimile hereof) is signed by the record Holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the Old Notes without alteration, enlargement or any
change whatsoever. If this Letter of Transmittal is signed by a participant
in the Book-Entry Transfer Facility, the signature must correspond with the
name as it appears on the security position listing as the Holder of the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the
New Notes issued in exchange therefor is to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered Holder,
the said Holder need not and should not endorse any tendered Old Notes, nor
provide a separate bond power. In any other case, such Holder must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on
the endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each
case signed as the name of the registered Holder or Holders appears on the
Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes of
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the
Company of their authority so to act must be submitted with this Letter of
Transmittal.
<PAGE>
Exhibit 99.1
Page 15
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by
a participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the tendered Old Notes) and the
issuance of New Notes (and any Old Notes not tendered or not accepted) are to
be issued directly to such registered holder(s) (or, if signed by a
participant in the Book-Entry Transfer Facility, any New Notes or Old Notes
not tendered or not accepted are to be deposited to such participant's
account at such Book-Entry Transfer Facility) and neither the box entitled
"Special Delivery Instructions" nor the box entitled "Special Registration
Instructions" has been completed, or (ii) such Old Notes are tendered for the
account of an Eligible Institution. In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which New Notes or substitute
Old Notes for principal amounts not tendered or not accepted for exchange are
to be issued or sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person
named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered Holder of the Old
Notes tendered hereby, or if tendered Old Notes are registered in the name of
any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of
Transmittal,
<PAGE>
Exhibit 99.1
Page 16
the amount of such transfer taxes will be billed directly to such tendering
Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law required that a
holder of any Old Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual in his or her social
security number. If the Company is not provided with the correct TIN, the
Holder may be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may be
obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting
a TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the Old Notes are registered in more than one name or
are not in the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-9 for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Old Notes
will be determined by the Company, in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes, the
Company's acceptance of which would, in the
<PAGE>
Exhibit 99.1
Page 17
opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects
or irregularities in tenders of Old Notes as to any ineligibility of any
holder who seeks to tender Old Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (includes
this Letter of Transmittal and the instructions hereto) by the Company shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. The Company will use reasonable
efforts to give notification of defects or irregularities with respect to
tenders of Old Notes, but shall not incur any liability for failure to give
such notification.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders
may also contact their broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Exchange Offer.
14. Acceptance of Tendered Old Notes and Issuance of New Notes; Return
of Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Exchange Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Old Notes when, as and if the
Company has given written and oral notice thereof to the Exchange Agent. If
any tendered Old Notes are not
<PAGE>
Exhibit 99.1
Page 18
exchanged pursuant to the Exchange Offer for any reason, such unexchanged Old
Notes will be returned, without expense, to the undersigned at the address
shown above (or credited to the undersigned's account at the Book-Entry
Transfer Facility designated above) or at a different address as may be
indicated under the box entitled "Special Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
HEREOF (TOGETHER WITH THE OLD NOTES) WHICH MUST BE DELIVERED BY BOOK-ENTRY
TRANSFER OR IN ORIGINAL HARD COPY FROM) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
<PAGE>
Exhibit 99.1
Page 19
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYER'S NAME: AURORA FOODS INC.
SUBSTITUTE PART I--Taxpayer Social
FORM W-9 Identification No.--For Security
DEPARTMENT OF THE TREASURY all accounts, enter your Number
INTERNAL REVENUE SERVICE taxpayer identification ---------
number in the appropriate
box. For most individuals OR
and sole proprietors, this
is your social security Employer
number. For other Identification
entities, it is your Number
Employer Identification
Number. If you do not
have a number, see How to ---------
Obtain a TIN in the
enclosed Guidelines.
Note: If the account
is in more than one name,
see Employer Identification
Number the chart on page 2
of the enclosed Guidelines
to determine what number
to enter.
- ------------------------------------------------------------------------------
Payer's Request for Part II--For Payees Exempt From Backup
Taxpayer Identification Withholding (see enclosed Guidelines)
Number
- ------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and either (a) I have
mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social
Security Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide
a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I
provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding; and
<PAGE>
Exhibit 99.1
Page 20
(3) Any other information provided on this form is true, correct
and complete.
- ------------------------------------------------------------------------------
SIGNATURE Date
-------------------------- ------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE
NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
<PAGE>
Exhibit 99.7
LETTER OF TRANSMITTAL
FOR
TENDER OF 9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
9 7/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2007
AURORA FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
WILMINGTON TRUST COMPANY
By Registered or
Certified Mail or by
Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn: Jill Rylee Attn: Corporate Trust Operations
Corporate Trust & c/o Harris Trust Co.
Administration Window of New York as Agent
1100 North Market Street 75 Water Street
Rodney Square North New York, NY 10004
Wilmington, DE 19890-0001
By Facsimile:
Wilmington Trust Company
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Jill Rylee
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
<PAGE>
Exhibit 99.7
Page 2
The undersigned hereby acknowledges receipt and review of the
Prospectus dated ____________________, 1997 (the "Prospectus") of
Aurora Foods Inc. (the "Company") and this Letter of Transmittal
(the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange its 9 7/8%
Series D Senior Subordinated Notes due February 15, 2007 (the "New
Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which the Prospectus is a part, for a like principal
amount of its issued and outstanding 9 7/8% Series C Senior
Subordinated Notes due February 15, 2007 (the "Old Notes").
Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to
time, to extend the Exchange Offer at its discretion, in which
event the term "Expiration Date" shall mean the latest time and
date in which the Exchange Offer is extended. The Company shall
notify the holders of the Old Notes of any extension by oral or
written notice prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old
Notes either if original Old Notes are to be forwarded herewith or
if delivery of Old Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer-Book-Entry Transfer." Holders of Old
Notes whose Old Notes are not immediately available, or who are
unable to deliver their Old Notes and all other documents required
by this Letter of Transmittal to the Exchange Agent on or prior to
the Expiration Date, or who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in
the Prospectus under the caption "The Exchange Offer-Guaranteed
Delivery Procedures." See Instruction 1. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any
person in whose name Old Notes are registered on the books of the
Company or any other person who has obtained a properly completed
bond power from the
<PAGE>
Exhibit 99.7
Page 3
registered Holder. The undersigned has completed, executed and delivered
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer. Holders who wish to tender their
Old Notes must complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE
PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST
BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR
ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL
MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered
numbers and principal amounts on a separate signed schedule and
affix the list to this Letter of Transmittal.
DESCRIPTION OF OLD NOTES TENDERED
NAME(S) AND ADDRESS(ES) AGGREGATE
OF REGISTERED HOLDER(S), PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) AMOUNT PRINCIPAL
ON OLD NOTES REGISTERED REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS* BY NOTE(S) TENDERED**
TOTAL
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old
Notes will be deemed to have tendered the entire aggregate
principal amount represented by such Old Notes. All tenders
must be in integral multiples of $1,000.
<PAGE>
Exhibit 99.7
Page 4
/ / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS
ONLY):
Name of Tendering Institution:
----------------------------------------------
Account Number:
-------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS
ONLY):
Name(s) of Registered Holder(s) of Old Notes:
- -----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Window Ticket Number (if available):
-----------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
- -----------------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
- -----------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
------------------------------------------------------------------------
Address:
---------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes. If the undersigned is a
broker-dealer that will receive New Notes for its own account in
exchange for Old Notes, it acknowledges that the Old Notes were
acquired as a result
<PAGE>
Exhibit 99.7
Page 5
of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the
principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance for exchange of the principal amount
of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and
transfers to the Company all right, title and interest in and to
the Old Notes tendered for exchange hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent, the agent
and attorney-in-fact of the undersigned (with full knowledge that
the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered
Old Notes with full power of substitution to (i) deliver such Old
Notes, or transfer ownership of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility, to the Company and
deliver all accompanying evidences of transfer and authenticity,
and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in
this paragraph shall be deemed to be irrevocable and coupled with
an interest.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, exchange,
assign and transfer the Old Notes tendered hereby and to acquire
the New Notes issuable upon the exchange of such tendered Old
Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the
same are accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is
being made in reliance upon interpretations
<PAGE>
Exhibit 99.7
Page 6
contained in no-action letters issued to third parties by the staff of the
Securities and Exchange Commission (the "Commission") that the New Notes
issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by Holders thereof
(other than any such Holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holders' business and such Holders are not engaging in and do not intend to
engage in a distribution of the New Notes and have no arrangement or
understanding with any person to participate in a distribution of such New
Notes. The undersigned hereby further represent(s) to the Company that (i)
any New Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not the undersigned, (ii) neither the undersigned nor any
such other person is engaging in or intends to engage in a distribution of
the New Notes, (iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, (iv) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Company or, if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, and (v) if the undersigned is a broker-dealer, such person has
acquired the Old Notes as a result of market-making activities or other
trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in
exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, the
undersigned acknowledges that it or such other person will deliver
a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that the undersigned or
such other person is an "underwriter" within the meaning of the
Securities Act. The undersigned acknowledges that if the
undersigned is participating in the Exchange Offer for the purpose
of distributing the New Notes (i) the undersigned cannot rely on
the position of the staff of the Commission in certain no-action
letters and, in the absence of an exemption therefrom, must comply
<PAGE>
Exhibit 99.7
Page 7
with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of
the New Notes, in which case the registration statement must
contain the selling security holder information required by Item
507 or Item 508, as applicable, of Regulation S-K of the
Commission, and (ii) failure to comply with such requirements in
such instance could result in the undersigned incurring liability
under the Securities Act for which the undersigned is not
indemnified by the Company.
If the undersigned or the person receiving the New Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the
undersigned represents to the Company that the undersigned
understands and acknowledges that the New Notes may not be offered
for resale, resold or otherwise transferred by the undersigned or
such other person without registration under the Securities Act or
an exemption therefrom.
The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and
transfer of the Old Notes tendered hereby, including the transfer
of such Old Notes on the account books maintained by the Book-Entry
Transfer Facility.
For purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes
when, as and if the Company gives oral or written notice thereof to
the Exchange Agent. Any tendered Old Notes that are not accepted
for exchange pursuant to the Exchange Offer for any reason will be
returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after
the Expiration Date.
All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or
dissolution of the undersigned, and every obligation of the
undersigned under this Letter of Transmittal shall be binding upon
the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned acknowledges that the Company's acceptance of
properly tendered Old Notes pursuant to the procedures described
under the caption "The Exchange Offer
<PAGE>
Exhibit 99.7
Page 8
- -- Procedures for Tendering" in the Prospectus and in the instructions hereto
will constitute a binding agreement between the undersigned and the Company
upon the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance
Instructions," please issue the New Notes issued in exchange for
the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the New Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes
not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the New Notes issued in exchange for the
Old Notes accepted for exchange in the name(s) of, and return any
Old Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and
"Special Delivery Instructions" to transfer any Old Notes from the
name of the registered holder(s) thereof if the Company does not
accept for exchange any of the Old Notes so tendered for exchange.
<PAGE>
Exhibit 99.7
Page 9
SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes
accepted for exchange, are to be issued in the name of someone
other than the undersigned, or (ii) if Old Notes tendered by
book-entry transfer which are not exchanged are to be returned by
credit to an account maintained at the Book-Entry Transfer
Facility. Issue New Notes and/or Old Notes to:
Name(s):
-----------------------------------------------------------------------
(Please Type or Print)
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
/ / Credit unexchanged Old Notes delivered by book-entry transfer
to the Book-Entry Transfer Facility set forth below:
- -------------------------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
- ------------------------------------------------------- ---------------------
Date
- ------------------------------------------------------- ---------------------
Date
Area Code and Telephone Number:________________________________________________
The above lines must be signed by the registered Holder(s) of
Old Notes as name(s) appear(s) on the Old Notes or on a security
position listing, or by person(s)
<PAGE>
Exhibit 99.7
Page 10
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or representative capacity, then such
person must (i) set forth his or her full title below and (ii) unless waived
by the Company, submit evidence satisfactory to the Company of such person's
authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.
Name(s):
-----------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
<PAGE>
Exhibit 99.7
Page 11
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
- -------------------------------------------------------------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Title)
- -------------------------------------------------------------------------------
(Name of Firm)
- -------------------------------------------------------------------------------
(Address, Include Zip Code)
- -------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated:____________________, 19__
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not
tendered, or New Notes issued in exchange for Old Notes accepted
for exchange, are to be mailed or delivered to someone other than
the undersigned, or to the undersigned at an address other than
that shown below the undersigned's signature.
Mail or deliver New Notes and/or Old Notes to:
Name:
- -------------------------------------------------------------------------------
(Please Type or Print)
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
<PAGE>
Exhibit 99.7
Page 12
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or
Book-Entry Confirmations. All physically delivered Old Notes or
any confirmation of a book-entry transfer to the Exchange Agent's
account at the Book-Entry Transfer Facility of Old Notes tendered
by book-entry transfer (a "Book-Entry Confirmation"), as well as a
properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof, and any other documents required
by this Letter of Transmittal, must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. The method of delivery of the
tendered Old Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and
risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it
is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure
delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes should be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to
tender their Old Notes and (a) whose Old Notes are not immediately
available, or (b) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date or (c) who are unable
to complete the procedure for book-entry transfer on a timely
basis, must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through a firm
which is a member of a registered national securities exchange or
of the National Association of Securities Dealers Inc. or a
commercial bank or a trust company having an office or
correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes, the registration number(s)
of such Old Notes and the principal amount of Old Notes tendered,
<PAGE>
Exhibit 99.7
Page 13
stating that the tender is being made thereby and guaranteeing
that, within three (3) New York Stock Exchange, Inc. ("NYSE")
trading days after the Expiration Date, this Letter of Transmittal
(or facsimile hereof) together with the Old Notes (or a Book-Entry
Confirmation) in proper form for transfer, must be received by the
Exchange Agent within three (3) NYSE trading days after the
Expiration Date; and (iii) the certificates for all physically
tendered shares of Old Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter are received by the Exchange
Agent within three (3) NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender Old Notes
pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date. Upon request of the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Old Notes
according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures"
section of the Prospectus.
3. Tender by Holder. Only a Holder of Old Notes may tender
such Old Notes in the Exchange Offer. Any beneficial Holder of Old
Notes who is not the registered Holder and who wishes to tender
should arrange with the registered Holder to execute and deliver
this Letter of Transmittal on his behalf or must, prior to
completing and executing this Letter of Transmittal and delivering
his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such Holder's name or obtain a
properly completed bond power from the registered Holder.
4. Partial Tenders. Tenders of Old Notes will be accepted
only in integral multiples of $1,000. If less than the entire
principal amount of any Old Notes is tendered, the tendering Holder
should fill in the principal amount tendered in the third column of
the box entitled "Description of Old Notes" above. The entire
principal amount of Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the
entire principal amount of all Old Notes is not tendered, then Old
Notes for the principal amount of Old
<PAGE>
Exhibit 99.7
Page 14
Notes not tendered and New Notes issued in exchange for any Old Notes
accepted will be sent to the Holder at his or her registered address, unless
a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Medallion Guarantee of Signatures. If this Letter of
Transmittal (or facsimile hereof) is signed by the record Holder(s)
of the Old Notes tendered hereby, the signature must correspond
with the name(s) as written on the face of the Old Notes without
alteration, enlargement or any change whatsoever. If this Letter
of Transmittal is signed by a participant in the Book-Entry
Transfer Facility, the signature must correspond with the name as
it appears on the security position listing as the Holder of the
Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed
by the registered Holder or Holders of Old Notes listed and
tendered hereby and the New Notes issued in exchange therefor is to
be issued (or any untendered principal amount of Old Notes is to be
reissued) to the registered Holder, the said Holder need not and
should not endorse any tendered Old Notes, nor provide a separate
bond power. In any other case, such Holder must either properly
endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an
Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed
by a person other than the registered Holder or Holders of any Old
Notes listed, such Old Notes must be endorsed or accompanied by
appropriate bond powers, in each case signed as the name of the
registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old
Notes of bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, or officers of
corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless
waived by the Company, evidence satisfactory to the Company of
their authority so to act must be submitted with this Letter of
Transmittal.
<PAGE>
Exhibit 99.7
Page 15
Endorsements on Old Notes or signatures on bond powers
required by this Instruction 5 must be guaranteed by an Eligible
Institution.
No signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Old Notes
tendered herewith (or by a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the
owner of the tendered Old Notes) and the issuance of New Notes (and
any Old Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) (or, if signed by a
participant in the Book-Entry Transfer Facility, any New Notes or
Old Notes not tendered or not accepted are to be deposited to such
participant's account at such Book-Entry Transfer Facility) and
neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Registration Instructions" has been
completed, or (ii) such Old Notes are tendered for the account of
an Eligible Institution. In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible
Institution.
6. Special Registration and Delivery Instructions. Tendering
holders should indicate, in the applicable box or boxes, the name
and address (or account at the Book-Entry Transfer Facility) to
which New Notes or substitute Old Notes for principal amounts not
tendered or not accepted for exchange are to be issued or sent, if
different from the name and address of the person signing this
Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes,
if any, applicable to the exchange of Old Notes pursuant to the
Exchange Offer. If, however, New Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered
to, or are to be registered or issued in the name of, any person
other than the registered Holder of the Old Notes tendered hereby,
or if tendered Old Notes are registered in the name of any person
other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of
Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with this Letter of Transmittal,
<PAGE>
Exhibit 99.7
Page 16
the amount of such transfer taxes will be billed directly to such
tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE
NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES
LISTED IN THIS LETTER OF TRANSMITTAL.
8. Tax Identification Number. Federal income tax law
required that a holder of any Old Notes which are accepted for
exchange must provide the Company (as payor) with its correct
taxpayer identification number ("TIN"), which, in the case of a
holder who is an individual in his or her social security number.
If the Company is not provided with the correct TIN, the Holder may
be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may
be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
To prevent backup withholding, each tendering holder must
provide such holder's correct TIN by completing the Substitute Form
W-9 set forth herein, certifying that the TIN provided is correct
(or that such holder is awaiting a TIN), and that (i) the holder
has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of failure to
report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer
subject to backup withholding. If the Old Notes are registered in
more than one name or are not in the name of the actual owner, see
the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9 for information on
which TIN to report.
The Company reserves the right in its sole discretion to take
whatever steps are necessary to comply with the Company's
obligation regarding backup withholding.
9. Validity of Tenders. All questions as to the validity,
form, eligibility (including time of receipt), and acceptance of
tendered Old Notes will be determined by the Company, in its sole
discretion, which determination will be final and binding. The
Company reserves the right to reject any and all Old Notes not
validly tendered or any Old Notes, the Company's acceptance of
which would, in the
<PAGE>
Exhibit 99.7
Page 17
opinion of the Company or its counsel, be
unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in
tenders of Old Notes as to any ineligibility of any holder who
seeks to tender Old Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer
(includes this Letter of Transmittal and the instructions hereto)
by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders
of Old Notes, but shall not incur any liability for failure to give
such notification.
10. Waiver of Conditions. The Company reserves the absolute
right to waive, in whole or part, any of the conditions to the
Exchange Offer set forth in the Prospectus.
11. No Conditional Tender. No alternative, conditional,
irregular or contingent tender of Old Notes on transmittal of this
Letter of Transmittal will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any
Holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address
indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests
for assistance or for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the
address or telephone number set forth on the cover page of this
Letter of Transmittal. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
14. Acceptance of Tendered Old Notes and Issuance of New
Notes; Return of Old Notes. Subject to the terms and conditions of
the Exchange Offer, the Company will accept for exchange all
validly tendered Old Notes as soon as practicable after the
Exchange Date and will issue New Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted tendered Old Notes when,
as and if the Company has given written and oral notice thereof to
the Exchange Agent. If any tendered Old Notes are not
<PAGE>
Exhibit 99.7
Page 18
exchanged pursuant to the Exchange Offer for any reason, such unexchanged Old
Notes will be returned, without expense, to the undersigned at the address
shown above (or credited to the undersigned's account at the Book-Entry
Transfer Facility designated above) or at a different address as may be
indicated under the box entitled "Special Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to
the limited withdrawal rights set forth in the Prospectus under the
caption "The Exchange Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED
FACSIMILE HEREOF (TOGETHER WITH THE OLD NOTES) WHICH MUST BE
DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FROM) OR
THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION TIME.
<PAGE>
Exhibit 99.7
Page 19
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYER'S NAME: AURORA FOODS INC.
SUBSTITUTE PART I--Taxpayer Social
FORM W-9 Identification Security
DEPARTMENT OF THE TREASURY No.--For all accounts, Number
INTERNAL REVENUE SERVICE enter your taxpayer _________
identification number
in the appropriate
box. For most OR
individuals and sole
proprietors, this is Employer
your social security Identifi-
number. For other cation
entities, it is your Number
Employer
Identification Number. _________
If you do not have a
number, see How to
Obtain a TIN in the
enclosed Guidelines.
Note: If the account
is in more than one
name, see Employer
Identification Number
the chart on page 2 of
the enclosed
Guidelines to
determine what number
to enter.
Payer's Request for Part II--For Payees Exempt From Backup
Taxpayer Identification Withholding (see enclosed Guidelines)
Number
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be
issued to me), and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60)
days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number;
(2) I am not subject to backup withholding either because (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding; and
<PAGE>
Exhibit 99.7
Page 20
(3) Any other information provided on this form is true, correct
and complete.
- -------------------------------------------------------------------------------
SIGNATURE Date
------------------------------------- ---------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU
WITH RESPECT TO THE NEW NOTES. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
<PAGE>
EXHIBIT 99.8
NOTICE OF GUARANTEED DELIVERY for
Tender of 9 7/8% Series C Senior Subordinated Notes due 2007
in Exchange for
9 7/8% Series D Senior Subordinated Notes due 2007
AURORA FOODS INC.
This form or one substantially equivalent hereto must be used by a holder
to accept the Exchange Offer of Aurora Foods Inc., a Delaware corporation
(the "Company"), who wishes to tender 9 7/8% Series C Senior Subordinated
Notes due 2007 (the "Old Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated ____________, 1997
(the "Prospectus") and in Instruction 2 to the related Letter of Transmittal.
Any holder who wishes to tender Old Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice
of Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
WILMINGTON TRUST COMPANY
By Registered or Certified
Mail or by Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn:Jill Rylee Attn: Corporate Trust Operations
Corporate Trust &
Administration Window c/o Harris Trust Company
1100 North Market Street of New York, as Agent
Rodney Square North 75 Water Street
Wilmington, DE 19890-0001 New York, NY 10004
By Facsimile:
Wilimington Trust Company
(302) 651-1079
Confirm by Telephone:
(302)651-8869
Jill Rylee
------------------------------------
<PAGE>
EXHIBIT 99.8
Page 2
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED BOX ON THE
LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
EXHIBIT 99.8
Page 3
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE NUMBER(S) AGGREGATE AGGREGATE
(IF KNOWN) OF OLD NOTES OR PRINCIPAL PRINCIPAL
ACCOUNT NUMBER AT THE AMOUNT AMOUNT
BOOK-ENTRY FACILITY REPRESENTED TENDERED
- ------------------------- ----------- ----------
PLEASE SIGN AND COMPLETE
Signatures of Registered
Holder(s) or Authorized
Signatory:
________________________ Date:____________________________
________________________ Address:
Name(s) of Registered _________________________________
Holder(s): _________________________________
________________________ Area Code and Telephone No.:
________________________ _________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
<PAGE>
EXHIBIT 99.8
Page 4
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Names(s):
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
Capacity:
- -------------------------------------------------------------
Address(es):
- -------------------------------------------------------------
- -------------------------------------------------------------
<PAGE>
EXHIBIT 99.8
Page 5
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal and any other required documents,
all by 5:00 p.m., New York City time, within five New York Stock Exchange
trading days following the Expiration Date.
Name of Firm:
- ---------------------------------- -----------------------------------
(AUTHORIZED SIGNATURE)
Address:
__________________________________ Name:______________________________
(INCLUDE ZIP CODE)
Area Code and Tel. Number: Title:_____________________________
(PLEASE TYPE OR PRINT)
__________________________________ Date:_______________________, 19__
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
EXHIBIT 99.8
Page 6
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. As an alternative to delivery by
mail, the holders may wish to consider using an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the
registered holder(s) appears on the Old Notes or signed as the name of the
participant shown on the Book-Entry Transfer Facility's security position
listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and submit with the
Letter of Transmittal evidence satisfactory to the Company of such person's
authority to so act.
<PAGE>
EXHIBIT 99.8
Page 7
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE>
EXHIBIT 99.9
Letter to Brokers
for
Tender of 9 7/8% Series C Senior Subordinated Notes Due 2007
in Exchange for
9 7/8% Series D Senior Subordinated Notes Due 2007
AURORA FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Aurora Foods Inc. (the "Company"), a Delaware corporation, to
exchange its 9 7/8% Series D Senior Subordinated Notes Due 2007, (the "New
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 9 7/8% Series C Senior Subordinated Notes Due 2007 (the "Old
Notes") upon the terms and subject to the conditions set forth in the
Company's Prospectus, dated _______________, 1997, and the related Letter of
Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______________, 1997;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee, with space
provided for obtaining such client's instruction with regard to the
Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
<PAGE>
EXHIBIT 99.9
Page 2
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the undersigned
nor any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the undersigned nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
WILMINGTON TRUST COMPANY
<PAGE>
EXHIBIT 99.10
Letter to Clients
for
Tender of 9 7/8% Series C Senior Subordinated Notes Due 2007
in Exchange for
9 7/8% Series D Senior Subordinated Notes Due 2007
AURORA FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________, 1997, of
Aurora Foods Inc. (the "Company"), a Delaware corporation, and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Company, to exchange its 9 7/8% Series D Senior
Subordinated Notes Due 2007 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like principal amount of its issued and outstanding 9 7/8% Series C Senior
Subordinated Notes Due 2007 (the "Old Notes"), upon the terms and subject to
the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record holder
and pursuant to your instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to tender Old Notes held
by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such New Notes, (iii) if the
undersigned is not a
<PAGE>
EXHIBIT 99.10
Page 2
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the undersigned nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or, if the undersigned is an "affiliate," that the undersigned will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. If the undersigned is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that such Old Notes were acquired as a
result of market-making activities or other trading activities, and it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, the undersigned is not deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.11
Instruction to Registered Holder and/or Book
Entry Transfer Participant from Beneficial Owner
for
Tender of 9 7/8% Series C Senior Subordinated Notes Due 2007
in Exchange for
9 7/8% Series D Senior Subordinated Notes Due 2007
AURORA FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant
of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
_________________, 1997 (the "Prospectus") of Aurora Foods Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 9 7/8% Series D Senior Subordinated Notes
Due 2007 (the "New Notes") for all of its outstanding 9 7/8% Series C Senior
Subordinated Notes Due 2007 (the "Old Notes"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$___________________ of the 9 7/8% Series C Senior Subordinated Notes
Due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
/ / To TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED (IF
ANY)): $____________________
/ / Not to TENDER any Old Notes held by you for the account of the
undersigned.
<PAGE>
EXHIBIT 99.11
Page 2
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the undersigned, (ii) neither the undersigned nor
any such other person has an arrangement or understanding with any person to
participate in the distribution within the meaning of the Securities Act of
1933, as amended (the "Securities Act") of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the undersigned
nor any such other person is engaged in or intends to participate in the
distribution of such New Notes and (iv) neither the undersigned nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
New Notes for its own account in exchange for Old Notes, it represents that such
Old Notes were acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
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Signature(s):
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Name(s) (please print):
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Address:
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Telephone Number:
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Taxpayer Identification or Social Security Number:
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Date:
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