<PAGE>
================================================================================
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 27, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 33-24715
AURORA FOODS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3921934
-------- ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
445 Hutchinson Avenue, Suite 960
Columbus, OH 43235
(Address of Principal Executive Office, Including Zip Code)
(614) 436-8600
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
----------------------- -----------------------------------------
None
----------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act
None (Title of Class)
----------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [_] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. (See
definition of Affiliate in Rule 405.) Not applicable.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
Shares Outstanding
March 1, 1998
Common stock, $0.01 par value 1,000
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
PART I
- ------
ITEM 1: BUSINESS
- ----------------
Business History
- ----------------
On December 31, 1996, Aurora Foods Inc. (the "Company") acquired substantially
all of the assets of the Mrs. Butterworth's(R) syrup and pancake business
("MBW") from a subsidiary of Unilever United States, Inc. ("Conopco" or the
"Predecessor"). The Company acquired the inventories, manufacturing equipment,
and certain intangible assets of MBW for a purchase price of approximately
$114.1 million. The acquisition was financed by (i) a net capital contribution
from Aurora Foods Holdings Inc. ("Holdings") of approximately $33.2 million,
(ii) term loans of $15.0 million and revolving loans of $30.0 million borrowed
under a $60.0 million senior secured debt facility, and (iii) loans of $50.0
million borrowed under a senior subordinated debt facility. On February 10,
1997, the senior subordinated facility of $50.0 million and the senior secured
facilities of $15.0 million of term loans and $30.0 million of revolving loans
were repaid with proceeds from a $100.0 million senior subordinated note
offering. Holdings is wholly owned by MBW Investors LLC, a Delaware limited
liability company ("MBW LLC").
On July 1, 1997, the Company acquired substantially all of the assets of the Log
Cabin(R) syrup business ("LC") from Kraft Foods, Inc. ("Kraft") for
approximately $222.0 million. The assets acquired included inventories, certain
manufacturing equipment and certain intangible assets. The acquisition was
financed by (i) a capital contribution from Holdings of approximately $28.6
million, (ii) term loans of $40.0 million and revolving loans of $47.0 million
borrowed under the senior secured debt facility, and (iii) proceeds of $102.5
million received in an additional senior subordinated note offering.
On January 16, 1998, subsequent to the Company's fiscal year end, the Company
acquired all of the assets of the Duncan Hines(R) retail baking mix business
(the "Duncan Hines Business") from Procter & Gamble Company ("P&G"). The assets
acquired by the Company include (i) Duncan Hines(R) and associated trademarks,
(ii) substantially all of the equipment for the manufacture of Duncan Hines
products currently located in P&G's Jackson, Tennessee facility, (iii)
proprietary formulations for Duncan Hines(R) products, (iv) other product
specifications and customer lists and (v) rights under certain contracts,
licenses, purchase orders and other arrangements and permits. The Company
intends to use the acquired assets in its operations of the Duncan Hines
Business. The purchase price of approximately $445.0 million was based on an
arm's length negotiation between the Company and P&G.
The Company financed the Duncan Hines Business acquisition and related costs
with a capital contribution by Holdings of $93.8 million and with additional
senior secured bank borrowings totaling approximately $373.0 million. The
additional senior secured bank debt was incurred under the Company's Second
Amended and Restated Credit Agreement dated as of January 16, 1998 (the "Second
Amended and Restated Credit Agreement").
1
<PAGE>
Products and Markets
- --------------------
The Company seeks to acquire established, well-recognized national dry grocery
brands which have been undermarketed and undermanaged in recent years and have
become non-core businesses to their corporate parents. The Company's objective
is to renew the growth of its brands by giving them the focus, strategic
direction, marketing resources and dedicated sales and marketing organization
they have lacked in recent years.
[LOGO OF MRS. BUTTERWORTH'S] [LOGO OF LOG CABIN] [LOGO OF DUNCAN HINES]
Each of the Company's three primary brands (including Duncan Hines) is a leading
national brand with significant market shares and strong consumer awareness.
Mrs. Butterworth(R) syrup was originally introduced in 1960 and is well known
for its unique buttery flavor and distinctive grandmother-shaped bottle. The
brand enjoys 100% aided brand awareness among syrup consumers. MBW products
include both regular and lite syrup and pancake mix. A reformulated lite syrup
product was introduced in the fourth quarter of 1997.
The heritage of the Log Cabin(R) brand dates back to 1888. The Company markets
and sells the Log Cabin(R) and Country Kitchen(R) brands of syrup. Log Cabin (R)
is a premium priced syrup that enjoys a strong consumer awareness. Country
Kitchen(R), introduced in 1954, is positioned to target the economy segment of
the syrup category by providing a lower cost alternative for price conscious
consumers. Log Cabin Lite(R) was introduced in 1985 and competes in the low
calorie segment of the market.
The Duncan Hines brand has been a household name for more than 40 years. The
Duncan Hines brand commands 92% brand awareness among consumers. Products
marketed under the Duncan Hines brand name include cake mixes, brownie mixes,
ready to spread frostings, and muffin and cookie mixes.
The Company's products are sold nationwide to supermarkets and other retail
channels. The Company sells its products through a network of food brokers to
wholesale and retail grocery accounts. The products are distributed either
directly to the customer or through independent wholesalers.
The Company also sells its syrup products in the foodservice distribution
channel through a foodservice distributor. Customers include military bases,
restaurant chains and business/industry.
Industry
- --------
The Company's brands compete in markets which are generally stable and growing.
Over the past five years, the syrup category has grown at a steady rate,
averaging 1% to 3% per year.
2
<PAGE>
Baking mixes account for approximately 9% of the sweet baked goods market, one
of the largest food categories in the U.S. with over $12.0 billion in annual
sales. According to industry reports, sales in the sweet baked goods industry
grew at a compound annual growth rate of 3% over the last four years, from $11.0
billion in 1992 to $12.2 billion in 1996. Four products, layer cake, frosting,
brownie and muffin mixes, account for more than 90% of U.S. baking mix sales
volume. The remaining 10% is comprised of several smaller product segments such
as specialty cake, dessert bar and cookie mixes.
Financial Information About Industry Segments
- ---------------------------------------------
The Company only competes in the dry grocery products segment of the food
industry. Accordingly, no separate industry segment information is provided.
Trademarks
- ----------
The Company owns a number of registered trademarks in the United States, Canada
and Puerto Rico. The Company's principal trademarks are Mrs. Butterworth's(R),
Log Cabin(R), Country Kitchen(R), Wigwam(R), and Duncan Hines(R). The Company's
trademarks are among its most valuable assets as it pursues its strategy of
building brands.
Competition
- -----------
The syrup category is composed of three major segments: regular table syrup,
lite table syrup, and pure maple/specialty flavored syrup. During 1997, regular
table syrup made up approximately 59% of the category, while lite and pure
maple/specialty flavored accounted for approximately 27% and 14%, respectively.
The various brands within the syrup category compete both on price and consumer
positioning. The "premium" brands in the syrup category are Mrs.
Butterworth's(R), Log Cabin(R) and Aunt Jemima(R). These three brands account
for approximately 53% of overall syrup dollar market share. During 1997, Log
Cabin, Aunt Jemima and Mrs. Butterworth's branded syrups ranked number one, two
and three, respectively, in net sales.
Four major manufacturers produce over 90% of total baking mix products sold in
the U.S. (the Company, General Mills (Betty Crocker(R), Gold Medal(R)), Grand
Metropolitan (Pillsbury(R)) and Chelsea Mills (Jiffy(R))). During 1997, Betty
Crocker(R), Duncan Hines(R) and Pillsbury (R) baking mix products ranked
number one, two and three, respectively, in net sales.
Production
- ----------
The Company does not own any manufacturing facilities. However, the Company
owns certain machinery and equipment, which are or will be located at the
manufacturing facilities of its contract manufacturer partners. Such machinery
and equipment is used in the production of its products. The Company has
entered into long-term co-pack agreements for the production of its syrup
products and is in the process of finalizing a long term co-pack agreement for
the production of its baking mix products.
3
<PAGE>
The Company's syrup products are produced by a third party manufacturer at four
manufacturing facilities and its baking mix products will be produced at two
manufacturing facilities upon the completion of the transition from P&G. The
syrup co-pack agreements have terms of five years with an automatic renewal for
one year unless cancelled by either party. Currently under the Duncan Hines
Transitional Services and Supply Agreements, P&G will manufacture and distribute
Duncan Hines' products for the Company for a period ranging from 6 to 15 months
from the Duncan Hines Business acquisition closing date. Once the Company has
executed definitive long-term co-pack arrangements for its baking mix products,
the Company intends to transition the Duncan Hines manufacturing assets from
P&G's Jackson plant to production facilities owned or leased by the contract
manufacturers.
Quality Control
- ---------------
Quality control processes at the production facilities where the Company's
products are contract manufactured emphasize applied research and technical
services directed at quality control and product improvement.
The Company's products and the facilities where the products are manufactured
are subject to various laws and regulations administered by the Federal Food and
Drug Administration, the United States Department of Agriculture, and other
federal, state, and local governmental agencies relating to the quality of
products, safety and sanitation. The Company believes that it complies with
such laws and regulations in all material respects.
Customers
- ---------
The Company;s business is not dependent upon a single customer or a small number
of customers, the loss of whom would have a material adverse effect on the
Company's operations.
Seasonality
- -----------
The Company does not experience any material effects of seasonality in its
business.
Raw Materials and Supplies
- --------------------------
The principal raw materials used by the Company are corn syrup, flour, sugar,
shortening, and paper and plastic for packaging materials. All such materials
and supplies are available from numerous independent suppliers. The Company's
objective is to procure ingredients through its contract manufacturer partners,
which meet both the Company's production needs and its quality standards, while
at the lowest aggregate cost to the Company.
Research and Development
- ------------------------
The Company's primary research and development department is located at its
corporate office in Columbus, Ohio. The department is responsible for nearly
all of the food research and product development for the Company. The Company's
research and development resources are focused on new product development,
product enhancement, process design and improvement, packaging and exploratory
research in new business areas.
4
<PAGE>
Employees
- ---------
As of March 1, 1998, the Company had a total of 46 employees.
ITEM 2: PROPERTIES
- -------------------
The Company owns manufacturing equipment that is subject to security interests
granted to the Company's senior lenders under the Second Amended and Restated
Credit Facility. The equipment is located or will be located in the future at
the manufacturing facilities of its contract manufacturer partners.
All of the Company's equipment is generally in good physical condition, is well
maintained, and is suitable for the manufacture of the particular product line
for which it is used. The Company's equipment generally operates with some
available capacity.
The Company leases its approximately 10,000 square foot headquarters office in
Columbus, Ohio pursuant to a lease that will expire during fiscal year 2002.
ITEM 3: LEGAL PROCEEDINGS
- -------------------------
The Company is subject to litigation in the ordinary course of business. In the
opinion of management, the ultimate outcome of any existing litigation would not
have a material adverse effect on the Company's financial condition or results
of operations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
Not applicable.
5
<PAGE>
PART II
- -------
ITEM 5: MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------------------
There is no established public trading market for the Company's common stock.
All of its issued and outstanding shares of common stock are owned by Holdings.
No cash dividends have been declared since the incorporation of the Company. The
Company is restricted under the Second Amended and Restated Credit Agreement
from declaring dividends, with certain limited exceptions, including for payment
of Holdings' and MBW LLC's taxes and to pay Holdings' and MBW LLC's fees and
expenses in connection with acquisitions.
ITEM 6: SELECTED FINANCIAL DATA
- -------------------------------
The selected financial data presented below, as of December 27, 1997 and for the
year ended December 27, 1997, is derived from the Company's audited financial
statements. The selected financial data of the Predecessor for the years ended
December 31, 1996, 1995, and 1994 is derived from the audited Statements of
Operations of the Predecessor. The selected financial data should be read in
conjunction with the Company's financial statements and the Predecessor's
Statements of Operations and notes thereto, included in Item 14.
<TABLE>
<CAPTION>
Aurora Foods, Inc. Predecessor
------------------------------ --------------------------------------
Year ended
(dollars in thousands) December 27, 1997 1996 1995 1994
--------------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $143,020 $89,541 $91,302 $96,729
Gross profit 97,291 60,586 63,559 66,799
Operating income 23,398 17,186 17,185 14,100
Net (loss) income 1,235 10,570 10,569 8,671
Total assets (1) 372,739 -- -- --
Total debt (1) 279,919 -- -- --
</TABLE>
(1) Total assets and total debt for the years ended December 31, 1996, 1995,
and 1994 are not available. The Predecessor did not operate MBW as a
separate division or business entity and therefore maintained debt and
certain other components of assets and liabilities on a consolidated basis.
See Note 1 to the Notes to Financial Statements of Mrs. Butterworth's
Business (a Component of CONOPCO, Inc.) contained in Item 14.
6
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the historical
financial information included in the financial statements and notes to the
financial statements. Unless otherwise noted, fiscal years in this discussion
refer to the Company's December-ending fiscal years.
Results of Operations
- ---------------------
The following table sets forth for the periods indicated the percentage which
the items in the Statements of Operations bear to net sales and the percentage
change of such items compared to the indicated prior period. Certain amounts
from prior years have been reclassified to conform to the Company's current year
presentation. The Statement of Operations columns for the years ended December
31, 1996 and 1995 are that of the Predecessor.
7
<PAGE>
Statements of Operations
- ------------------------
<TABLE>
<CAPTION>
Aurora Foods Inc. Predecessor
----------------------------------------------------------------- Increase Increase
Years ended (Decrease) (Decrease)
----------------------------------------------------------------- 1996 to 1995 to
(dollars in thousands) December 27, 1997 December 31, 1996 December 31, 1995 1997 1996
----------------- ----------------- ----------------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $143,020 100.0% $91,581 (1) 100.0% $93,382 (1) 100.0% 56.2% (1.9)%
Cost of goods sold 45,729 32.0 28,955 31.6 27,743 29.7 57.9 4.4
-------- ----- ------- ----- ------- ----- ----- -----
Gross profit 97,291 68.0 62,626 68.4 65,639 70.3 55.4 (4.6)
-------- ----- ------- ----- ------- ----- ----- -----
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 17,096 12.0 10,180 (1) 11.1 9,663 (1) 10.3 67.9 5.4
Trade promotions 26,075 18.2 17,672 19.3 19,380 20.8 47.5 (8.8)
Consumer marketing 15,142 10.6 10,835 11.8 13,291 14.2 39.8 (18.5)
-------- ----- ------- ----- ------- ----- ----- -----
Total brokerage, distribution and
marketing expenses 58,313 40.8 38,687 42.2 42,334 45.3 50.7 (8.6)
Amortization of goodwill and
other intangibles 5,938 4.1 - - - - 0.0 0.0
Selling, general and administrative
expenses 5,229 3.6 6,753 7.4 6,120 6.6 (22.6) 10.3
Incentive compensation expense 2,300 1.6 - - - - 0.0 0.0
Transition related costs 2,113 1.5 - - - - 0.0 0.0
-------- ----- ------- ----- ------- ----- ----- -----
Total operating expenses 73,893 51.6 45,440 49.6 48,454 51.9 62.6 (6.2)
-------- ----- ------- ----- ------- ----- ----- -----
Operating income 23,398 16.4 17,186 18.8 17,185 18.4 36.1 0.0
Interest income (151) (0.1) - - - - 0.0 0.0
Interest expense 18,393 12.9 - - - - 0.0 0.0
Amortization of deferred
financing expense 3,059 2.1 - - - - 0.0 0.0
Other bank and financing
expenses 83 0.1 - - - - 0.0 0.0
-------- ----- ------- ----- ------- ----- ----- -----
Income before
income taxes 2,014 1.4 17,186 18.8 17,185 18.4 (88.3) 0.0
Income tax provision 779 0.5 6,616 7.2 6,616 7.1 (88.2) 0.0
-------- ----- ------- ----- ------- ----- ----- -----
Net income $ 1,235 0.9% $10,570 11.6% $10,569 11.3% (88.3)% 0.0%
======== ===== ======= ===== ======= ===== ===== =====
</TABLE>
(1) Cash discounts of the Predecessor for the years ended December 31, 1996 and
1995 have been reclassified from net sales to brokerage and distribution
expenses to provide consistency with the Company's presentation and
accounting policy and to facilitate comparison between periods.
8
<PAGE>
Year Ended December 27, 1997 Compared to the Year Ended December 31, 1996
Net Sales. Net sales for the period increased $51.4 million versus the prior
year to $143.0 million. The increase was due primarily to the acquisition of
LC, which added $50.4 million in net sales. Net dollar sales for MBW
increased 1.0% to $92.6 million for the year ended December 27, 1997 from $91.6
million for the 1996 period, while case volume increased 5.4% to 4.14 million
standard cases.
Syrup sales increased $52.1 million to $133.2 million in 1997 from $81.1 million
in 1996. The increase was due primarily to the LC acquisition, which added $50.4
million in sales during 1997. MBW syrup dollar sales increased $1.7 million, or
2.1%, to $82.8 million in 1997. MBW syrup case volume increased 7.6% to 3.52
million standard cases in 1997 from 3.27 million standard cases in 1996. The
percentage increase in MBW syrup case volume exceeded the percentage increase in
dollar sales because the Predecessor adopted a value pricing strategy in mid-
1996, which lowered the list cost on 90% of its retail syrup volume by 10%. The
increase in syrup volume was attributable to increases in the Company's Mrs.
Butterworth's Original(R) brand and foodservice and club products. The volume
increase was partially offset by a decrease in sales of Mrs. Butterworth's
Country Best Recipe(R) and Mrs. Butterworth's Lite(R) brands.
Pancake mix sales of $9.8 million in 1997 were down by $0.7 million as compared
to the 1996 period, and pancake mix volume decreased 7.0% to 611,000 standard
cases. The overall pancake mix category was down approximately 4% in 1997 from
the prior year.
Gross Profit. Gross profit as a percentage of net sales was 68.0% for the 1997
period as compared to 68.4% for the 1996 period. The gross margin percentage in
the 1996 period was impacted by the value pricing strategy implemented in mid-
year 1996. The change to value pricing caused net revenues and gross profits to
be reduced in 1997 relative to the prior year, which only included a partial
year impact of value pricing.
Brokerage, Distribution, and Marketing Expenses. Brokerage, distribution, and
marketing expenses for 1997 were 40.8% of net sales as compared to 42.2% for
1996. The improvement was due to lower trade promotions in 1997 as a result of
the value pricing strategy as well as a reduction in high value in-ad coupons
compared to 1996.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill and
other intangibles of $5.9 million was attributable to amortization of goodwill
associated with the acquisitions of MBW on December 31, 1996 and LC on July 1,
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $5.2 million for 1997 were $1.6 million
less than the $6.8 million of expense incurred for 1996. The favorable variance
was due to lower overhead spending associated with the Company's stand-alone
structure as compared to amounts allocated to MBW during the Predecessor's
ownership period.
Transition Related Costs. Transition related costs consist of one-time costs
incurred to establish the Company's operations and integrate the acquired
businesses, including relocation expenses, recruiting fees, sales support and
other unique transitional expenses.
9
<PAGE>
Operating Income. Operating income as a percentage of net sales was 16.4% for
1997 as compared to 18.8% for 1996. The decrease in the Company's operating
profit margin was primarily due to amortization of goodwill and other
intangibles (4.1%), incentive compensation expense (1.6%) and transition related
expenses (1.5%), which were not incurred under the Predecessor's ownership.
Excluding the impact of these expenses, the operating margin increased to 23.6%
of net sales, because trade promotions, consumer marketing and selling, general
and administrative expenses were lower than the prior year as a percentage of
net sales. Overall, operating income increased $6.2 million, or 36.1%, to
$23.4 million as compared to $17.2 million in 1996.
Interest Expense and Amortization of Deferred Financing Expense. Net interest
expense and amortization of deferred financing expense was $21.3 million in
1997. These expenses were related to the financing of the acquired businesses.
The Predecessor did not separately allocate these respective costs to MBW.
Income Tax Provision. The Company has a combined federal and state tax rate of
approximately 38.7% in 1997 as compared to the Predecessor's effective rate in
1996 of 38.5%.
Net Income. Net income was $1.2 million in 1997, which was $9.3 million lower
than the prior year. The decline in net income was attributable to the interest
expense, financing and goodwill expenses incurred during 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales declined 1.9% to $91.6 million for the year ended December
31, 1996 as compared to $93.4 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 $81.1 million in 1996 from $82.9 million
in 1995. Syrup volume increased 3.4% to 78.6 million pounds in 1996 from 76.0
million pounds in 1995. In May 1996, the Predecessor adopted a value pricing
strategy to position its brand as the best value among the three national syrup
brands. This value pricing strategy has benefited the brand through higher
volumes and savings on consumer marketing expenses, but resulted in a net
decrease in syrup dollar sales in 1996.
Pancake mix sales remained constant at $10.5 million in 1996, the same as in
1995. Pancake mix volume was flat at 16.1 million pounds in 1996, which was the
same volume achieved in 1995.
Gross Profit. Gross profit as a percentage of net sales was 68.4% for the year
ended December 31, 1996, as compared to 70.3% for the year ended December 31,
1995. The decrease in the gross profit margin was primarily due to lower list
prices related to the Predecessor's value pricing strategy.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses for 1996 were 42.2% as a percentage of net sales as compared
to 45.3% for 1995. The favorable variance was the result of lower trade
promotion and consumer marketing expenses.
10
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $6.8 million for 1996 were $0.7 million more than
expenses of $6.1 million in 1995.
Operating Income. Operating income as a percentage of net sales improved to
18.8% for the year ended December 31, 1996 as compared to 18.4% 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 11.8% in 1996 from 14.2% in 1995 due to a reduction in costly buy-one-get-
one-free promotions.
Interest Expense and Amortization of Deferred Financing Expense. The
Predecessor did not allocate interest expense or amortization of deferred
financing expense to MBW.
Income Tax Provision. The provision for income taxes of $6.6 million in 1996
represented an effective tax rate of 38.5%, the same rate as in 1995.
Net Income. Net income was $10.6 million in 1995 and 1996 due to the factors
discussed above.
Liquidity and Capital Resources
For the year ended December 27, 1997, cash provided by operations was $23.0
million. Net income before depreciation and amortization provided cash of $11.2
million. Current assets, excluding cash, increased $24.0 million and current
liabilities, excluding current maturities of debt, increased $21.1 million. At
December 31, 1996, all items of working capital were recorded on the books of
the Predecessor pursuant to the Transition Services Agreement with Conopco. The
Company received a monthly cash amount from the Predecessor in settlement for
the operational activity during each month. Upon termination of the Transition
Services Agreement in July 1997, the Company's balance sheet incorporated all
items of working capital and accordingly, the Company experienced a substantial
increase in current assets and current liabilities.
Net cash used in investing activities was $229.2 million in 1997. In addition
to the acquisition of LC, the Company spent $2.4 million in 1997 for capital
expenditures and $0.8 million on software to establish a computer system for the
Company. The capital expenditures were incurred to relocate and install
acquired manufacturing equipment at the contract manufacturers' production
facilities. The Company expects to spend approximately $10.7 million on capital
expenditures in 1998. The Company anticipates that these expenditures will be
funded from internal cash flow.
During 1997, cash of $202.2 million was provided by financing activities. The
Company received $202.5 million from issuances of senior subordinated notes and
$90.0 million from borrowings under the senior secured term debt and senior
secured revolving debt facilities under the Second Amended and Restated Credit
Agreement. In addition, the Company received a capital contribution from
Holdings in the amount of $28.5 million. The proceeds from the notes and debt
facilities were used to repay senior secured debt and a senior subordinated
note, together totaling $95.0 million, existing from the acquisition of MBW on
December 31, 1996 and to fund the acquisition of LC.
11
<PAGE>
At December 27, 1997, the Company had $4.7 million of cash and cash equivalents
and an unused commitment of $22.5 million on its revolving debt facility. The
Company's primary sources of liquidity are cash flows from operations and
available borrowings under its $60.0 million revolving debt facility. Management
believes the available borrowing capacity combined with cash provided by
operations will provide the Company with sufficient cash to fund operations as
well as to meet existing obligations.
Other Information
- -----------------
On January 16, 1998, subsequent to the Company's fiscal year end, the Company
acquired all the assets of the Duncan Hines Business from P&G. The assets
acquired by the Company include (i) the Duncan Hines(R) and associated
trademarks, (ii) substantially all of the equipment for the manufacture of
Duncan Hines products currently located in P&G's Jackson, Tennessee facility,
(iii) proprietary formulations for Duncan Hines products, (iv) other product
specifications and customer lists and (v) rights under certain contracts,
licenses purchase orders and other arrangements and permits. The Company
intends to use the acquired assets in its operations of the Duncan Hines
Business. The purchase price was approximately $445.0 million and was based on
an arm's length negotiations between the Company and P&G.
The Company financed the acquisition of the Duncan Hines Business and related
costs with a capital contribution by Holdings of $93.8 million and with
additional senior secured bank borrowings totaling approximately $373.0 million.
The additional senior secured bank debt was incurred under the Company's Second
Amended and Restated Credit Agreement.
Impact of New Accounting Pronouncements. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income", which establishes standards for
reporting and display of comprehensive income and components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. This statement is effective for financial statements for fiscal
years beginning after December 15, 1997. The adoption of SFAS 130 will not have
any impact on the financial position or results of operations of the Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information", which establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for fiscal
years beginning after December 15, 1997. The adoption of SFAS 131 will not have
any impact on the financial position or results of operations of the Company.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
Reference is made to Item 14.
12
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Not applicable.
13
<PAGE>
PART III
- --------
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------------------------------
The names, ages and positions of all directors and executive officers of Aurora
Foods Inc., as of March 1, 1998, are listed below, followed by a brief account
of their business experience for at least the past five years. Directors and
officers serve in their positions until their resignation or removal. Officers
serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Ian R. Wilson 68 Chairman of the Board of Directors
Thomas J. Ferraro 50 President and Director
Ray Chung 49 Executive Vice President and Director
James B. Ardrey 39 Executive Vice President and Director
C. Gary Willett 43 Executive Vice President
M. Laurie Cummings 34 Vice President and Secretary
Alan Mintz 55 Vice President - Sales
Dirk C. Grizzle 35 Chief Financial Officer
David E. De Leeuw 53 Director
Charles Ayres 38 Director
Tyler T. Zachem 32 Director
Peter Lamm 46 Director
Richard C. Dresdale 40 Director
</TABLE>
Ian R. Wilson - Chairman of the Board of Directors
Mr. Wilson is the managing partner of Dartford Partnership, LLC ("Dartford"), a
private investment partnership focused on the food and beverage industries. Mr.
Wilson was formerly Chairman and Chief Executive Officer of Windmill Corporation
("Windmill"), a leading specialty miller and supplier of branded consumer
products which he founded in March 1989. Mr. Wilson was also formerly Chairman
and Chief Executive Officer of Wyndham Foods, Inc. ("Wyndham"), a major cookie
company he founded in 1985 and positioned as the leading popular priced cookie
company in the United States. From 1983 to 1984, Mr. Wilson was the Chairman and
Chief Executive Officer of Castle & Cooke (Dole), an international food and real
estate concern. Prior to Castle & Cooke, Mr. Wilson spent 25 years with The
Coca-Cola Company, initially in South Africa, where he was Plant Manager of
Johannesburg and later Vice President - Area Manager for Southern Africa, and
also served in a series of international operating management positions.
Ultimately, Mr. Wilson served 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, Windy Hill Pet Food Company, Inc. and Van de Kamp's, Inc.
14
<PAGE>
Thomas J. Ferraro - President and Director
Prior to joining the Company in December 1996, Mr. Ferraro served as President
of Campfire, Inc. (which recently merged with International Home Foods, Inc.),
from September 1994 to June 1996. Prior to joining Campfire, Inc., he was Vice
President of Sales for the Niche Grocery division of Borden, Inc. from 1991 to
1994. Mr. Ferraro's experience with niche grocery products extends back to his
early career with RJR Nabisco, Inc. and Drackett Products, a division of
Bristol-Meyers Squibb Company, where he held a variety of marketing and sales
positions.
Ray Chung - Executive Vice President and Director
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 (Colgate-Palmolive).
Between 1981 and 1984, Mr. Chung served as Vice President - Finance for Riviana
Foods, Inc. Mr. Chung is an Executive Vice President and a Director of Windy
Hill Pet Food Company, Inc. and an Executive Vice President of Van de Kamp's,
Inc.
James B. Ardrey - Executive Vice President and Director
Mr. Ardrey is a partner in Dartford. From January 1993 to February 1995, Mr.
Ardrey was a consultant to Windmill, conducting its divestiture program. Over
the period 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, Mr. Ardrey was a consultant with Booz, Allen & Hamilton. Mr.
Ardrey is also an Executive Vice President and a Director of Van de Kamp's, Inc.
and an Executive Vice President of the Windy Hill Pet Food Company, Inc.
C. Gary Willett - Executive Vice President
Prior to joining the Company in December 1996, Mr. Willett served as Executive
Vice President/General Manager of Campfire, Inc. (which recently merged into
International Home Foods, Inc.), from August 1995 to September 1996. 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 Vice President/General Manager of Elmer's. Before joining Borden,
Inc., Mr. Willett spent six years with The Kellogg Company in various marketing
and sales positions.
M. Laurie Cummings - Vice President and Secretary
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 Pet Food Company, Inc.
and Van de Kamp's, Inc.
15
<PAGE>
Alan Mintz - Vice President - Sales
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 Foods division.
Prior to joining Borden, Inc., Mr. Mintz held various sales positions at General
Foods Corp. from August 1967 to June 1985.
Dirk C. Grizzle - Chief Financial Officer
Prior to joining the Company in July 1997, 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 positions with KPMG Peat Marwick, most recently as Senior
Manager in KPMG's International Services practice in London, England.
David E. De Leeuw - Director
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., a managing general partner of MDC Management Company IV, L.P.,
which is the general partner of McCown De Leeuw & Co. IV, L.P., a member of
Gamma Fund, LLC and a member of Delta Fund LLC. Prior to founding McCown De
Leeuw & Co. with George E. McCown in 1984, 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. Mr. De Leeuw began his
career as an investment banker with Paine Webber Incorporated. He currently
serves as a director of Vans, Inc., AmeriComm Holdings Inc., Nimbus CD
International, Inc., American Residential Investment Trust and Outsourcing
Solutions Inc.
Charles Ayres - Director
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., a general partner
of MDC Management Company IV, L.P., which is the general partner of McCown De
Leeuw & Co. IV, L.P., a member of Gamma Fund LLC and a member of Delta Fund LLC.
Mr. Ayres has been associated with McCown & De Leeuw & Co. since 1991. Prior to
joining McCown De Leeuw & Co., Mr. Ayres was a founding 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. He currently serves as a director of Nimbus CD International,
Inc., Tiara Motorcoach Corporation and Papa Gino's, Inc.
16
<PAGE>
Tyler T. Zachem - Director
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., principal of MDC Management Company IIIA, L.P., which is the
general partner of McCown De Leeuw & Co. III (Asia), L.P. and a principal of
MDC Management Company IV, L.P., which is the general partner of McCown De Leeuw
& Co. IV, L.P. Mr. Zachem has been associated with McCown De Leeuw & Co. since
July 1993. Mr. Zachem previously worked as a consultant with McKinsey & Co. and
as an investment banker with McDonald & Company. He currently serves as a
director of Outsourcing Solutions Inc., RSP Manufacturing Corporation, The Brown
Schools, Inc. and Papa Gino's Inc.
Peter Lamm - Director
Mr. Lamm is President of Fenway Partners Management, 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 ("BCC"), 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 BCC. Mr. Lamm is also a
director of Central Tractor Farm & Country, Inc., Van de Kamp's, Inc., as well
as a director of various private corporations.
Richard C. Dresdale - Director
Mr. Dresdale is a Managing Director of Fenway Partners Management, Inc. Prior
to founding Fenway with Mr. Lamm and Andrea Geisser, Mr. Dresdale was a
principal at Clayton, Dubilier amd Rice, Inc. ("CD&R"). Mr. Dresdale also
served as a limited partner of the general partner of three of the investment
partnerships managed by CD&R. Mr. Dresdale previously 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., Nukote Holdings, Inc.
and Remingtom Arms Company.
17
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION
- --------------------------------
The following Summary Compensation Table sets forth the compensation received by
the officers of the company, during the year ended December 27, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Principal Other
Position as of December 27, 1997 Year Salary (1) Bonus Compensation
- -------------------------------- ---- ------ -------- ------------
<S> <C> <C> <C> <C>
Thomas J. Ferraro 1997 $175,000 $143,000 $ 9,000
President and Director
C. Gary Willett 1997 $140,000 $ 97,000 $ 7,000
Executive Vice President
Alan Mintz 1997 $124,000 $ 65,000 $15,600
Vice President - Sales
Dirk C. Grizzle 1997 $120,000 $ 33,000 $ -
Chief Financial Officer
</TABLE>
(1) Amounts have been annualized.
Other compensation includes Company contributions on behalf of the officers to
profit sharing and savings plans and other related benefits.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Members of the compensation committee of the Board of Directors of the Company
are Messrs. Ian R. Wilson, David E. De Leeuw and Peter Lamm. Mr. Wilson serves
as chairman of the compensation committee.
The Company is party to a Management Services Agreement and an Advisory Services
Agreement, as described in Item 13, with Dartford and McCown De Leeuw & Co. III,
L.P. ("MDC"), respectively, both members of MBW LLC. Mr. Wilson is the managing
partner of Dartford and Mr. De Leeuw is the managing partner of MDC.
In connection with the acquisitions of MBW and LC, the Company has paid to
certain members of MBW LLC, who are also represented on the Board of Directors
or officers of the Company and beneficial owners, fees for services rendered in
connection with the acquisition and related financing of LC. The aggregate
amount paid to certain members of MBW LLC, on or prior to December 27, 1997, was
$4.7 million and was funded by the proceeds of the financings. Of this $4.7
million, $1.3 million was paid to Dartford (whose partners include executive
officers and directors as described in Item 10); $481,000 was paid to Fenway
Partners Management, Inc., whose general partners include Mr. Peter Lamm and Mr.
Richard C. Dresdale (both directors of the Company); $2.7 million was paid to
18
<PAGE>
MDC, whose general partners and principal include Mr. David E. De Leeuw, Mr.
Charles Ayres and Mr. Tyler T. Zachem (all directors of the Company); $259,000
in total was paid to Mr. Thomas J. Ferraro and Mr. C. Gary Willett (both
officers of the Company). The fee amounts were negotiated among the equity
investors.
Employment Agreements
- ---------------------
The Company entered into an employment agreement with Thomas J. Ferraro to serve
as President of the Company. Mr. Ferraro's employment agreement provides for a
two-year term, commencing on December 31, 1996 (the "MBW Closing Date");
however, on each anniversary of the MBW 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 Closing Date. Under the employment agreement, Mr.
Ferraro receives an annual base salary of $175,000 per year and is eligible to
receive a bonus of up to 70% of his base salary based upon certain earnings
criteria. Effective January 1, 1998, Mr. Ferraro's salary and bonus opportunity
was adjusted to $275,000 and 80%, respectively, and the term of employment
agreement was revised to three years with a two year renewal according to the
respective anniversary of the MBW 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 Mr. Ferraro's employment agreement. Mr. Ferraro's
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.
The Company also has employment agreements with Messrs. C. Gary Willett, Alan
Mintz and Dirk C. Grizzle. Mr. Willett serves as Executive Vice President of
the Company. Per Mr. Willett's employment agreement, Mr. Willett receives an
annual base salary of $140,000 per year and is eligible to receive a bonus of up
to 60% of his base salary based upon certain earnings criteria. Mr. Willett's
employment agreement provides for a two-year term, commencing on the MBW Closing
Date; however, on each anniversary of the MBW 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 Closing Date. Effective January 1,
1998, Mr. Willett's salary and bonus opportunity was adjusted to $200,000 and
80%, respectively, and the term of the employment agreement was revised to three
years with a two year renewal according to the respective anniversary of the MBW
Closing Date. Per Mr. Mintz's employment agreement, Mr. Mintz receives an
annual base salary of $120,000 per year and is eligible to receive a bonus of up
to 60% of his base salary based upon certain earnings criteria. Mr. Mintz
serves as Vice President of Sales of the Company. Mr. Mintz's 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 Mr. Mintz's employment agreement
will always be six months. Effective January 1, 1998, Mr. Mintz's salary and
bonus opportunity was adjusted to $175,000 and 70%, respectively. Mr. Grizzle
serves as Chief Financial Officer of the Company. Per Mr. Grizzle's employment
agreement, 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 certain
earnings criteria. Mr. Grizzle's employment agreement provides for a one-year
term, commencing on June 30, 1997. On December 30, 1998, and each day
thereafter, the term will automatically be extended for an additional day so
that the term remaining under Mr. Grizzle's employment agreement will always
19
<PAGE>
be six months. Effective January 1, 1998, Mr. Grizzle's salary and
bonus opportunity was adjusted to $150,000 and 70%, respectively. If
the Company terminates Messrs. Willett, Mintz or Grizzle without cause, the
Company is required to pay each an amount equal to the base salary he would have
been entitled to receive through the end of the current term of each respective
employment agreement. The employment agreements also provide that until the
later of the first anniversary date of each officer's termination and the end of
the current term of the employment agreements, Messrs. Willett, Mintz and
Grizzle will not compete with or solicit employees from the Company.
Directors' Compensation
- -----------------------
Directors, all of whom are officers, employees or otherwise affiliates of the
Company, have not received, as of March 1, 1998, and are not expected in the
future to 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.
Incentive Compensation Plan
- ---------------------------
The Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement") of MBW LLC contains an incentive compensation arrangement (the
"Incentive Plan") as a means by which certain key employees and other
specifically designated persons ("Key Personnel") of the Company, and/or
affiliated with the Company, may be given an opportunity to benefit from
appreciation in the value of the Company. Under the Incentive Plan, Key
Personnel are issued a specific class of limited liability company member units
("Incentive Units"), at a diminutive value, as a means to participate in the
appreciation of the Company. The Incentive Units are subject to a vesting
requirement based on terms of employment or other factors.
Upon a change of control or initial public offering of the Company's or
Holdings' stock, all Incentive Units will vest immediately, except for certain
Incentive Units issued after December 31, 1997, which will remain subject to
normal vesting requirements under the Incentive Plan. The holders of vested
Incentive Units will be entitled to certain payments or distributions based on
the amounts paid or distributed to the investors in MBW LLC. In general, there
will be no payments to holders of vested Incentive Units until the MBW LLC
investors have received a designated return on their investments. The type of
payment will be cash or non-cash consideration, depending on the type of
triggering event and the type of distribution received by MBW LLC investors.
The total amount due under the Incentive Plan, if any, is subject to the vesting
factors discussed above. Based on management and the Board of Director's
assessment of the current valuation of the Company, compensation expense for
the year ended December 27, 1997 totaled 2.3 million. Should the Company
appreciate further in value, compensation expense to be recognized in future
periods under the Incentive Plan could be significant. The fiscal 1997
compensation expense has been recorded as a liability of MBW LLC as the sponsor
of
20
<PAGE>
the Incentive Plan. However, because the Incentive Plan is for the benefit of
Key Personnel of the Company, expense recognized under the Incentive Plan has
been pushed down to the Company, and has been recorded by the Company as expense
and as additional paid in capital from its parent.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
All of the outstanding capital stock of the Company is held by Holdings and all
of the outstanding capital stock of Holdings is held by MBW LLC. The Class A
and Class B limited liability company interests ("Common LLC Securities") are
the only classes of MBW LLC's limited liability company interests that currently
possess voting rights. As of March 1, 1998, there were 141,877 issued and
outstanding interests of MBW LLC Common LLC Securities. The following table
sets forth certain information regarding the beneficial ownership of the Common
LLC Securities of MBW LLC, as of March 1, 1998, by each person who beneficially
owns more than 5% of MBW LLC Common LLC Securities, by directors and certain
executive officers of the Company, individually, and by the directors and
executive officers of the Company as a group.
21
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Common LLC Common LLC
Name and Address of Beneficial Owner Securities(1) Securities(1)
- ------------------------------------ ------------- -------------
<S> <C> <C>
5% MEMBERS:
McCown De Leeuw Co. III, L.P.(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
McCown De Leeuw & Co. III (Europe), L.P.(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
McCown De Leeuw & Co. III (Asia), L.P.(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
Gamma Fund LLC(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
McCown De Leeuw & Co. IV, L.P.(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
Delta Fund LLC(2) 94,019 66.3%
c/o McCown De Leeuw & Co.
3000 Sand Hill Road, Building 3, Suite 290
Menlo Park, CA 94025
Fenway Partners Capital Fund, L.P.(3) 35,481 25.0%
152 West 57th Street
New York, New York 10019
California Public Employment Retirement System(4) 21,538 15.2%
Lincoln Plaza
400 P Street
Sacramento, California 95814
Dartford Partnership, LLC(4) 7,888 5.6%
456 Montgomery Street, Suite 2200
San Francisco, California 94104
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Common LLC Common LLC
Securities (1) Securities (1)
-------------- ---------------
<S> <C> <C>
Ian R. Wilson (5) 7,888 5.6%
James B. Ardrey (5) 7,888 5.6%
Ray Chung (5) 7,888 5.6%
M. Laurie Cummings (5) 7,888 5.6%
David E. De Leeuw (2) 94,019 66.3%
Charles Ayres (2) 94,019 66.3%
Tyler T. Zachem (2) 94,019 66.3%
Peter Lamm (3) 35,481 25.0%
Richard C. Dresdale (3) 35,481 25.0%
Thomas J. Ferraro 340 0.2%
C. Gary Willett 139 0.1%
Alan Mintz 177 0.1%
Dirk C. Grizzle 334 0.2%
All directors and executive
officers of the Company as a group 138,378 97.5%
</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 34,655.8 membership units owned by McCown De Leeuw & Co. III,
L.P., an investment partnership whose general partner is MDC, 2,460.3 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"), 576.6 membership units held by McCown De Leeuw & Co. III (Asia), L.P.,
an investment partnership whose general partner is MDC IIIA, and 749.65
membership units owned by Gamma Fund LLC, a California limited liability
company, 333,076.9 membership units owned by McCown De Leeuw & Co. IV, L.P., an
investment partnership whose general partner is MDC Management Company IV, L.P.
("MDC IV") and 961.5 membership units owned by Delta Fund LLC. In addition,
under an irrevocable proxy, McCown De Leeuw & Co. III, L.P., has the power to
vote all of LLC's securities held by the California Public Employee 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, MDC IIA and MDC IV.
Voting and dispositive decisions regarding the Common LLC Securities are made by
Mr. McCown and Mr. De Leeuw, as Managing General Partners of each MDC, MDC IIIA
and MDC IV, who together have more than the required two-thirds-in-interest vote
of the Managing General Partners necessary to effect such decisions on behalf of
such entity. Voting and dispositive decisions regarding the Common LLC
Securities owned by Gamma Fund LLC and Delta Fund LLC are made by a vote or
consent of a majority in number of the voting members of Gamma Fund LLC and
Delta Fund LLC. Messrs. McCown, De Leeuw, King, Hellman, Ayres and Zuckerman
have no direct ownership of any shares of Common LLC Securities except, in the
case of Gamma Fund LLC and Delta Fund LLC, to the extent of their proportionate
partnership interests of membership interests.
23
<PAGE>
(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. Messrs. Peter Lamm and Richard C. 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 the MBW LLC's Common LLC Securities held by
Fenway. Each of Messrs. Lamm and Dresdale disclaims the existence of a group and
disclaims beneficial ownership of MBW LLC Common LLC Securities held by Fenway.
(4) Under an irrevocable proxy, California Public Employee Retirement System
has granted McCown De Leeuw & Co. III, L.P. the right to vote all of the Common
LLC Securities it holds.
(5) Mr. Ian Wilson is the managing partner and Mr. James B. Ardrey, Mr. Ray
Chung and Ms. M. Laurie Cummings are each partners of Dartford, and as such they
may be deemed to have the power to vote or dispose of MBW LLC's Common LLC
Securities held by Dartford. Each of Messrs. Wilson, Ardrey, and Chung and Ms.
Cummings disclaims the existence of a group and disclaims beneficial ownership
of MBW LLC Common LLC Securities held by Dartford.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
As of March 1, 1998, Aurora Foods Inc. has maintained business relationships and
engaged in certain transactions as described below.
The Company is party to a Management Services Agreement with Dartford pursuant
to which Dartford provides management oversight on financial and operational
matters. The Company paid fees to Dartford, a member of MBW LLC, in connection
with this agreement totaling $768,000 in fiscal 1997. The annual management fee
was $600,000 prior to the acquisition of LC and $935,000 after the acquisition
of LC.
The Company is party to an Advisory Services Agreement with MDC pursuant to
which MDC provides certain advisory functions. The Company paid fees to MDC, a
member of MBW LLC, in connection with this agreement totaling $293,000 in fiscal
1997. The annual advisory fee was $250,000 prior to the acquisition of LC and
$336,000 after the acquisition of LC
The terms of the Management Services Agreement and the Advisory Services
Agreement were negotiated on an arms-length basis between Dartford and MDC and
the other equity investors. Dartford partners include Mr. Ian R. Wilson, Mr.
Ray Chung, Mr. James B. Ardrey and Ms. M. Laurie Cummings, who are directors
and/or executive officers of the Company. MDC partners include Mr. David E. De
Leeuw and Mr. Charles Ayres and principal Mr. Tyler T. Zachem, who are all
directors of the Company.
In connection with the acquisitions of MBW, LC and the Duncan Hines Business,
the Company paid to certain members of MBW LLC, who are also represented on the
Board of Directors or officers of the Company and beneficial owners, fees for
services rendered in connection with the acquisitions and related financings.
The aggregate amount paid to certain members of MBW LLC was $8.8 million and was
funded by the proceeds of the financings. Of this amount, $1.3 million was paid
to Dartford (whose partners include executive officers and directors as
described in Item 10); $259,000 in total was paid to Mr. Thomas J. Ferraro
(director and President of the Company) and Mr. C. Gary Willett (Executive Vice
President of the Company); $5.7 million was paid to MDC, whose general partners
and principal include Mr. David E. De Leeuw, Mr. Charles Ayres and Mr. Tyler T.
Zachem (all directors of the Company); and $1.5 million was
24
<PAGE>
paid to Fenway Partners Capital Fund, L.P., whose partners include Mr. Peter
Lamm and Mr. Richard C. Dresdale (both directors of the Company). The fee
amounts were negotiated among the equity investors.
On December 31, 1996 and January 16, 1998, Mr. Thomas J. Ferraro, the President
of the Company, and Mr. C. Gary Willett, Executive Vice President of the Company
and on July 1, 1997 and January 16, 1998, Mr. Alan Mintz, Vice President Sales
and Mr. Dirk C. Grizzle, Chief Financial Officer of the Company, and on January
16, 1998, Mr. Bob Kraska, 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 in MBW LLC. The promissory notes mature
December 31, 1999 and January 16, 2001 for Mr. Ferraro and Mr. Willett, June 30,
2000 and January 16, 2001 for Mr. Mintz and Mr. Grizzle and January 16, 2001 for
Mr. Kraska. Interest is due and payable quarterly at the rate of 8.0% per annum
and there are required annual principal payments. The aggregate balances
outstanding as of March 1, 1998 on the promissory notes were $580,849. The
outstanding balances are as follows:
<TABLE>
<S> <C>
Mr. Ferraro $171,000
Mr. Willett 75,349
Mr. Mintz 100,000
Mr. Grizzle 194,200
Mr. Kraska 40,300
--------
$580,849
========
</TABLE>
25
<PAGE>
PART IV
- -------
ITEM 14: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
- ---------------------------------------------------
<TABLE>
<S> <C>
(a) 1.a. Financial Statements of the Company
Report of Independent Accountants 32
Balance Sheets as of December 27, 1997
and December 31, 1996 33
Statement of Operations for the year ended
December 27, 1997 34
Statement of Changes in Stockholder's Equity
for the year ended December 27, 1997 35
Statement of Cash Flows for the year ended
December 27, 1997 36
Notes to the Financial Statements 37 through 51
b. Financial Statements of the Predecessor
Mrs. Butterworth's Business (A Component of CONOPCO, Inc.):
Report of Independent Accountants 52
Statement of Assets to be Acquired as of December 31, 1996 53
Statements of Operations for the years
ended December 31, 1996 and 1995 54
Notes to the Financial Statements 55 through 60
2. Financial Statement Schedule
Schedule IX - Valuation Reserves 61
3. Exhibits
</TABLE>
26
<PAGE>
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
1.1 Purchase Agreement dated February 5, 1997 by and between the Company and
Chase Securities Inc. (Incorporated by reference to Exhibit 1.1 to the
Company's Form S-4 filed on August 21, 1997 (the "S-4")).
1.2 Purchase Agreement dated June 18, 1997 by and between the Company, Chase
Securities, Inc. and Credit Suisse First Boston Corporation. (Incorporated
by reference to Exhibit 1.2 to the S-4).
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. (Incorporated by reference to Exhibit 2.1 to the S-4).
2.2 Asset Purchase Agreement dated as of March 7, 1997 by and between the
Company and Kraft Foods, Inc. (Incorporated by reference to Exhibit 2.2 to
the S-4).
2.3 Asset Purchase Agreement, dated as of November 26, 1997, by and between the
Company and Procter & Gamble Company. (Incorporated by reference to Exhibit
2.1 to the Form 8-K filed on January 30, 1998 (the "8-K")).
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.
(Incorporated by reference to Exhibit 3.1 to the S-4).
3.2 Amended and Restated By-laws of the Company. (Incorporated by reference to
Exhibit 3.2 to the S-4).
4.1 Indenture dated as of February 10, 1997, by and between the Company and
Wilmington Trust Company (the "Indenture"). (Incorporated by reference to
Exhibit 4.1 to the S-4).
4.2 Specimen Certificate of 9 7/8% Series A Senior Subordinated Note due 2007
(included in Exhibit 4.1 hereto). (Incorporated by reference to Exhibit 4.2
to the S-4).
4.3 Specimen Certificate of 9 7/8% Series B Senior Subordinated Note due 2007
(included in Exhibit 4.1 hereto). (Incorporated by reference to Exhibit 4.3
to the S-4).
4.4 Form of Note Guarantee to be issued by future subsidiaries of the Company
pursuant to the Indenture (included in Exhibit 4.1 hereto). (Incorporated
by reference to Exhibit 4.4 to the S-4).
</TABLE>
27
<PAGE>
<TABLE>
<C> <S>
4.6 Indenture dated as of July 1, 1997 by and between the Company and
Wilmington Trust Company (the "Series C Indenture"). (Incorporated by
reference to Exhibit 4.6 to the S-4).
4.7 Specimen Certificate of 9 7/8% Series C Senior Subordinated Note due 2007
(included in Exhibit 4.6 hereto). (Incorporated by reference to Exhibit
4.7 to the S-4).
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).
(Incorporated by reference to Exhibit 4.8 to the S-4).
10.1 Management Services Agreement, dated as of December 31, 1996, by and
between the Company and Dartford Partnership, L.L.C. (Incorporated by
reference to Exhibit 10.1 to the S-4).
10.2 Advisory Services Agreement, dated as of December 31, 1996, by and between
the Company and MDC Management Company III, L.P. (Incorporated by
reference to Exhibit 10.2 to the S-4).
10.3 Agreement dated as of December 31, 1996, by and between MBW Foods Inc. and
Fenway Partners, Inc. (Incorporated by reference to Exhibit 10.3 to the S-4).
10.4 Second Amended and Restated Credit Agreement, dated as of January 16,
1998, by and among the Company, Aurora Foods 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 (Incorporated by reference to Exhibit 10.5
to the S-4).
10.6 Employment Agreement, dated as of December 31, 1996, by and between the
Company and C. Gary Willett. (Incorporated by reference to Exhibit 10.6 to
the S-4).
10.8 Flavor Supply Agreement, dated as of December 31, 1996, by and between the
Company and Quest International Flavors & Food Ingredients Company.
(Incorporated by reference to Exhibit 10.8 to the S-4).
10.10 Shared Technology License Agreement, dated as of December 31, 1996, by and
between the Company and Conopco, Inc. (Incorporated by reference to
Exhibit 10.10 to the S-4).
10.11 First Amended and Restated Limited Liability Company Agreement of MBW Investors
LLC, dated as of January 16, 1998.
</TABLE>
28
<PAGE>
<TABLE>
<C> <S>
10.12 Employment Agreement dated as of January 20, 1997, by and between the
Company and Alan Mintz. (Incorporated by reference to Exhibit 10.12 to
the S-4).
10.13 Amended Transitional Co-Pack Agreement, dated as of July 1, 1997, by and
between the Company and Kraft Foods, Inc. (Incorporated by reference to
Exhibit 10.13 to the S-4).
10.14 Transition Services Agreement, dated as of July 1, 1997, by and between
the Company and Kraft Foods, Inc. (Incorporated by reference to Exhibit
10.14 to the S-4).
10.15 Excluded Business Co-Pack Agreement, dated as of July 1, 1997, by and
between the Company and Kraft Foods, Inc. (Incorporated by reference to
Exhibit 10.15 to the S-4).
10.16 First Amended and Restated Red Wing Co-Pack Agreement, dated as of
November 19, 1997, by and between the Company and The Red Wing Company, Inc.
(Confidential treatment for a portion of this document has been requested by
the Company).
10.17 Employment Agreement dated July 1, 1997, by and between the Company and
Dirk Grizzle.
10.18 Production Agreement, dated November 19, 1997, by and between the Company
and The Red Wing Company, inc. (Confidential treatment for a portion of
this document has been requested by the Company).
10.20 Transitional Supply Agreement, dated November 26, 1997, by and between
the Company and Procter & Gamble Distribution Company. (Confidential treatment
for a portion of this document has been requested by the Company).
12.1 Statement re: computation of ratios.
21.1 Subsidiaries of Registrant. (Incorporated by reference to Exhibit 21.1 to
the S-4).
27.1 Financial Data Schedule.
23.1 Consent of Price Waterhouse LLP. (Incorporated by reference to Exhibit
23.1 to the S-4).
23.4 Consent of Coopers & Lybrand L.L.P. (Incorporated by reference to Exhibit
23.4 to the S-4).
24.1 Power of Attorney. (Incorporated by reference to Exhibit 24.1 to the S-4).
</TABLE>
29
<PAGE>
(b) Reports on Form 8-K
None.
30
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AURORA FOODS INC.
By: /s/ Thomas J. Ferraro
---------------------
Thomas J. Ferraro President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 27, 1998.
/s/ Thomas J. Ferraro
- -----------------------
Thomas J. Ferraro President and Director
(Principal Executive Officer)
/s/ Dirk C.Grizzle
- -----------------------
Dirk C.Grizzle Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Ian R. Wilson Chairman of the Board of Directors
- -----------------------
Ian R. Wilson
/s/ Ray Chung Director
- -----------------------
Ray Chung
/s/ James B. Ardrey Director
- -----------------------
James B. Ardrey
/s/ David E. De Leeuw Director
- -----------------------
David E. De Leeuw
/s/ Charles Ayres Director
- -----------------------
Charles Ayres
/s/ Tyler T. Zachem Director
- -----------------------
Tyler T. Zachem
/s/ Peter Lamm Director
- -----------------------
Peter Lamm
/s/ Richard C. Dresdale Director
- -----------------------
Richard C. Dresdale
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
of Aurora Foods Inc.
In our opinion, the financial statements listed in the index appearing under
Item 14 (a) 1.a. and Item 14 (a) 2. on page 26 present fairly, in all material
respects, the financial position of Aurora Foods Inc. (the Company) at December
27, 1997 and December 31, 1996 (commencement of operations), and the results of
its operations and its cash flows for the year ended December 27, 1997 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
San Francisco, California
March 18, 1998
32
<PAGE>
AURORA FOODS INC.
BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
Commencement
of Operations
December 27, December 31,
1997 1996
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,717 $ 8,666
Accounts receivable (net of $140 allowance) 12,362 -
Accounts receivable - other (Note 4) 1,474 480
Inventories (Note 5) 6,902 1,182
Prepaid expenses and other assets 1,955 9
Deferred tax asset (Note 11) 2,966 -
-------- --------
Total current assets 30,376 10,337
Property, plant and equipment, net (Note 6) 14,075 5,206
Goodwill and other intangible assets, net (Note 7) 315,241 111,358
Other assets 13,047 3,995
-------- --------
Total assets $372,739 $130,896
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long term debt (Note 9) $ 4,375 $ -
Accounts payable 6,443 -
Accrued liabilities (Note 8) 17,409 2,736
-------- --------
Total current liabilities 28,227 2,736
Deferred tax liability (Note 11) 3,745 -
Senior secured revolving debt facility (Note 9) 37,500 30,000
Senior secured term debt (Note 9) 35,625 15,000
Senior subordinated notes (Note 9) 202,419 50,000
-------- --------
Total liabilities 307,516 97,736
-------- --------
Stockholder's equity:
Common stock, $0.01 par value; 3,000 shares
authorized; 1,000 shares issued and outstanding - -
Paid-in capital 64,203 33,270
Promissory notes (Note 14) (215) (110)
Retained earnings 1,235 -
-------- --------
Total stockholder's equity 65,223 33,160
-------- --------
Commitments and contingent liabilities (Note 16)
Total liabilities and stockholder's equity $372,739 $130,896
======== ========
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
AURORA FOODS INC.
STATEMENT OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Year ended
December 27,
1997
-------------
<S> <C>
Net sales $143,020
Cost of goods sold 45,729
--------
Gross profit 97,291
--------
Brokerage, distribution and marketing expenses:
Brokerage and distribution 17,096
Trade promotions 26,075
Consumer marketing 15,142
--------
Total brokerage, distribution and marketing expenses 58,313
Amortization of goodwill and other intangibles 5,938
Selling, general and administrative expenses 5,229
Incentive compensation expense (Note 15) 2,300
Transition related costs (Note 10) 2,113
--------
Total operating expenses 73,893
--------
Operating income 23,398
Interest income (151)
Interest expense 18,393
Amortization of deferred financing expense 3,059
Other bank and financing expenses 83
--------
Income before income taxes 2,014
Income tax provision (Note 11) 779
--------
Net income $ 1,235
========
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
AURORA FOODS INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Additional
Stock Paid-in Promissory Retained
Shares Capital Notes Earnings Total
-------- ---------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1,000 $33,270 $(110) $ - $33,160
Capital contribution - 28,633 (125) - 28,508
Payments on officer promissory
notes (Note 14) - - 20 - 20
Incentive compensation (Note 15) - 2,300 - - 2,300
Net income - - - 1,235 1,235
----- ------- ----- ------ -------
Balance at December 27, 1997 1,000 $64,203 $(215) $1,235 $65,223
===== ======= ===== ====== =======
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
AURORA FOODS INC.
STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Year ended
December 27,
1997
-------------
<S> <C>
Cash flows from operating activities:
Net income $ 1,235
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 9,976
Deferred income taxes 779
Incentive compensation (Note 15) 2,300
Change in assets and liabilities, net of effects of business
acquired:
Increase in accounts receivable (12,362)
Increase in accounts receivable - other (994)
Decrease in inventories 2,975
Increase in prepaid expenses and other assets (1,946)
Increase in accounts payable 6,443
Increase in accrued liabilities 14,624
---------
Net cash provided by operating activities 23,030
---------
Cash flows from investing activities:
Additions to property, plant and equipment (2,411)
Changes to other non-current assets and other liabilities (844)
Payment for acquisition of business (Note 3) (225,930)
---------
Net cash used in investing activities (229,185)
---------
Cash flows from financing activities:
Proceeds from senior secured revolving and term debt (Note 9) 90,000
Proceeds from senior subordinated notes (Note 9) 202,500
Repayment of borrowings (107,500)
Capital contributions from Holdings, net of officer promissory notes 28,500
Debt issuance costs (11,294)
---------
Net cash provided by financing activities 202,206
---------
Decrease in cash and cash equivalents (3,949)
Cash and cash equivalents, beginning of period 8,666
---------
Cash and cash equivalents, end of period $ 4,717
=========
Supplemental Cash Flow Disclosure:
Cash paid for interest $ 10,091
Cash paid for income taxes $ 195
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
Notes to the Financial Statements
NOTE 1 - THE COMPANY
- --------------------
ORGANIZATION
Aurora Foods Inc. (the "Company"), a 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 ("MBW") (Note 3) from
Conopco, Inc., a subsidiary of Unilever United States, Inc. ("Conopco" or the
"Predecessor"). On July 1, 1997, the Company acquired substantially all the
assets of the Log Cabin syrup business ("LC") from Kraft Foods, Inc. ("Kraft")
(Note 3). The Company is a wholly-owned subsidiary of Aurora Foods Holdings
Inc. ("Holdings"), also a Delaware corporation. Holdings is wholly-owned by MBW
Investors LLC ("MBW LLC"), a Delaware limited liability company. See Subsequent
Events (Note 17).
OPERATIONS
The Company produces and markets syrup and pancake mix products that are sold
across the United States. The products are manufactured under temporary co-
packing agreements with Conopco and Kraft and under long-term co-packing
agreements with third parties. The Company's manufacturing equipment has been or
will be installed at certain facilities of these third parties. The principal
trademarks under which the products are sold are Mrs. Butterworth's(R) and Log
Cabin(R).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
The policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses 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.
FISCAL YEAR
The Company's fiscal year ends on the last Saturday of December. Accordingly,
the results of operations reflect activity for the period from December 31, 1996
(commencement of operations) through December 27, 1997. The balance sheet as of
December 31, 1996 reflects the acquisition of the business from Conopco as of
that date but prior to the commencement of operations.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with original
maturities 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
contract manufacturers' raw materials, packaging, labor and manufacturing
overhead.
37
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the individual assets ranging from three to fifteen years. Costs
which improve an asset or extend its useful life are capitalized, while repairs
and maintenance costs are expensed as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets include goodwill, trademarks and various
identifiable intangible assets purchased by the Company. Goodwill is being
amortized over forty years using the straight-line method. Other intangible
assets are being amortized using the straight-line method over periods ranging
from five to forty years.
IMPAIRMENT OF LONG-LIVED ASSETS
Upon commencement of operations, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
SFAS 121 requires the Company to review long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The assessment of impairment is based on the estimated undiscounted
future cash flows from operating activities compared with the carrying value of
the assets. If the undiscounted future cash flows of an asset are less than the
carrying value, a write-down would be recorded, measured by the amount of the
difference between the carrying value of the asset and the fair value of the
asset. Management believes that there has been no impairment at December 27,
1997.
OTHER ASSETS
Other assets consist of deferred loan acquisition costs, systems software, and
other miscellaneous assets. Deferred loan acquisition costs of the senior
subordinated notes and senior secured term debt are being amortized using the
interest method over the terms of the respective notes and debt. Aggregate
amortization of deferred loan acquisition costs and other assets charged against
income in the year ended December 27, 1997 was $3.1 million.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
For purposes of financial reporting, the Company has determined that the fair
value of financial instruments, other than the senior subordinated notes,
approximates book value at December 27, 1997. The fair market value of the
senior subordinated notes at December 27, 1997, based on quoted market prices,
was $210.5 million.
CONCENTRATION OF CREDIT RISK
The Company sells its products to supermarkets and other retail channels. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral.
38
<PAGE>
The Company maintains reserves for potential credit losses and had no
significant concentration of credit risk at December 27, 1997.
INCOME TAXES
The Company records income taxes in accordance with the provisions of Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes". This
method of accounting for income taxes uses an asset and liability approach which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities.
ADVERTISING
Costs related to advertising the Company's products are expensed in the period
incurred, or expensed ratably over the year in relation to revenues. Advertising
expense for the year ended December 27, 1997 was $4.1 million.
NOTE 3 - BUSINESS ACQUISITIONS
- ------------------------------
MRS. BUTTERWORTH'S
At the close of business on December 31, 1996, the Company acquired
substantially all the assets of Mrs. Butterworth's syrup and pancake business
from Conopco. The Company manufactures its products under co-packing agreements
with third parties.
The Company acquired the inventories, manufacturing equipment and intangible
assets of MBW for a purchase price of $114.1 million. The purchase agreement
contains customary representations, warranties and covenants by each of Conopco
and the Company. The acquisition was accounted for by using the purchase method
of accounting.
The acquisition was financed by (i) a net capital contribution from Holdings of
approximately $33.2 million, (ii) term loans of $15.0 million and revolving
loans of $30.0 million borrowed under a $60.0 million senior secured debt
facility, and (iii) loans of $50.0 million borrowed under a senior subordinated
debt facility. On February 10, 1997, the senior subordinated debt facility of
$50.0 million and the senior secured facilities of $15.0 million of term debt
and $30.0 million of revolving debt were repaid with proceeds from a $100.0
million senior subordinated note offering.
39
<PAGE>
The cost to acquire MBW has been allocated to tangible and intangible assets
acquired as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash paid to acquire assets $114,132
Other acquisition costs 3,663
--------
117,795
Costs assigned to tangible assets (6,138)
--------
Cost attributable to intangible assets $111,657
========
</TABLE>
LOG CABIN
On July 1, 1997, the Company acquired substantially all the assets of the LC
syrup business from Kraft. The Company manufactures the products under
co-packing agreements with Kraft and a third party.
The Company acquired the inventories, certain manufacturing equipment and
intangible assets of LC for a purchase price of $222.0 million. The purchase
agreement contains customary representations, warranties and covenants by each
of Kraft and the Company. The acquisition was accounted for by using the
purchase method of accounting. The allocation of purchase price has not been
finalized; however, any changes are not expected to be material.
The acquisition was financed by (i) a capital contribution from Holdings of
approximately $28.6 million, (ii) term loans of $40.0 million and revolving
loans of $47.0 million borrowed under a senior secured debt facility, and (iii)
proceeds of $102.5 million received in an additional senior subordinated note
offering.
The cost to acquire LC has been allocated to tangible and intangible assets
acquired, as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash paid to acquire assets $221,995
Other acquisition costs 3,636
--------
225,631
Costs assigned to tangible assets (16,163)
--------
Cost attributable to intangible assets $209,468
========
</TABLE>
40
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Had the acquisition of LC taken place on January 1, 1997, the unaudited pro
forma net sales and net income for the year ended December 27, 1997 would have
been $194.2 million and $7.0 million, respectively.
NOTE 4 - ACCOUNTS RECEIVABLE - OTHER
- ------------------------------------
Accounts receivable - other consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 27, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Conopco $ 111 $480
Kraft 1,057 --
Other 306 --
------ ----
$1,474 $480
====== ====
</TABLE>
The balances due as of December 27, 1997 from Conopco and Kraft were comprised
of accounts receivable collected by them on behalf of the Company. The balance
due as of December 31, 1996 from Conopco was an inventory settlement owed to the
Company.
NOTE 5 - INVENTORIES
- --------------------
Inventories consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 27, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials $ 270 $ 523
Finished goods 6,632 659
------ ------
$6,902 $1,182
====== ======
</TABLE>
41
<PAGE>
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 27, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Machinery and equipment $14,357 $5,206
Furniture and fixtures 416 --
Computer equipment 313 --
------- ------
15,086 5,206
Less accumulated depreciation (1,011) --
------- ------
$14,075 $5,206
======= ======
</TABLE>
NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS
- ---------------------------------------------
Goodwill and other intangible assets consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
December 27, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Goodwill $216,485 $ 64,518
Trademarks 99,600 44,500
Other intangibles 5,040 2,340
-------- --------
321,125 111,358
Less accumulated amortization (5,884) --
-------- --------
$315,241 $111,358
======== ========
</TABLE>
NOTE 8 - ACCRUED LIABILITIES
- ----------------------------
Accrued liabilities consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 27, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Accrued interest $ 8,383 $ --
Accrued trade promotions and
consumer marketing 5,092 --
Other 3,934 2,736
------- ------
$17,409 $2,736
======= ======
</TABLE>
42
<PAGE>
NOTE 9 - LONG TERM DEBT
- ------------------------
Long term debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 21, December 31,
1997 1996
------------ ------------
<S> <C> <C>
SENIOR SECURED DEBT
Senior secured term debt; weighted average interest rate of 8.0% at December 27, 1997;
principal due in quarterly installments through December 31, 2003; floating interest rate
at the prime rate plus 1.25% or, alternatively, the one, two, three or six month
Eurodollar rate plus 2.25% payable quarterly or at the termination of the Eurodollar
contract interest period 40,000 -
Senior secured revolving debt facility; interest rate of 8.0% at December 27, 1997;
principal due December 31, 2003; floating interest rate at prime plus 1.25% or,
alternatively, the one, two, three, or six month Eurodollar rate plus 2.25% payable
quarterly or at the termination of the Eurodollar contract period 37,500 -
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 sixth 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 10.0% 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 months Eurodollar rate plus 3.00%
payable quarterly or at the termination of the Eurodollar contract interest period - 15,000
SENIOR SUBORDINATED NOTES
Senior subordinated notes issued February 10, 1997 at par value of $100,000; coupon
interest rate of 9.875% with interst payable each August 15 and February 15; matures
on February 15, 2007 100,000 -
Senior subordinated notes issued July 1, 1997 at par value $100,000 plus premium of
$2,500; net of unamortized premium of $2,419 at December 27, 1997; coupon interest
rate of 9.875% with interest payable each August 15 and February 15; effective rate
9.48%; matures February 15, 2007 100,000 -
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; matures on December 31, 2006 - 50,000
--------- ------------
277,500 95,000
Add: unamortized premium on senior subordinated notes 2,419 -
Less: current portion of long term debt (4,375) -
--------- ------------
Long term debt $ 275,544 $ 95,000
========= ============
</TABLE>
43
<PAGE>
Annual principal payments for the next five years and thereafter consist of the
following (dollars in thousands):
<TABLE>
<S> <C>
1998 $ 4,375
1999 4,875
2000 5,750
2001 6,750
2002 7,750
Thereafter $248,000
--------
$277,500
========
</TABLE>
SENIOR SECURED DEBT
- -------------------
On December 31, 1996, the Company and Holdings entered into a Credit Agreement
(the "Agreement") with several banks for $15.0 million of senior secured term
debt and a $45.0 million senior secured revolving debt facility. The proceeds
from the senior secured term debt, a draw of $30.0 million from the senior
secured revolving debt facility, the $50.0 million senior subordinated note and
capital contributed from Holdings were used to acquire MBW from Conopco, pay
fees and expenses and fund working capital.
The Company amended the Agreement, dated as of July 1, 1997, to provide for
borrowings of $40.0 million of senior secured term debt and a $60.0 million
senior secured revolving debt facility. Together with a $100.0 million senior
subordinated note offering and capital contributed from Holdings, the Company
consummated the LC acquisition, paid fees and expenses and provided for the
working capital requirements related to the acquisition.
The $60.0 million senior secured revolving debt facility is subject to
limitations based on letters of credit. At December 27, 1997, the Company had
unused borrowing availability of $22.5 million. The Agreement requires a
commitment fee of 0.5% per annum payable quarterly on the unused portions of the
revolving debt facility.
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 Company was in compliance with these
covenants at December 27, 1997.
SENIOR SUBORDINATED NOTES
- -------------------------
On February 10, 1997, the Company issued $100.0 million of senior subordinated
notes (the "Old Notes"). The proceeds from the Old Notes were primarily used to
retire the $45.0 million of senior secured debt and the $50.0 million senior
subordinated note incurred to finance the MBW acquisition. On July 1, 1997, the
Company issued $100.0 million of senior subordinated notes (the "New Notes").
The New Notes were issued at a premium in the amount of $2.5 million. The
unamortized balance of the premium on the New Notes at December 27, 1997 was
44
<PAGE>
$2.4 million. The proceeds from the New Notes were primarily used to fund the
acquisition of LC. (Together, the Old Notes and New Notes are the "Notes".)
The Company may redeem the Notes at any time after February 15, 2002, at the
redemption price together with accrued and unpaid interest. In addition, the
Company may redeem $35.0 million of the Notes at any time prior to February 15,
2000 subject to certain requirements, with the cash proceeds received from one
or more Equity Offerings (as defined), at a redemption price of 109.875%
together with accrued and unpaid interest. Upon a Change in Control (as
defined), the Company has the option at any time prior to February 15, 2002 to
redeem the Notes at a redemption price of 100% plus the Applicable Premium (as
defined), together with accrued and unpaid interest. If the Company does not
redeem the Notes or if the Change of Control occurs after February 15, 2002, the
Company is required to offer to repurchase the Notes at a price equal to 101%
together with accrued and unpaid interest.
The indenture includes restrictive covenants, which limit additional borrowings,
cash dividends, sale of assets, mergers and the sale of stock. The Company was
in compliance with these covenants at December 27, 1997.
NOTE 10 - TRANSITION RELATED COSTS
- ----------------------------------
Transition related costs consist of one-time costs incurred to establish the
Company's operations and integrate the acquired businesses, including relocation
expenses, recruiting fees, sales support and other unique transitional expenses.
Transition related costs for the year ended December 27, 1997 were approximately
$2.1 million.
NOTE 11 - INCOME TAXES
- ----------------------
The Company is included in the consolidated federal income tax return of
Holdings. State income tax returns are filed by Holdings and the Company on a
separate company basis or on a combined basis depending on the particular rules
in each state. The Company's income tax provision is computed as if all income
tax returns were filed on a stand alone basis.
45
<PAGE>
The provision for income taxes is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year ended
December 27,
1997
------------
<S> <C>
Current tax expense:
Federal $ --
State --
-------
Total current provision --
-------
Deferred tax expense:
Federal 656
State 123
-------
Total deferred provision 779
-------
Total provision for income taxes $ 779
=======
Deferred tax assets (liabilities) consist of the following:
Deferred tax assets - current: $ 1,230
Loss carryforwards 844
Coupon reserves 325
Inventory 320
Other 247
-------
Total deferred tax assets - current 2,966
-------
Deferred tax assets - non-current:
Incentive compensation 873
Goodwill 228
Depreciation 20
-------
Total deferred tax assets - non-current 1,121
-------
Deferred tax liabilities - non-current:
Goodwill (4,465)
Depreciation (401)
-------
Total deferred tax liabilities - non-current: (4,866)
-------
Net deferred tax liability $ (779)
=======
</TABLE>
46
<PAGE>
The Company has not recorded a valuation allowance for its deferred tax assets.
Management believes the deferred tax assets are more likely than not to be
realized.
At December 27, 1997, the Company generated a federal net operating loss of
approximately $3.1 million. These losses can be used to offset future taxable
income through the year 2017. The Company is a loss corporation as
defined in section 382 of the Internal Revenue Code. Therefore, if certain
substantial changes of the Company's ownership should occur, there could be
significant annual limitations of the amount of net operating loss carryfowards
which can be utilized.
The provision for income taxes differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to pretax
income as a result of the following differences (dollars in thousands):
<TABLE>
<CAPTION>
Year ended
December 27,
1997
-----------
<S> <C>
Provision for income taxes at U.S. statutory rate $685
Increase in tax resulting from:
Nondeductible expenses 13
State taxes, net of federal benefit 81
----
$779
====
</TABLE>
NOTE 12 - LEASES
- ----------------
The Company leases certain facilities, machinery and equipment under operating
lease agreements with varying terms and conditions. The leases are
noncancellable operating leases which expire on various dates through 2002.
Future annual minimum lease payments under these leases are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Minimum
Lease
Years ending December 27, Payments
------------------------- --------
<S> <C>
1998 $115
1999 114
2000 124
2001 137
2002 59
Thereafter -
----
$549
====
</TABLE>
Rent expense was $0.1 million for the year ended December 27, 1997.
47
<PAGE>
NOTE 13 - SAVINGS AND BENEFIT PLANS
- -----------------------------------
The Company offers a retirement savings plan to employees in the form of 401(k)
and profit sharing plans. Under the 401(k) plan, employee contributions up to
6% of total compensation are matched 50% by the Company, with vesting occurring
ratably over a five year period. Profit sharing contributions of 2% of
compensation are made on behalf of all employees on an annual basis. Profit
sharing contributions also vest ratably over a five year period. The Company's
contributions to the 401(k) and profit sharing plans for the fiscal year ending
December 27, 1997 were $0.1 million.
NOTE 14 - RELATED PARTY TRANSACTIONS
- ------------------------------------
Aurora Foods Inc. maintains business relationships and engages in
certain transactions as described below.
The Company entered into a Management Services Agreement with Dartford
Partnership, L.L.C. ("Dartford") pursuant to which Dartford provides management
oversight on financial and operational matters. The Company paid fees to
Dartford, a member of MBW LLC, in connection with this agreement totaling
$768,000 in fiscal 1997. The annual management fee was $600,000 prior to the
acquisition of LC and $935,000 after the acquisition of LC.
The Company entered into an Advisory Services Agreement with McCown De Leeuw &
Co. III, L.P. ("MDC") pursuant to which MDC provides certain advisory functions.
The Company paid fees to MDC, a member of MBW LLC, in connection with this
agreement totaling $293,000 in fiscal 1997. The annual advisory fee was
$250,000 prior to the acquisition of LC and $336,000 after the acquisition
of LC.
In connection with the acquisitions of MBW and LC, the Company paid to certain
members of MBW LLC, who are also represented on the Board of Directors or
officers of the Company and beneficial owners, fees for services rendered in
connection with the acquisitions and related financings consummated in 1997.
The aggregate amount paid to certain members of MBW LLC was $4.7 million and was
funded by the proceeds of the financings. Of this amount, $1.3 million was paid
to Dartford, whose partners include Mr. Ian R. Wilson, Mr. Ray Chung, Mr. James
B. Ardrey and Ms. M. Laurie Cummings (all are directors and/or executive
officers of the Company); $259,000 in total was paid to Mr. Thomas J. Ferraro
(director and President of the Company) and Mr. C. Gary Willett (Executive Vice
President of the Company); $2.7 million was paid to MDC, whose general partners
and principal include Mr. David E. De Leeuw, Mr. Charles Ayres and Mr. Tyler T.
Zachem (all directors of the Company); and $481,000 was paid to Fenway Partners
Capital Fund, L.P., whose partners include Mr. Peter Lamm and Mr. Richard C.
Dresdale (both directors of the Company). The fee amounts were negotiated among
the equity investors.
On December 31, 1996, Mr. Thomas J. Ferraro, the President of the Company, and
Mr. C. Gary Willett, Executive Vice President of the Company and on July 1,
1997, Mr. Alan Mintz, Vice President Sales, and Mr. Dirk C. Grizzle, Chief
Financial Officer 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 in MBW LLC. The promissory notes mature
December 31, 1999 for Mr. Ferraro and Mr. Willett, and June 30, 2000 for Mr.
Mintz and Mr. Grizzle. Interest is due and payable quarterly at the rate of
8.0% per annum and
48
<PAGE>
there are required annual principal payments. The aggregate balances outstanding
as of December 27, 1997 on the promissory notes were $215,000. The outstanding
balances are as follows:
<TABLE>
<S> <C>
Mr. Ferraro $ 40,000
Mr. Willett 50,000
Mr. Mintz 50,000
Mr. Grizzle 75,000
--------
$215,000
========
</TABLE>
NOTE 15 - INCENTIVE COMPENSATION PLAN
- -------------------------------------
The Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement") of MBW LLC contains an incentive compensation arrangement (the
"Incentive Plan") as a means by which certain key employees and other
specifically designated persons ("Key Personnel") of the Company, and/or
affiliated with the Company, may be given an opportunity to benefit from
appreciation in the value of the Company. Under the Incentive Plan, Key
Personnel are issued a specific class of limited liability company member units
("Incentive Units"), at a diminutive value, as a means to participate in the
appreciation of the Company. The Incentive Units are subject to vesting
requirements based on terms of employment or other factors.
Upon a change of control or initial public offering ("IPO") of the Company's or
Holdings' stock, all Incentive Units will vest immediately, except for certain
Incentive Units issued after December 31, 1997, which will remain subject to
normal vesting requirements under the Incentive Plan. The holders of vested
Incentive Units will be entitled to certain payments or distributions based on
the amounts paid or distributed to the investors in MBW LLC. In general, there
will be no payments to holders of vested Incentive Units until the MBW LLC
investors have received a designated return on their investments. The type of
payment will be cash or non-cash consideration, depending on the type of
triggering event and the type of distribution received by MBW LLC investors.
The total amount due under the Incentive Plan, if any, is subject to the vesting
factors discussed above. Based on management and the Board of Director's
assessment of the current valuation of the Company, compensation expense for the
year ended December 27, 1997 totaled $2.3 million. Should the Company appreciate
further in value, compensation expense to be recognized in future periods under
the Incentive Plan could be significant. The fiscal 1997 compensation expense
has been recorded as a liability of MBW LLC as the sponsor of the Incentive
Plan. However, because the Incentive Plan is for the benefit of Key Personnel of
the Company, expense recognized under the Incentive Plan has been pushed down to
the Company, and has been recorded by the Company as expense and as additional
paid in capital from its parent.
49
<PAGE>
NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES
- ------------------------------------------------
The Company is subject to litigation in the ordinary course of business. In the
opinion of management, the ultimate outcome of any existing litigation would not
have a material adverse effect on the Company's financial condition or results
of operations.
The Company has entered into manufacturing contracts, which require minimum
annual production orders. The minimum annual production orders for all
contracts through the year 2003 are 3.3 million cases of product. This volume
represents substantially less than the Company's current production
requirements.
NOTE 17 - SUBSEQUENT EVENTS
- --------------------------
ACQUISITION
On January 16, 1998, subsequent to the Company's fiscal year end, the Company
acquired all the assets of the Duncan Hines Business from the Procter & Gamble
Company ("P&G"). The assets acquired by the Company include (i) Duncan Hines(R)
and associated trademarks, (ii) substantially all of the equipment for the
manufacture of Duncan Hines products currently located in P&G's Jackson,
Tennessee facility, (iii) proprietary formulations for Duncan Hines products,
(iv) other product specifications and customer lists and (v) rights under
certain contracts, licenses, purchase orders and other arrangements and permits.
The Company intends to use the acquired assets in its operations of the Duncan
Hines Business. The purchase price of approximately $445.0 million was based on
an arm's length negotiation between the Company and P&G.
To finance the acquisition of the Duncan Hines Business and related costs, the
Company incurred an early extinguishment of its existing senior secured term
debt and senior secured revolving debt facility, borrowed $450.0 million of
senior secured bank debt under a Second Amended and Restated Credit Agreement,
and received a capital contribution from Holdings of $93.8 million. As a result
of the early extinguishment, the Company will record an extraordinary charge of
$1.8 million net of the income taxes of $1.2 million, for the write off of
deferred loan acquisition costs in 1998.
The cost to acquire the Duncan Hines Business has been allocated to tangible and
intangible assets acquired as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash paid to acquire assets $445,000
Other acquisition costs 3,121
--------
448,121
Costs assigned to tangible assets (40,953)
--------
Costs attributable to intangible assets $407,168
========
</TABLE>
50
<PAGE>
The following unaudited pro forma combined results of operations of the Company
and the Duncan Hines Business, together with the other acquisitions made by the
Company for the year ended December 27, 1997, gives pro forma effect to the
acquisitions as though the acquisitions occurred as of January 1, 1997 (dollars
in thousands):
<TABLE>
<S> <C>
Net sales $460,294
========
Net income $ 4,260
========
</TABLE>
The foregoing unaudited pro forma results of operations reflect one year's
amortization of the goodwill and other intangibles resulting from the
acquisition of the assets of the Duncan Hines Business. The allocation of
purchase price has not been finalized; however, any changes are not expected to
be material.
INTEREST RATE SWAP AGREEMENT
The Company entered into an interest rate swap agreement (the "Swap") on March
17, 1998, in order to reduce the impact of changes in interest rates on its
floating rate long term debt. The notional principal amount covered under the
Swap is $150.0 million and the term is three years. The effective current swap
rate is 5.81%. The applicable rate is set quarterly with the first reset date on
June 17, 1998. Amounts to be paid or received, if any, under the Swap will be
recognized as an increase or decrease, respectively, in interest expense. The
counterparty to the Company's Swap is a major financial institution.
Under the Swap, the Company will make payments to the counterparty if the three-
month LIBOR rate is less than the swap rate and receive payments from the
counterparty if the three month LIBOR rate exceeds the swap rate. The payments
will be calculated based upon the notional principal amount. At the time the
Swap was entered into, the three-month LIBOR rate was 5.69%.
Risks associated with the Swap include those associated with changes in the
market value and interest rates. Management considers the potential loss in
future earnings and cash flows attributable to the Swap to not be material.
51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
of CONOPCO, Inc.
We have audited the accompanying statement of assets to be acquired as of
December 31, 1996 and the statements of operations for the years ended December
31, 1996 and 1995 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, 1996
and 1995, 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
52
<PAGE>
Mrs. Butterworth's Business
(A Component of CONOPCO, Inc.)
Statement of Assets to be Acquired
December 31, 1996
(in thousands)
<TABLE>
<S> <C>
Inventories $ 829
Machinery and equipment, net of accumulated depreciation of $1,791 2,774
------
Total assets $3,603
======
</TABLE>
The accompanying notes are an integral part of the financial statements
53
<PAGE>
MRS. BUTTERWORTH'S BUSINESS
(A COMPONENT OF CONOPCO, INC.)
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales $89,541 $91,302
Costs and expenses:
Cost of products sold 28,955 27,743
Brokerage and distribution 8,140 7,583
Trade promotions 17,672 19,380
Consumer marketing 10,835 13,291
Selling, general and administrative 6,753 6,120
------- -------
Total costs and expenses 72,355 74,117
------- -------
Income before taxes 17,186 17,185
Provision for income taxes 6,616 6,616
------- -------
Net income $10,570 $10,569
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<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 7). The Business was operated as part of Van den Bergh
Foods Company ("Van den Bergh"), a division of the Company. The Business'
products, which are distributed on a national basis, consist of syrup and
pancake mix. A significant portion of the Business' 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 of the Business, as defined
in the Agreement.
Throughout the periods covered by the financial statements, the Business
operations were conducted and accounted for as a 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.
55
<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)
The manufacturing and distribution operations of the Business are conducted at
sites where other Company manufacturing and distribution 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 Note 2, 3 and 5 for a 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.
56
<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
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 of its property 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 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.
57
<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)
Selling, general and administrative. Selling, general and administrative
consists solely of allocated selling, administration 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 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.
58
<PAGE>
Mrs. Butterworth's Business
(A Component of CONOPCO, Inc.)
Notes to Financial Statements (Continued)
December 31, 1996
(In thousands)
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 and $3,026 in allocated costs
for the years ended December 31, 1996 and 1995, respectively. Selling,
general and administrative expenses include $6,753 and $6,120 of allocated
costs for the years ended December 31, 1996 and 1995, respectively.
4. Provision for Income Taxes
Taxes computed at the U.S. statutory rates are summarized below:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
Amount % Amount %
------ ---- ------ -----
<S> <C> <C> <C> <C>
Federal $5,843 34.0 $5,843 34.0
State (net of federal tax benefit) 773 4.5 773 4.5
------ ---- ------ ----
Provision for income taxes $6,616 38.5 $6,616 38.5
====== ==== ====== ====
</TABLE>
59
<PAGE>
Mrs. Butterworth's Business
(A Component of CONOPCO, Inc.)
Notes to Financial Statements (Continued)
December 31, 1996
(In thousands)
5. Inventories
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Raw materials, packaging and supplies $ 301
Finished products 631
-----
932
Adjustment to LIFO basis (103)
-----
$ 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. Depreciation Expense
Depreciation provided in costs and expenses was $277 in 1996 and $311 in
1995.
7. 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.
60
<PAGE>
Schedule IX - Valuation Reserves
- --------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End
Description of Period Expenses Accounts Deductions of Year
------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
December 27, 1997 Allowance for doubtful accounts $ - $ 140,000 $ - $ - $ 140,000
========== ========== ========== ========== ==========
</TABLE>
61
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 16, 1998
AMONG
AURORA FOODS INC.,
AS BORROWER,
AURORA FOODS HOLDINGS INC.,
AS GUARANTOR,
THE LENDERS LISTED HEREIN,
AS LENDERS,
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
THE NATIONAL WESTMINSTER BANK PLC,
AS SYNDICATION AGENT
AND
SWISS BANK CORPORATION,
AS DOCUMENTATION AGENT
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
AURORA FOODS
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1.
DEFINITIONS ............................................................ 2
1.1 Certain Defined Terms....................................... 2
1.2 Accounting Terms Utilization of GAAP for Purposes of
Calculations Under Agreement................................ 39
1.3 Other Definitional Provisions............................... 40
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.................................. 40
2.1 Commitments; Loans.......................................... 40
2.2 Interest on the Loans....................................... 47
2.3 Fees........................................................ 51
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments; Application
of Proceeds of Collateral and Payments under Guaranties..... 52
2.5 Use of Proceeds............................................. 63
2.6 Special Provisions Governing Eurodollar Rate Loans.......... 63
2.7 Increased Costs; Taxes; Capital Adequacy.................... 66
2.8 Obligation of Lenders and Issuing Lenders to Mitigate....... 70
SECTION 3.
LETTERS OF CREDIT........................................................... 71
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein...................................... 71
3.2 Letter of Credit Fees....................................... 73
3.3 Drawings and Payments and Reimbursement of Amounts Paid Under
Letters of Credit........................................... 74
3.4 Obligations Absolute........................................ 77
3.5 Indemnification; Nature of Issuing Lender's Duties.......... 78
3.6 Increased Costs and Taxes Relating to Letters of Credit..... 79
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT................................... 80
4.1 Conditions to Term Loans and Revolving Loans................ 80
4.2 Conditions to All Loans..................................... 85
4.3 Conditions to Letters of Credit............................. 86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
SECTION 5.
<C> <S> <C>
REPRESENTATIONS AND WARRANTIES............................................... 87
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries..................................................... 87
5.2 Authorization of Borrowing, etc.................................. 88
5.3 Financial Condition.............................................. 89
5.4 No Material Adverse Change; No Restricted Junior Payments........ 90
5.5 Title to Properties; Liens; Intellectual Property................ 90
5.6 Litigation: Adverse Facts........................................ 92
5.7 Payment of Taxes................................................. 92
5.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts........................................................ 92
5.9 Governmental Regulation.......................................... 93
5.10 Securities Activities............................................ 93
5.11 Employee Benefit Plans........................................... 93
5.12 Certain Fees..................................................... 94
5.13 Environmental Protection......................................... 94
5.14 Employee Matters................................................. 95
5.15 Solvency......................................................... 95
5.17 Related Agreements............................................... 96
5.18 Disclosure....................................................... 97
5.19 Subordination of Seller Notes.................................... 97
SECTION 6.
AFFIRMATIVE COVENANTS........................................................ 98
6.1 Financial Statements and Other Reports........................... 98
6.2 Corporate Existence, etc......................................... 103
6.3 Payment of Taxes and Claims: Tax Consolidation................... 103
6.4 Maintenance of Properties; Insurance............................. 103
6.5 Inspection; Lender Meeting....................................... 104
6.6 Compliance with Laws, etc........................................ 104
6.7 Environmental Disclosure and Inspection.......................... 104
6.8 Company's Remedial Action Regarding Hazardous Materials.......... 106
6.9 Execution of Subsidiary Guaranty and Subsidiary Security Agreements
by Subsidiaries and Future Subsidiaries.......................... 106
6.10 Conforming Leasehold Interests; Matters Relating to Additional Real
Property Collateral.............................................. 107
6.11 Interest Rate Protection......................................... 109
6.12 Further Assurances............................................... 109
SECTION 7.
NEGATIVE COVENANTS........................................................... 110
7.1 Indebtedness..................................................... 110
7.2 Liens and Related Matters........................................ 111
7.3 Investments; Joint Ventures...................................... 113
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
<C> <S>
7.4 Contingent Obligations..................................... 114
7.5 Restricted Junior Payments................................. 115
7.6 Financial Covenants........................................ 116
7.7 Restriction on Fundamental Changes; Asset Sales............ 120
7.8 Sales and Lease-Backs...................................... 121
7.9 Transactions with Shareholders and Affiliates.............. 122
7.10 Disposal of Subsidiary Stock............................... 122
7.11 Conduct of Business........................................ 123
7.12 Amendments or Waivers of Certain Related Agreements; Amendments
of Documents Relating to Subordinated Indebtedness; Designation
of "Designated Senior Indebtedness"; Preferred Stock....... 123
7.13 Fiscal Year................................................ 124
SECTION 8.
EVENTS OF DEFAULT.................................................. 124
8.1 Failure to Make Payments When Due.......................... 124
8.2 Default in Other Agreements................................ 124
8.3 Breach of Certain Covenants................................ 125
8.4 Breach of Warranty......................................... 125
8.5 Other Defaults Under Loan Documents........................ 125
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc....... 125
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc......... 126
8.8 Judgments and Attachments.................................. 126
8.9 Dissolution................................................ 126
8.10 Employee Benefit Plans..................................... 126
8.11 Change in Control.......................................... 127
8.12 Invalidity of Guaranties................................... 127
8.13 Failure of Security........................................ 128
8.14 Failure to Consummate Duncan Hines Acquisition............. 128
8.15 Termination or Breach of Certain Transition Agreements, Log
Cabin Transition Agreements and Duncan Hines Transaction
Agreements................................................. 128
8.16 Conduct of Business By Holdings and MBW LLC................ 128
8.17 Default Under Subordination Provisions..................... 129
SECTION 9.
AGENTS 130
9.1 Appointment................................................ 130
9.2 Powers; General Immunity................................... 131
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness.............................. 133
9.4 Right to Indemnity......................................... 133
9.5 Successor Agents and Swing Line Lender..................... 133
9.6 Collateral Documents....................................... 134
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
<C> <S> <C>
SECTION 10.
MISCELLANEOUS............................................................... 134
10.1 Assignments and Participations in Loans, Letters of Credit... 134
10.2 Expenses..................................................... 138
10.3 Indemnity.................................................... 138
10.4 Set-Off; Security Interest in Deposit Accounts............... 139
10.5 Ratable Sharing.............................................. 139
10.6 Amendments and Waivers....................................... 140
10.7 Independence of Covenants.................................... 142
10.8 Notices...................................................... 142
10.9 Survival of Representations, Warranties and Agreements....... 143
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative........ 143
10.11 Marshalling; Payments Set Aside.............................. 143
10.12 Severability................................................. 144
10.13 Obligations Several; Independent Nature of Lenders' Rights... 144
10.14 Headings..................................................... 144
10.15 Applicable Law............................................... 144
10.16 Successors and Assigns....................................... 144
10.17 Consent to Jurisdiction and Service of Process............... 145
10.18 Waiver of Jury Trial......................................... 145
10.19 Confidentiality.............................................. 146
10.20 Counterparts; Effectiveness.................................. 147
</TABLE>
-iv-
<PAGE>
ANNEXES
Annex A Pricing Grid
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TRANCHE A TERM NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF TRANCHE C TERM NOTE
VII FORM OF REVOLVING NOTE
VIII FORM OF SWING LINE NOTE
IX FORM OF SUBSIDIARY GUARANTY
X FORM OF HOLDINGS GUARANTY
XI FORM OF PLEDGE AGREEMENT
XII FORM OF SECURITY AGREEMENT
XIII FORM OF DUNCAN HINES PATENT AND TRADEMARK SECURITY AGREEMENT
XIV FORM OF COMPLIANCE CERTIFICATE
XV FORM OF OPINION OF COUNSEL TO LOAN PARTIES
XVI FORM OF OPINION OF SIMPSON THACHER & BARTLETT
XVII FORM OF ASSIGNMENT AGREEMENT
XVIII FORM OF PERMITTED SELLER NOTE
XIX FORM OF CERTIFICATE RE NON-BANK STATUS
XX FORM OF COLLATERAL ACCOUNT AGREEMENT
XXI FORM OF COLLATERAL ACCESS AGREEMENT
-v-
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES; LENDING OFFICES
4.1C CORPORATE AND CAPITAL STRUCTURE; MANAGEMENT
5.1 SUBSIDIARIES OF HOLDINGS
5.5B OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS
5.5C OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS (LOG
CABIN)
5.5D OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS (DUNCAN
HINES)
5.8 MATERIAL CONTRACTS
7.6E STIPULATED CONSOLIDATED EBITDA AND CONSOLIDATED CAPITAL EXPENDITURES
-vi-
<PAGE>
AURORA FOODS INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of January 16,
1998 and entered into by and among AURORA FOODS INC., a Delaware corporation
("Company"), AURORA FOODS HOLDINGS INC., a Delaware corporation ("Holdings"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "Lender" and collectively as "Lenders"),
THE CHASE MANHATTAN BANK, as administrative agent for Lenders (in such capacity,
"Administrative Agent"), THE NATIONAL WESTMINSTER BANK PLC, as syndication agent
(in such capacity, "Syndication Agent") and SWISS BANK CORPORATION, as
documentation agent (in such capacity, "Documentation Agent").
RECITALS
WHEREAS, Holdings and Company (capitalized terms used in these recitals without
definition shall have the respective meanings assigned in subsection 1.1 hereof)
and certain financial institutions (the "Existing Lenders") are parties to the
Amended and Restated Credit Agreement, dated as of July 1,1997 (the "Existing
Credit Agreement"), pursuant to which the Existing Lenders made loans to, and
acquired participations in letters of credit for the account of, Company to
enable Company to consummate the transactions contemplated by the Log Cabin
Acquisition Agreement;
WHEREAS, MBW LLC has entered into an Asset Sale and Purchase Agreement, dated as
of November 26, 1997 (the "Duncan Hines Acquisition Agreement") with The Procter
& Gamble Company, an Ohio corporation ("P&G"), which agreement will be assigned
to the Company on or prior to the Effective Date, pursuant to which MBW LLC has
agreed to purchase and P&G has agreed to sell substantially all of the assets of
the retail baking mix businesses (the "Duncan Hines Business") upon the terms
and subject to the conditions set forth therein (the "Duncan Hines
Acquisition");
WHEREAS, Company desires that Existing Lenders and the New Lenders amend and
restate the Existing Credit Agreement to provide term loan facilities in an
aggregate principal amount of $450,000,000 (the "Term Loan Facilities") and a
revolving credit facility in an aggregate principal amount of $75,000,000 (the
"Revolving Credit Facility") which, together with the contribution by Holdings
of approximately $99,000,000 in equity to Company, will be used (i) to finance
the purchase price for the Duncan Hines Business payable in connection with the
Duncan Hines Acquisition, (ii) to refinance existing indebtedness under the
Existing Credit Agreement, (iii) to pay Transaction Costs and (iv) to provide
financing for working capital and other general corporate purposes (including
acquisitions) of Company and its Subsidiaries;
<PAGE>
WHEREAS, Holdings desires to guaranty, and Company desires that all of its
future Subsidiaries guaranty, all of the obligations of Company with respect to
the credit facilities provided by Lenders;
WHEREAS, Company desires to secure all of the Obligations and desires that all
of its future Subsidiaries secure their respective obligations under the
Subsidiary Guaranty, and Holdings desires to secure its obligations under its
Guaranty, by granting to Administrative Agent, for the benefit of Agents and
Lenders, (i) a first priority Lien on substantially all of their respective real
and personal property and (ii) a first priority pledge of all of the capital
stock of their respective direct Subsidiaries;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Company, Holdings, Lenders and Agents agree as
follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following meanings:
"Acquisition" means the transactions contemplated by the Acquisition Agreement.
"Acquisition Agreement" means that certain Asset Purchase Agreement dated as of
December 18,1996, by and between Company and Seller, as in effect on the Closing
Date and as such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under subsection
7.12A.
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date, the
rate per annum obtained by dividing (i) the London Interbank offered rate for
deposits in U.S. Dollars for maturities comparable to the Interest Period for
which such Adjusted Eurodollar Rate will apply as of approximately 11:00 A.M.
(London time) on such Interest Rate Determination Date as set forth on Telerate
Page 3750 by (ii) a percentage equal to 100% minus the stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable on such Interest
Rate Determination Date to any member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities" as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"Adjustment Date" means the first Business Day following receipt by the
Administrative Agent of both (i) the financial statements required to be
delivered pursuant to subsection 6.1(ii) or 6.1(iii), as the case may be, for
the most recently
<PAGE>
completed fiscal period and (ii) the certificate required to be delivered
pursuant to subsection 6.1(iv) with respect to such fiscal period.
"Administrative Agent" means Chase, in its capacity as Administrative Agent, and
any successor to Chase in such capacity appointed pursuant to subsection 9.5A.
"Affected Lender" has the meaning assigned to that term in subsection 2.6C.
"Affected Loans" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" means, individually, each of Administrative Agent, the Syndication Agent
and the Documentation Agent, and "Agents" means Administrative Agent, the
Syndication Agent and the Documentation Agent, collectively.
"Aggregate Amounts Due" has the meaning assigned to that term in subsection
10.5.
"Agreement" means this Second Amended and Restated Credit Agreement dated as of
January 16, 1998, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"Anniversary" means each of the dates that are anniversaries of the Effective
Date.
"Applicable Margin" means (i) in the case of Revolving Loans and Tranche A Term
Loans, 1.50% if such Loans are Base Rate Loans and 2.50% if such Loans are
Eurodollar Rate Loans, (ii) in the case of Tranche B Term Loans, 1.75% if such
Loans are Base Rate Loans and 2.75% if such Loans are Eurodollar Rate Loans,
(iii) in the case of Tranche C Term Loans, 2.00% if such Loans are Base Rate
Loans and 3.00% if such Loans are Eurodollar Rate Loans and (iv) in the case of
the Commitment Fee, 0.50%; provided that, from and after June 30,1998, the
Applicable Margin will be adjusted on each Adjustment Date based upon the ratio
of Consolidated Total Debt at the last day of the 12-month period ending on the
date of the financial statements relating to such Adjustment Date to
Consolidated EBITDA for such period as determined from such financial
statements, to the Applicable Margin set forth on Annex A hereto opposite the
level for which the ratio of Consolidated Total Debt to Consolidated EBITDA so
determined satisfies the corresponding criteria set forth
<PAGE>
under the heading "Ratio of Consolidated Total Debt to Consolidated EBITDA", and
provided further, that in the event that the financial statements required to be
delivered pursuant to subsection 6.1(ii) and (iii), as applicable, and the
related certificate required pursuant to subsection 6. 1(iv), are not delivered
when due, then if such financial statements are not delivered prior to the date
upon which the resultant Default shall become an Event of Default, then,
effective upon such Default becoming an Event of Default, during the period from
the date upon which such financial statements were required to be delivered
until one Business Day following the date upon which they actually are
delivered, the Applicable Margin (x) with respect to Revolving Loan and Tranche
A Term Loans shall be 1.50%, if such Loans are Base Rate Loans and 2.50%, if
such Loans are Eurodollar Rate Loans (y) with respect to Tranche B Term Loans,
1.75%, if such Loans are Base Rate Loans and 2.75%, if such Loans are Eurodollar
Loans, (z) with respect to Tranche C Term Loans, 2.00%, if such Loans are Base
Rate Loans and 3.00%, if such Loans are Eurodollar Loans and (aa) with respect
to the Commitment Fee shall be 0.50%.
"Applied Amount" has the meaning assigned to that term in subsection 2.4C(ii).
"Approved Fund" means, with respect to a Lender that is a fund that invests in
loans, any other fund that invests in loans and has the same investment advisor
as such Lender or is managed by an Affiliate of such investment advisor.
"Asset Sale" means the sale (including in any sale-leaseback transaction) by
Company or any of its Subsidiaries to any Person (other than Company or any of
its Wholly Owned Subsidiaries) of (i) any of the stock of any of Company's
Subsidiaries, (ii) all or substantially all of the assets of any division or
line of business of Company or any of its Subsidiaries, or (iii) any other
assets other than sales of assets (including without limitation inventory) in
the ordinary course of business and sales of obsolete equipment, excluding any
such other assets to the extent that the aggregate value of such assets sold in
any single transaction or transactions is equal to $4,000,000 or less in any one
Fiscal Year.
"Assignment Agreement" means an assignment agreement in substantially the form
of Exhibit XVII annexed hereto or in such other form as may be approved by
Administrative Agent.
"Assumption Agreement" means that certain Assignment and Assumption Agreement
dated as of December 31, 1996, by and between Seller and Company, as in effect
on the Closing Date and as such agreement may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12A.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
<PAGE>
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y) the rate
which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by reference
to the Base Rate as provided in subsection 2.2A.
"Business" means the assets and liabilities of Company relating to the
manufacture and sale of pancake syrup and pancake and waffle mix marketed under
the Mrs. Butterworth's and Country Crock brand names, as set forth in the
Acquisition Agreement.
"Business Day" means (i) for all purposes other than as covered by clause (ii)
below, any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, findings, issuances and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day
described in clause (i) above and that is also (a) a day for trading by and
between banks in Dollar deposits in the London interbank market and (b) a day on
which banking institutions are open for business in London.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) marketable securities issued or directly and
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct 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, having the highest rating obtainable
from either Standard & Poor's Rating Service ("S&P") or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A- 1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's, issued by any Lender or any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having unimpaired capital and surplus
of not less than $250,000,000 (each Lender and each such commercial bank being
herein called a "Cash Equivalent Bank"); and (v) Eurodollar time deposits having
a maturity of less than one year
<PAGE>
purchased directly from any Cash Equivalent Bank (provided such deposit is with
such Cash Equivalent Bank or any other Cash Equivalent Bank).
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments (including
any Cash received by way of deferred payment pursuant to, or monetization of, a
note receivable or otherwise, but only as and when so received) received by
Company or any of its Subsidiaries from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate substantially in the form
of Exhibit XIX annexed hereto delivered by a Lender to Administrative Agent
pursuant to subsection 2.7B(ii).
"Chase" means The Chase Manhattan Bank and its successors, including, without
limitation, its successors by merger.
"Closing Date" means December 31, 1996.
"Collateral" means all of the properties and assets (including capital stock) in
which Liens are purported to be granted by the Collateral Documents.
"Collateral Access Agreement" means any landlord waiver, mortgagee waiver,
bailee letter or any similar acknowledgment or agreement of any landlord or
mortgagee in respect of any Real Property Asset where any Collateral is located
or any warehouseman or processor in possession of any Inventory of any Loan
Party, substantially in the form of Exhibit XXI annexed hereto with such changes
thereto as may be agreed to by Administrative Agent in the reasonable exercise
of its discretion.
"Collateral Account" has the meaning assigned to that term in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement executed
and delivered by Company and Administrative Agent on the Effective Date,
substantially in the form of Exhibit XX annexed hereto, pursuant to which
Company may pledge cash to Administrative Agent to secure the obligations of
Company to reimburse Issuing Lenders for payments made under one or more Letters
of Credit as such Collateral Account Agreement may hereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Collateral Documents" means the Pledge Agreement, the Security Agreement, the
Patent and Trademark Security Agreement, the Log Cabin Patent and Trademark
Security Agreement, the Duncan Hines Patent and Trademark Security Agreement,
the Collateral Account Agreement, the Mortgages and any other documents,
instruments or agreements delivered by any Loan Party pursuant to this Agreement
or any of the other Loan Documents in order to grant or perfect liens on any
assets of such Loan Party as security for the Obligations.
<PAGE>
"Commercial Letter of Credit" means any letter of credit or similar instrument
issued for the purpose of providing the primary payment mechanism in connection
with the purchase of any materials, goods or services by Company or any of its
Subsidiaries in the ordinary course of business of Company or such Subsidiary.
"Commitment Fee" and "Commitment Fees" have the meanings assigned to such terms
in subsection 2.3A.
"Commitments" means the commitments of Lenders to make Loans as set forth in
subsection 2.1A.
"Company" has the meaning assigned to that term in the introduction to this
Agreement.
"Company Common Stock" means the common stock of Company, par value $0.011 per
share.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit XIV annexed hereto delivered to Administrative Agent by Company pursuant
to subsection 6.1(iv).
"Condemnation Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(d).
"Conforming Leasehold Interest" means any Recorded Leasehold Interest as to
which the lessor has agreed in writing for the benefit of Administrative Agent
(which writing has been delivered to Administrative Agent), whether under the
terms of the applicable lease, under the terms of a Landlord Consent and
Estoppel, or otherwise, to the matters described in the definition of "Landlord
Consent and Estoppel," which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
"Consolidated Capital Expenditures" means, for any period, the aggregate amount
paid or accrued by Holdings and its Subsidiaries for the rental, lease, purchase
(including by way of the acquisition of Securities of a Person), construction or
use of any property during such period, the value or cost of which, in
conformity with GAAP, would appear on the consolidated balance sheet of Holdings
and its Subsidiaries in the category of "purchases of property, plant or
equipment" at the end of such period, excluding any such expenditure made to
restore, replace or rebuild property to the condition of such property
immediately prior to any damage, loss, destruction or condemnation of such
property, to the extent such expenditure is made with insurance proceeds or
condemnation awards relating to any such damage, loss, destruction or
condemnation; provided, however, that Consolidated Capital Expenditures shall
not include expenditures up to an aggregate amount equal to the portion of the
purchase price for any Permitted Acquisition made pursuant to
<PAGE>
subsection 7.7(vii) that would otherwise be treated as a Consolidated Capital
Expenditure.
"Consolidated Cash Interest Coverage Ratio" means, for any period, the ratio of
(i) Consolidated EBITDA for such period to (ii) Consolidated Cash Interest
Expense for such period.
"Consolidated Cash Interest Expense" means, for any period, Consolidated
Interest Expense payable in Cash during such period.
"Consolidated Current Assets" means, as at any date of determination, the total
assets of Holdings and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of determination, the
total liabilities of Holdings and its Subsidiaries on a consolidated basis which
may properly be classified as current liabilities in conformity with GAAP.
"Consolidated EBITDA" means; for any period, (i) the sum of the amounts for such
period of (a) Consolidated Net Income, plus (b)to the extent deducted in
determining such Consolidated Net Income, (1) Consolidated Interest Expense, (2)
depreciation, (3) depletion, (4) amortization, (5) all federal, state, local and
foreign income taxes, (6) transaction fees paid to the MDC Entities and/or
Dartford and/or Fenway in connection with acquisitions made after the Closing
Date, so long as such transaction fees are paid in accordance with the terms of
the MDC Advisory Services Agreement, the Dartford Management Agreement and the
Fenway Agreement, (7) non-recurring charges incurred prior to September 30, 1998
related to the Business and the Log Cabin Business, with respect to (A)
relocation of Company's assets, (3) the purchase of computers and computer-
related equipment and (C) transition related expenses in connection with the
foregoing, but only to the extent that such non-recurring charges, together with
all expenditures excluded from Consolidated Capital Expenditures under clause
(iii) (a) of the definition of Consolidated Fixed Charges, do not exceed
$6,000,000 in the aggregate, (8) non-recurring charges incurred prior to June
30, 1999 with respect to relocation of the Company's assets related to the
Duncan Hines Business and transition related expenses in connection therewith,
but only to the extent that such non-recurring charges, together with all
expenditures excluded from Consolidated Capital Expenditures under clause (iii)
(b) of the definition of Consolidated Fixed Charges, do not exceed $15,000,000
in the aggregate, (9) manufacturing overhead costs related to the Duncan Hines
Transitional Supply Agreement not to exceed $8,200,000 per year as long as the
Duncan Hines Transitional Supply Agreement is in effect, (10) all other non-cash
items reducing Consolidated Net Income and (11) any extraordinary and unusual
losses, minus (ii) the sum of the amounts for such period of (a) all other non-
cash items increasing Consolidated Net Income, plus (b) any extraordinary and
unusual gains, all of the
<PAGE>
foregoing as determined on a consolidated basis for Holdings and its
Subsidiaries in conformity with GAAP and calculated in accordance with
subsection 7.6E, if applicable.
"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, (b) to the extent deducted from Consolidated EBITDA by
virtue of clause (ii)(b) of the definition thereof, extraordinary and unusual
cash gains, and (c) the Consolidated Working Capital Adjustment minus (ii) the
sum, without duplication, of the amounts for such period of (a) voluntary and
scheduled cash repayments of Consolidated Total Debt (excluding repayments of
Revolving Loans except to the extent the Revolving Loan Commitments are
permanently reduced in connection with such repayments), (b) Consolidated
Capital Expenditures (net of any proceeds of any related financings with respect
to such expenditures), (c) expenditures made in connection with any Permitted
Acquisition pursuant to subsection 7.7(vii) (net of any proceeds of any related
financings 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 Agreement and the Fenway Agreement, (d) Consolidated
Interest Expense, (e) to the extent added back to Consolidated EBITDA by virtue
of clause (i)(b)(11) of the definition thereof, extraordinary and unusual cash
losses, (f) to the extent added back to Consolidated EBITDA by virtue of clauses
(i)(b)(7) or (i)(b)(8) of the definition thereof, non-recurring charges paid in
cash, (g) to the extent added back to Consolidated EBITDA by virtue of clause
(i)(b)(9) of the definition thereof, manufacturing overhead costs related to the
Duncan Hines Transitional Supply Agreement, and (h) the provision for current
taxes based on income of Holdings and its Subsidiaries and payable in cash with
respect to such period.
"Consolidated Fixed Charges" means, for any period, an amount equal to the sum
of the amounts for such period of (i) scheduled amortization of Indebtedness of
Holdings and its Subsidiaries (as reduced by prepayments previously made), and
discount or premium relating to any such Indebtedness for such period, whether
expensed or capitalized, (ii) Consolidated Cash Interest Expense, (iii)
Consolidated Capital Expenditures (excluding (a) expenditures which would
otherwise be included in Consolidated Capital Expenditures incurred prior to
September 30,1998 related to the Business and the Log Cabin Business, with
respect to (1) relocation of Company's assets, (2) the purchase of computers and
computer-related equipment and (3) transition related expenses in connection
with the foregoing, but only to the extent that such expenditures, together with
all non-recurring charges added back to Consolidated EBITDA by virtue of clause
(i)(b)(7) of the definition thereof, do not exceed $6,000,000 in the aggregate
and (b) expenditures which would otherwise be included in Consolidated Capital
Expenditures incurred prior to June 30, 1999 with respect to relocation of the
Company's assets related to the Duncan Hines Business and transition related
expenses in connection therewith, but only to the extent that such
<PAGE>
expenditures, together with all non-recurring charges added back to Consolidated
EBITDA by virtue of clause (i)(b)(8) of the definition thereof, do not exceed
$15,000,000 in the aggregate), and (iv) taxes actually paid in cash by Holdings
or any of its Subsidiaries.
"Consolidated Interest Expense" means, for any period, the net interest expense
of Holdings and its Subsidiaries for such period (net of any interest income of
Holdings and its Subsidiaries during such period) as determined on a
consolidated basis in conformity with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss) of
Holdings and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP; provided that there
shall be excluded (i) the income (or loss) of any Person in which any other
Person (other than Holdings or any of the Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid in cash to Holdings or any of its Subsidiaries by such Person during such
period and (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of Company or is merged into or consolidated with Company
or any of its Subsidiaries or the date such Person's assets are acquired by
Company or any of its Subsidiaries.
"Consolidated Total Debt" means, as at any date of determination, all
outstanding Indebtedness of Holdings and its Subsidiaries as determined on a
consolidated basis in conformity with GAAP.
"Consolidated Total Senior Debt" means, as at any date of determination, all
outstanding Indebtedness of Holdings and its Subsidiaries other than
Subordinated Indebtedness, as determined on a consolidated basis in conformity
with GAAP.
"Consolidated Working Capital" means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person (i) with respect to any
Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that
<PAGE>
Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Interest Rate Agreements. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of business),
comaking, discounting with recourse or sale with recourse by such Person of the
obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or parties
to an agreement, and (c) any liability of such Person for the obligation of
another through any agreement (contingent or otherwise) (x) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise) or
(y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
sub clauses (x) or (y) of this sentence, the primary purpose or intent thereof
is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if less, the amount to which such Contingent Obligation
is specifically limited.
"Continuing Director" shall mean, as of any date of determination, any member of
the Board of Directors of Company who (i) was a member of such Board of
Directors on the Closing Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of the MDC Entities and/or
Dartford and/or Fenway.
"Contractual Obligation" means, as applied to any Person, any provision of any
Security issued by that Person or of any material indenture, mortgage, deed of
trust, contract, undertaking, agreement or other instrument to which that Person
is a party or by which it or any of its properties is bound or to which it or
any of its properties is subject.
"CSI" means Chase Securities Inc. and its successors and assigns, including,
without limitation, its successors by merger.
"Dartford" means Dartford Partnership L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Dartford Management Agreement" means that certain Management Services Agreement
dated as of December 31, 1996, by and between Company and Dartford, as in effect
on the Closing Date and as such agreement may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12A.
"Defaulting Lender" means any Lender with respect to which a Lender Default is
in effect.
<PAGE>
"Deposit Account" means a demand, time, savings, passbook or like account with a
bank, savings and loan association, credit union or like organization, other
than an account evidenced by a negotiable certificate of deposit.
"Documentation Agent" has the meaning assigned to that term in the introduction
to this Agreement.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Duncan Hines Acquisition" has the meaning assigned to that term in the Recitals
to this Agreement.
"Duncan Hines Acquisition Agreement" has the meaning assigned to that term in
the Recitals to this Agreement.
"Duncan Hines Assumption Agreement" means that certain Assumption Agreement
dated as of January 16, 1998, by and between P&G and Company.
"Duncan Hines Business" has the meaning assigned to that term in the Recitals to
this Agreement.
"Duncan Hines Patent and Trademark Security Agreement" means the Duncan Hines
Patent and Trademark Security Agreement entered into by and among Company, the
Subsidiary Guarantors and the Administrative Agent dated as of the Effective
Date, substantially in the form of Exhibit XIII annexed hereto, as such Duncan
Hines Patent and Trademark Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time.
"Duncan Hines Patent License Agreement" means that certain Patent License
Agreement dated as of January 16, 1998, by and between P&G and Company, as in
effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"Duncan Hines Related Agreements" means the Duncan Hines Acquisition Agreement,
the Duncan Hines Assumption Agreement and the Duncan Hines Transition
Agreements.
"Duncan Hines Technology License Agreement" means the Technology License
Agreement dated as of January 16,1998, by and between P&G and the Company as in
effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under Section 7.12A.
<PAGE>
"Duncan Hines Transition Agreements" means, collectively, (i) the Duncan Hines
Transitional Supply Agreement, (ii) the Duncan Hines Transition Services
Agreement, (iii) the Duncan Hines Technology License Agreement and (iv) the
Duncan Hines Patent License Agreement.
"Duncan Hines Transition Services Agreement" means the Transitional Services
Agreement, dated as of January 16, 1998, by and between P&G and Company as in
effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"Duncan Hines Transitional Supply Agreement" means the Transitional Supply
Agreement, dated as of January 16, 1998, by and between P&G and the Company as
in effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"Effective Date" means the date (on or before January 16, 1998) on which the
conditions precedent set forth in subsection 4.1 shall be satisfied or waived.
"Eligible Assignee" means (i) (a) a commercial bank organized under the laws of
the United States or any state thereof; (b) a commercial bank organized under
the laws of any other country or a political subdivision thereof; provided that
(x) such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development or a political
subdivision of such country; (c) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including, but not limited to,
insurance companies, funds and lease financing companies; and (d) any other
financial institution or fund (whether a corporation, partnership, trust or
other entity) that is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and has combined capital
and surplus or net assets of at least $100,000,000, in each case (under clauses
(a) through (d) above) that is reasonably acceptable to Administrative Agent;
and (ii) any Lender, any Affiliate of any Lender, and any Approved Fund;
provided that no Affiliate of Company shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined in Section
3(3) of ERISA which is subject to ERISA and which is maintained or contributed
to by Company or any of its ERISA Affiliates.
"Employment Agreements" means, collectively, (i) that certain Employment
Agreement dated as of December 31, 1996, by and between Company and Thomas
Ferraro and (ii) that certain Employment Agreement dated as of December 31,1996,
by and between Company and Gary Willett.
<PAGE>
"Environmental Claim" means any written accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any of
its Subsidiaries, any of their respective Affiliates that are directly or
indirectly controlled by Company, or any Facility.
"Environmental Laws" means all laws, statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health, public health and
safety, industrial hygiene or protection of wetlands, in any manner applicable
to Company or any of its Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. /s/ 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. /s/ 1801 et seq.,), the Resource
Conservation and Recovery Act (42 U.S.C. /s/ 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. /s/ 1251 et seq.), the Clean Air Act (42 U.S.C.
/s/ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. /s/ 2601 et
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. /s/ 136
et seq.), the Occupational Safety and Health Act (29 U.S.C. /s/ 651 et seq.),
and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. /s/ 11001
et seq.), each as amended or supplemented, and any analogous future or present
local, state and federal statutes and regulations promulgated pursuant thereto,
each as in effect as of the date of determination.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts and
commissions and other reasonable costs associated therewith) from the issuance
of any equity Securities of Holdings or Company after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation which is
a member of a controlled group of corporations within the meaning of Section
414(b) of the Internal Revenue Code of which that Person is a member; (ii) any
trade or business (whether or not incorporated) which is a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that Person is a member; and (iii) solely
for purposes of obligations under Section 412 of the Internal Revenue Code or
under the applicable
<PAGE>
sections set forth in Section 414(t)(2) of the Internal Revenue Code, any member
of an affiliated service group within the meaning of Section 414(m) or (o) of
the Internal Revenue Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is a
member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043(c) of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation or with respect to which no penalty will be
assessed by the PBGC for failure to satisfy such notice requirements); (ii) the
failure to meet the minimum funding standard of Section 412 of the Internal
Revenue Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Internal Revenue Code) or the failure to
make by its due date a required installment under Section 412(m) of the Internal
Revenue Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by Company or any of its ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting, in either case, in liability
pursuant to Section 4063 or 4064 of ERISA, respectively; (v) the institution by
the PBGC of proceedings to terminate any Pension Plan pursuant to Section 4042
of ERISA; (vi) the imposition of liability on Company or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal by Company or any
of its ERISA Affiliates in a complete or partial withdrawal (within the meaning
of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan resulting in
withdrawal liability pursuant to Section 4201 of ERISA, or the receipt by
Company or any of its ERISA Affiliates of written notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA, or that it intends to terminate or has terminated under Section 4042
of ERISA or under Section 4041A of ERISA if such termination would result in
liability to Company or any of its ERISA Affiliates; (viii) the imposition on
Company or any of its ERISA Affiliates of fines, penalties or taxes under
Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or
(I) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the failure
of any Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under Section
401(a) of the Internal Revenue Code, or the failure of any trust forming part of
any Pension Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (x) the imposition of a Lien pursuant to Section
40l(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates determined by
reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
<PAGE>
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time, and any successor statute.
"Existing Credit Agreement" has the meaning assigned to that term in the
Recitals to this Agreement.
"Existing Lenders" has the meaning assigned to that term in the Recitals to this
Agreement.
"Existing Subordinated Note Documents" means the Existing Subordinated Note
Indenture, the Existing Subordinated Notes and each other document executed in
connection with the Existing Subordinated Notes, as each such document may be
amended, restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12B.
"Existing Subordinated Note Indenture" means the indenture pursuant to which the
Existing Subordinated Notes are issued, in a form delivered to Agents and
Lenders on or prior to the Effective Date, with such changes thereto as are
permitted under subsection 7.12B and as such indenture may thereafter be
amended, restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12B.
"Existing Subordinated Notes" means the 9-7/8% Senior Subordinated Notes of
Company due 2007 issued on February 10, 1997 pursuant to the Existing
Subordinated Note Indenture in the form delivered to Agents and Lenders on or
prior to the Effective Date with such changes thereto as are permitted under
subsection 7.12B and as such notes may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12B.
"Facilities" means any and all real property (including, without limitation, all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
(but only as to portions of buildings actually leased or used) or any of their
respective predecessors or any of their respective Affiliates that are directly
or indirectly controlled by Company.
"Federal Funds Effective Rate" means, for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by
<PAGE>
Administrative Agent from three Federal funds brokers of recognized standing
selected by Administrative Agent.
"Fenway" means Fenway Partners Capital Fund, L.P., a Delaware limited
partnership .
"Fenway Agreement" means that certain Advisory Agreement dated as of December
31, 1996, by and between Company and Fenway, as in effect on the Closing Date
and as such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under subsection
7.12A.
"FFDC Act" means the Federal Food, Drug and Cosmetic Act, as amended from time
to time, and any successor statute.
"First Priority" means, with respect to any Lien purported to be created in any
Collateral pursuant to any Collateral Document, that (i) such Lien has priority
over any other Lien on such Collateral and (ii) such Lien is the only Lien
(other than Permitted Encumbrances and Liens permitted pursuant to subsection
7.2A) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Holdings and its Subsidiaries ending on
the last Saturday in December of each calendar year.
"Fixed Charge Component" has the meaning assigned to that term in subsection 7.
6E(i).
"Flavor Supply Agreement" means that certain Flavor Supply Agreement dated as of
December 31, 1996, by and between Company and Quest, as in effect on the Closing
Date and as such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under subsection
7.12A.
"Flood Hazard Property" means a Mortgaged Property located in an area designated
by the Federal Emergency Management Agency as having special flood or mud slide
hazards.
"Funding and Payment Office" means the office of Administrative Agent and Swing
Line Lender located at One Chase Manhattan Plaza, 8th Floor, New York, New York
10081 or such offices of Administrative Agent or any successor Administrative
Agent specified by Administrative Agent or such successor Administrative Agent
in a written notice to Loan Parties and Lenders).
<PAGE>
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set forth in
subsection 1.2, generally accepted accounting principles set forth in 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 may be approved by a significant segment of the accounting profession,
in each case as the same are applicable to the circumstances as of the date of
determination and specifically, terms used herein applicable to Company and its
Subsidiaries defined by reference to GAAP shall give effect to the subtraction
of minority interests.
"Governmental Acts" has the meaning assigned to that term in subsection 3.5.
"Governmental Authorization" means any permit, license, authorization, plan,
directive, consent order or consent decree of or from any federal, state or
local governmental authority, agency or court.
"Guaranty" means, individually, each of the Holdings Guaranty, the Subsidiary
Guaranty and any other guaranty of the Obligations, and "Guaranties" means the
Holdings Guaranty, the Subsidiary Guaranty and each other guaranty of the
Obligations, collectively.
"Guarantors" means Holdings and the Subsidiary Guarantors.
"Hazardous Materials" means (i) any chemical, material or substance defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", "infectious waste", "toxic substances" or any other formulations
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity," or "EP toxicity" or words of
similar import under any applicable Environmental Laws; (ii) any oil, petroleum,
petroleum fraction or petroleum derived substance; (iii) any drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority.
"Holdings" has the meaning assigned to that term in the introduction to this
Agreement.
<PAGE>
"Holdings Common Stock" means the common stock of Holdings, par value $0.01 per
share.
"Holdings Guaranty" means the Second Amended and Restated Holdings Guaranty
executed and delivered by Holdings on the Effective Date, substantially in the
form of Exhibit X annexed hereto, as such Holdings Guaranty may thereafter be
amended, restated, supplemented or otherwise modified from time to time.
"Immaterial Subsidiaries" means, with respect to any Person, any Subsidiary or
Subsidiaries of such Person the assets of which constitute, individually or in
the aggregate, less than 5% of the total assets of such Person and its
Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (other than accounts
payable incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business), (iv) any obligation owed for all
or any part of the deferred purchase price of property or services (excluding
any such obligations incurred under ERISA), which purchase price is (a) due more
than six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements constitute Contingent Obligations and
not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in subsection
10.3.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Insurance Proceeds" has the meaning assigned to that term in subsection
2.4B(iii)(d).
"Intellectual Property" means collectively the MBW Intellectual Property, the
Log Cabin Intellectual Property and the Duncan Hines Intellectual Property, each
as defined in subsections 5.5B, 5.5C and 5.5D, respectively.
"Interest Payment Date" means (i) with respect to any Base Rate Loan, the last
Business Day of each March, June, September and December of each year,
commencing on March 31,1998 and (ii) with respect to any Eurodollar Rate Loan,
the last day of each Interest Period applicable to such Loan; provided that in
the case of
<PAGE>
each Interest Period of longer than three months, "Interest Payment Date" shall
also include the date that is three months after the commencement of such
Interest Period.
"Interest Period" has the meaning assigned to that term in subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to hedge Company or any of its Subsidiaries against
fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the Adjusted
Eurodollar Rate, for purposes of determining the interest rate in respect of an
Interest Period. The Interest Rate Determination Date in respect of calculating
the Adjusted Eurodollar Rate shall be the second Business Day prior to the first
day of the related Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter.
"Inventory" means, with respect to any Person as of any date of determination,
all goods, merchandise and other personal property which are then held by such
Person for sale or lease, including raw materials and work in process.
"Investment" means (i) any direct or indirect purchase or other acquisition by
Company or any of its Subsidiaries of, or of a beneficial interest in, stock or
other Securities of any other Person (other than a Person that, prior to such
purchase or acquisition, was a Wholly Owned Subsidiary of Company), or (ii) any
direct or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Company or any of
its Subsidiaries to any other Person other than a Wholly Owned Subsidiary of
Company, including all Indebtedness and accounts receivable acquired from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business; provided however that the term
"Investment" shall not include (a) current trade and customer accounts
receivable for goods furnished or services rendered in the ordinary course of
business and payable in accordance with customary trade terms, (b) advances and
prepayments to suppliers for goods and services in the ordinary course of
business, (c) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to Company or
any of its Subsidiaries or as security for any such Indebtedness or claims, (d)
Cash held in Deposit Accounts with banks and trust companies (other than
Lenders) not exceeding $2,000,000 in aggregate amount, (e) Cash held in any
Deposit Account with a Lender and (f) shares in a mutual fund that invests
solely in Cash Equivalents. The amount of any Investment shall be the original
cost of such Investment plus the cost of all
<PAGE>
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment.
"IP Collateral" means the Collateral under the Patent and Trademark Security
Agreement, the Log Cabin Patent and Trademark Security Agreement and the Duncan
Hines Patent and Trademark Security Agreement.
"Issuing Lender" means, with respect to any Letter of Credit, the Lender which
agrees or is otherwise obligated to issue such Letter of Credit, determined as
provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other similar arrangement,
whether in corporate, partnership or other legal form; provided that in no event
shall any corporate Subsidiary of any Person be considered to be a Joint Venture
to which such Person is a party.
"Kraft" means Kraft Foods, Inc., a Delaware corporation.
"Landlord Consent and Estoppel" means, with respect to any Leasehold Property, a
letter, certificate or other instrument in writing from the lessor under the
related lease, satisfactory in form and substance to Administrative Agent,
pursuant to which such lessor agrees, for the benefit of Administrative Agent,
(i) that without any further consent of such lessor or any further action on the
part of the Loan Party holding such Leasehold Property, such Leasehold Property
may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at
a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent
third party assignee if Administrative Agent, any Lender, or an Affiliate of
either so acquires such Leasehold Property), (ii) that such lessor shall not
terminate such lease as a result of a default by such Loan Party thereunder
without first giving Administrative Agent notice of such default and at least 30
days (or, if such default cannot reasonably be cured by Administrative Agent
within such period, such longer period as may reasonably be required) to cure
such default, (iii) to the matters contained in a Collateral Access Agreement,
and (iv) to such other matters relating to such Leasehold Property as
Administrative Agent may reasonably request.
"Leasehold Property" means any leasehold interest of any Loan Party as lessee
under any lease of real property, other than any such leasehold interest
designated from time to time by Administrative Agent in its sole discretion as
not being required to be included in the Collateral.
"Lender" and "Lenders" means the persons identified as "Lenders" and listed on
the signature pages of this Agreement, together with their successors and
permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires, provided that
the term "Lenders", when
<PAGE>
used in the context of a particular Commitment, shall mean Lenders having that
Commitment.
"Lender Default" shall mean (i) the refusal (which has not been retracted) of a
Lender to make available its portion of any Loans (including any Revolving Loans
made to pay Refunded Swing Line Loans or to reimburse drawings under Letters of
Credit) in accordance with subsection 2.1A(v) or its portion of any unreimbursed
drawing or payment under a Letter of Credit in accordance with subsection 3.3C
or (ii) a Lender having notified Company and/or Administrative Agent in writing
that it does not intend to comply with its obligations under subsection 2.1 or
subsections 3.1 C, 3.3B or 3.3C.
"Lending Office" means, as to any Lender, the office or offices of such Lender
specified as the "Lending Office" on Schedule 2.1 , or such other office or
offices as such Lender may from time to time notify Company and Administrative
Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit and
Standby Letters of Credit issued or to be issued by Issuing Lenders for the
account of Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the sum of (i)
the maximum aggregate amount which is or at any time thereafter may become
available for drawing under all Letters of Credit then outstanding (whether or
not the conditions to drawing thereunder have been met) plus (ii) the aggregate
amount of all drawings under Letters of Credit honored by Issuing Lenders and
not theretofore reimbursed by Company (including any such reimbursement out of
the proceeds of Revolving Loans pursuant to subsection 3.3B).
"Leverage Ratio" means, as of any date of determination, the ratio of
Consolidated Total Debt, as of the date of determination, to Consolidated
EBITDA, for the twelve-month period ending on the date of determination, in each
case calculated for Holdings and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Lien" means any lien, mortgage, pledge, assignment, security interest, fixed or
floating charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means, as the context requires, one or more of the Term Loans,
Revolving Loans and Swing Line Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of Credit (and any
applications for, or reimbursement agreements or other documents or certificates
executed by Company in favor of an Issuing Lender relating to, the Letters of
Credit),
<PAGE>
the Holdings Guaranty, the Subsidiary Guaranty, the Collateral Documents and any
Interest Rate Agreement entered into by Company with a Lender or an Affiliate of
any Lender.
"Loan Party" means, individually, each of Holdings, Company and any Subsidiary
Guarantors, and "Loan Parties" means Holdings, Company and each Subsidiary
Guarantor, collectively.
"Log Cabin Acquisition" means the acquisition of the Log Cabin Business pursuant
to the terms of the Log Cabin Acquisition Agreement.
"Log Cabin Acquisition Agreement" means that certain Asset Purchase Agreement
dated as of May 7, 1997 between the Company and Kraft.
"Log Cabin Assumption Agreement" means that certain Assumption Agreement dated
as of July 1,1997, by and between Kraft and Company.
"Log Cabin Business" means the assets of the retail syrup business marketed
under the Log Cabin and Country Kitchen trademarks and the foodservice business
marketed under the Log Cabin, Log Cabin Lite and Wigwam trademarks and under
private label arrangements.
"Log Cabin Co-Pack Agreement" means the Transitional Co-Pack Agreement, dated as
of July 1, 1997, by and between Kraft and the Company as in effect on the
Effective Date and as such agreement may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12A.
"Log Cabin Excluded Products Co-Pack Agreement" means the Excluded Business Co-
Pack Agreement, dated as of July 1, 1997, by and between Kraft and the Company
as in effect on the Effective Date and as such agreement may thereafter be
amended, restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
"Log Cabin Patent and Trademark Security Agreement" means the Log Cabin Patent
and Trademark Security Agreement entered into by and among Company, the
Subsidiary Guarantors and the Administrative Agent dated as of July 1,1997, as
such Log Cabin Patent and Trademark Security Agreement may thereafter be
amended, restated, supplemented or otherwise modified from time to time.
"Log Cabin Patent License Agreement" means that certain Patent and Know-How
License Agreement dated as of July 1, 1997, by and between Kraft and Company, as
in effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
<PAGE>
"Log Cabin Transition Agreements" means, collectively, (i) the Log Cabin Co-Pack
Agreement, (ii) the Log Cabin Excluded Products Co-Pack Agreement, (iii) the Log
Cabin Transition Services Agreement and (iv) the Log Cabin Patent License
Agreement.
"Log Cabin Transition Services Agreement" means the Transition Services
Agreement, dated as of July 1, 1997, by and between Kraft and Company as in
effect on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"Management Fees" means the fees payable by Company pursuant to the MDC Advisory
Services Agreement, the Dartford Management Agreement and the Fenway Agreement.
"Management Investors" shall mean such Persons other than the MDC Entities,
Dartford and Fenway as shall hold membership interests in MBW LLC on or prior to
the Effective Date, which Persons shall be reasonably acceptable to
Administrative Agent and Lenders.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of Company and its Subsidiaries, taken as a whole, (ii) the material impairment
of the ability of any Loan Party to perform the Obligations and (iii) a material
adverse effect upon the legality, validity, binding effect or enforceability
against a Loan Party of a Loan Document to which it is a party.
"Material Contract" means any of the Employment Agreements or any other contract
or other arrangement to which Holdings or any of its Subsidiaries is a party
(other than the Loan Documents) for which breach, nonperformance, cancellation
or failure to renew could have a Material Adverse Effect.
"Maximum Consolidated Capital Expenditures Amount" has the meaning assigned to
that term in subsection 7.6D.
"MBW LLC" means MBW Investors LLC, a Delaware limited liability company.
"MBW LLC Agreement" means that certain Amended and Restated Limited Liability
Company Agreement dated as of December 31, 1996, by and among the MDC Entities,
Dartford, Fenway and the Management Investors, as such agreement may be amended,
restated, supplemented or otherwise modified from time to time.
<PAGE>
"MDC Advisory Services Agreement" means that certain Advisory Services Agreement
dated as of December 31 , 1996, by and between Company and MDC Management
Company III, L.P., as in effect on the Closing Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under subsection 7.12A.
"MDC Entities" means McCown De Leeuw & Co. III, L.P., a California limited
partnership, McCown De Leeuw & Co. Offshore (Europe) III, L.P., a Bermuda
limited partnership, McCown De Leeuw & Co. III (Asia), L.P., a Bermuda limited
partnership, Gamma Fund LLC, a California limited liability company, McCown De
Leeuw & Co. IV, L.P., a California limited partnership and Delta Fund LLC, a
California limited liability company.
"Mortgage" means any mortgage or legal charge (whether designated as a deed of
trust or a mortgage or by any similar title) granted by Company or any of its
Subsidiaries (or, at Administrative Agent's option, an amendment to an existing
Mortgage, in form satisfactory to Administrative Agent, adding such Mortgaged
Property to the Real Property Assets encumbered by an existing Mortgage) in any
Real Property Asset to secure the Obligations, as such mortgage or legal charge
may be amended, restated, supplemented or otherwise modified from time to time,
and "Mortgages" means all such instruments collectively.
"Mortgage Policy" has the meaning assigned to that term in subsection 6.10B(iv).
"Mortgaged Property" has the meaning assigned to that term in subsection 6.10B.
"Multiemployer Plan" means a "multiemployer plan", as defined in Section
4001(a)(3) of ERISA which is subject to Title IV of ERISA, to which Company or
any of its ERISA Affiliates is contributing or to which Company or any of its
ERISA Affiliates has an obligation to contribute.
"NatWest" means The National Westminster Bank PLC and its successors, including,
without limitation, its successors by merger.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of such
Asset Sale net of bona fide direct costs of sale including, without limitation,
(i) income taxes reasonably estimated to be actually payable as a result of such
Asset Sale within one year of the date of receipt of such Cash Proceeds, (ii)
transfer, sales, use and other taxes payable in connection with such Asset Sale,
(iii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale, and (iv) broker's
commissions and reasonable fees and expenses of
<PAGE>
counsel, accountants and other professional advisors in connection with such
Asset Sale.
"New Lender" means any Lender which is a party to this Agreement on the
Effective Date which is not an Existing Lender.
"New Subordinated Note Documents" means the New Subordinated Note Indenture, the
New Subordinated Notes and each other document executed in connection with the
New Subordinated Notes, as each such document may be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12B.
"New Subordinated Note Indenture" means the indenture pursuant to which the New
Subordinated Notes are issued, in a form delivered to Agents and Lenders on or
prior to the Effective Date, with such changes thereto as are permitted under
subsection 7.12B and as such indenture may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12B.
"New Subordinated Notes" means the 9-7/8% Series C Senior Subordinated Notes of
Company due 2007 issued pursuant to the New Subordinated Note Indenture in the
form delivered to Agents and Lenders on or prior to the Effective Date with such
changes thereto as are permitted under subsection 7. 12B and as such notes may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under subsection 7.12B.
"Non-Defaulting Lender" means and includes each Lender other than a Defaulting
Lender.
"Non-US Lenders" has the meaning assigned to that term in subsection 2.7B(iii).
"Notes" means one or more of the Tranche A Term Notes, Tranche B Term Notes,
Tranche C Term Notes, Revolving Notes or Swing Line Note or any combination
thereof.
"Notice of Borrowing" means a notice in the form of Exhibit I annexed hereto
delivered by Company to Administrative Agent pursuant to subsection 2.lB with
respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the form of
Exhibit II annexed hereto delivered by Company to Administrative Agent pursuant
to subsection 2.2D with respect to a proposed conversion or continuation of the
applicable basis for determining the interest rate with respect to the Loans
specified therein.
<PAGE>
"Notice of Issuance of Letter of Credit" means a notice in the form of Exhibit
III annexed hereto delivered by Company to Administrative Agent pursuant to
subsection 3.1 B(i) with respect to the proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party from time
to time owed to Agents, Lenders or any of them under the Loan Documents, whether
for principal, interest, reimbursement of amounts drawn under Letters of Credit
or payments for early termination of Interest Rate Agreements, fees, expenses,
indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer), its president, its chief financial officer or a vice president;
provided that every Officer's Certificate with respect to the compliance with a
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer making or giving such Officer's Certificate has read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the signer
he or she has made or has caused to be made such examination or investigation as
is necessary to enable him or her to express an informed opinion as to whether
or not such condition has been complied with, and (iii) a statement as to
whether, in the opinion of the signer, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease (including, without
limitation, leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"P&G" has the meaning assigned to that term in the Recitals to this Agreement.
"Patent and Trademark Security Agreement" means the Patent and Trademark
Security Agreement entered into by and among Company, the Subsidiary Guarantors
and Administrative Agent dated as of the Closing Date, as such Patent and
Trademark Security Agreement may thereafter be amended, restated, supplemented
or otherwise modified from time to time.
"Patent License Agreement" means that certain Patent License Agreement dated as
of December 31, 1996, by and among Seller, Unilever PLC and Company, as in
effect on the Closing Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to
Section 4002 of ERISA (or any successor thereto).
<PAGE>
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to Title IV of ERISA.
"Permitted Acquisition" means an acquisition of assets or a business effected in
accordance with the provisions of subsection 7.7(vii).
"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA) incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of Default
under subsection 8.8;
(v) leases or subleases granted to others not interfering in any material
respect with the ordinary conduct of the business of Company or any of
its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor under any Capital
Lease permitted by subsection 7.1 (iii) or any Operating Lease not
prohibited by this Agreement, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b);
<PAGE>
(viii) Liens arising from filing UCC financing statements relating solely to
leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties in connection with the
importation of goods;
(x) deposits in the ordinary course of business to secure liabilities to
insurance carriers, lessors, utilities and other service providers; and
(xi) bankers liens and rights of setoff with respect to customary depository
arrangements entered into in the ordinary course of business.
"Permitted Seller Note" means a promissory note substantially in the form of
Exhibit XVIII annexed hereto representing any Indebtedness of Company incurred
in connection with any Permitted Acquisition payable to the seller in connection
therewith, as such note may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection 7. 12B;
provided that no Permitted Seller Note shall (i) be guarantied by any Subsidiary
of Company or secured by any property of Company or any of its Subsidiaries or
(ii) bear cash interest at a rate in excess of 12% per annum; and provided
further, that no Permitted Seller Note shall provide for any prepayment or
repayment of all or any portion of the principal thereof prior to the date of
the final scheduled installment of principal of any of the Loans.
"Person" means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, joint stock companies, Joint
Ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Pledge Agreement" means that certain Second Amended and Restated Pledge
Agreement by and among Company, Holdings, the Subsidiary Guarantors and
Administrative Agent dated as of the Closing Date and substantially in the form
of Exhibit XI annexed hereto, as such Pledge Agreement may be amended, restated,
supplemented or otherwise modified from time to time.
"Pledged Collateral" means the "Pledged Collateral" as defined in the Pledge
Agreement.
"Potential Event of Default" means a condition or event that, after notice or
after any applicable grace period has lapsed, or both, would constitute an Event
of Default.
<PAGE>
"Prime Rate" means the rate of interest per annum publicly announced from time
to time by Chase as its prime commercial lending rate in effect at its principal
office in New York City. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Chase or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.
"Proceedings" has the meaning assigned to that term in subsection 6.1(x).
"Pro Forma Calculation Period" has the meaning assigned to that term in
subsection 7.6E(i).
"Pro Rata Share" means with respect to each Lender, the Revolving Loan Pro Rata
Share, Tranche A Term Loan Pro Rata Share, Tranche B Term Loan Pro Rata Share
and Tranche C Term Loan Pro Rata Share of such Lender; in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
subsection 10.1. The initial Pro Rata Share of each Lender is set forth opposite
the name of that Lender in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor or
substitute office in which filings are necessary or, in the opinion of
Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"Pure Food and Drug Laws" means the FFDC Act and the pure food and drug laws of
each of the states of the United States into which products of the Business,
the Log Cabin Business and the Duncan Hines Business are or have been shipped.
"Quest" means Quest International Flavors & Food Ingredients Company.
"Quest Agreements" means, collectively, (i) that certain Flavor Escrow Agreement
dated as of December 31, 1996, by and among Quest, the escrow agent named
therein and Company, as in effect on the Closing Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under subsection 7.12A, and (ii) the Flavor Supply
Agreement.
"Real Property Asset" means, at any time of determination, any interest then
owned by any Loan Party in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with respect to which a
Record Document (as hereinafter defined) has been recorded in all places
necessary or desirable, in Administrative Agent's reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrances of the affected real property. For purposes of this definition, the
term "Record Document" means, with respect to any Leasehold Property, (a) the
lease
<PAGE>
evidencing such Leasehold Property or a memorandum thereof, executed and
acknowledged by the owner of the affected real property, as lessor, or (b) if
such Leasehold Property was acquired or subleased from the holder of a Recorded
Leasehold interest, the applicable assignment or sublease document, executed and
acknowledged by such holder, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form reasonably
satisfactory to Administrative Agent.
"Red Wing" means The Red Wing Company, Inc., a Delaware corporation.
"Red Wing Co-Pack Agreement" means each of the First Amended and Restated
Production Agreement, dated as of November 19, 1997, by and between Red Wing and
Company and the Production Agreement, dated as of November 19, 1997, by and
between Red Wing and the Company (collectively, the "Red Wing Co-Pack
Agreements") as in effect on the Effective Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under subsection 7.12A.
"Refunded Swing Line Loans" has the meaning assigned to that term in subsection
2. 1A(v).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Regulatory Shares" means, with respect to any Person, shares of such Person
required to be issued as qualifying shares to directors or persons similarly
situated or shares issued to Persons other than Company or a Wholly Owned
Subsidiary of Company in response to regulatory requirements of foreign
jurisdictions pursuant to a resolution of the Board of Directors of such Person,
so long as such shares do not exceed one percent of the total outstanding shares
of equity such Person and any owners of such shares irrevocably covenant with
Company to remit to Company or waive any dividends or distributions paid or
payable in respect of such shares.
"Reimbursement Date" has the meaning assigned to that term in subsection 3.3B.
"Related Agreements" means the Subordinated Note Indentures, the Subordinated
Notes, the other Subordinated Note Documents, the Acquisition Agreement, the Log
Cabin Acquisition Agreement, the Duncan Hines Acquisition Agreement, the
Assumption Agreement, the Log Cabin Assumption Agreement, the Duncan Hines
Assumption Agreement, the MDC Advisory Services Agreement, the Dartford
Management Agreement, the Fenway Agreement, the Transition Agreements,
<PAGE>
the Log Cabin Transition Agreements, the Red Wing Co-Pack Agreements and the
Duncan Hines Transition Agreements.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Requisite Lenders" means Non-Defaulting Lenders having or holding not less than
51% of the sum of the aggregate Term Loan Exposure of all Non-Defaulting Lenders
plus the aggregate Revolving Loan Exposure of all Non-Defaulting Lenders.
"Restricted Junior Payment" means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of Company now or
hereafter outstanding, except a dividend payable solely in shares of that class
of stock to the holders of that class, (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of Holdings or Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Holdings or Company now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, any Subordinated Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to make Revolving
Loans to Company pursuant to subsection 2.1A(iv) and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means January 16, 2005 or any
earlier date of termination of the Revolving Loan Commitments pursuant to this
Agreement.
"Revolving Loan Exposure" means, with respect to any Lender as of any date of
determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's Revolving Loan Commitment and (ii) after the termination of the
Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event that Lender
is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (net of any participations purchased by
other Lenders in such Letters of Credit) plus (c) the aggregate amount of all
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of
<PAGE>
Credit plus (d) the aggregate amount of all participations purchased by that
Lender in any outstanding Swing Line Loans plus (e) in the case of Swing Line
Lender, the sum of the aggregate outstanding principal amount of all Swing Line
Loans (in each case net of any participations therein purchased by other
Lenders).
"Revolving Loan Pro Rata Share" means with respect to all payments, computations
and other matters relating to the Revolving Loan Commitment or the Revolving
Loans of any Lender or any Letters of Credit issued by any Lender or any
participations purchased by any Lender therein or in any Swing Line Loans, the
percentage obtained by dividing (i) the Revolving Loan Exposure of that Lender
by (ii) the aggregate Revolving Loan Exposure of all Lenders, in any such case
as the applicable percentage may be adjusted by assignments permitted pursuant
to subsection 10.1.
"Revolving Loans" means the Loans made by Lenders to Company pursuant to
subsection 2.lA(iv).
"Revolving Notes" means (i) the promissory notes of Company issued pursuant to
subsection 2.IE(i)(d) on the Effective Date and (ii) any promissory notes issued
by Company pursuant to the last sentence of subsection 10.lB(i) in connection
with assignments of the Revolving Loan Commitment and Revolving Loans of any
Lender, in each case substantially in the form of Exhibit VII annexed hereto, as
they may be amended, restated, supplemented or otherwise modified from time to
time.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to time,
and any successor statute.
"Security Agreement" means the Second Amended and Restated Security Agreement
entered into by and among Company, Holdings, the Subsidiary Guarantors and
Administrative Agent dated as of the Effective Date and substantially in the
form of Exhibit XII annexed hereto, as such Security Agreement may be amended,
restated, supplemented or otherwise modified from time to time.
"Seller" means Conopco, Inc., a New York corporation, doing business as Van den
Bergh Foods Company.
<PAGE>
"Senior Leverage Ratio" means, as of any date of determination, the ratio of
Consolidated Total Senior Debt, as of the date of determination, to Consolidated
EBITDA, for the twelve-month period ending on the date of determination, in each
case calculated for Holdings and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Shared Technology License Agreement" means that certain Shared Technology
License Agreement dated as of December 31, 1996, by and between Seller and
Company, as in effect on the Closing Date and as such agreement may thereafter
be amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 7.12A
"Solvent" means, with respect to any Person, that as of the date of
determination both (i) (a) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (c) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) workers' compensation
liabilities of Company or any of its Subsidiaries, (ii) the obligations of third
party insurers of Company or any of its Subsidiaries arising virtue of the laws
of any jurisdiction requiring third party insurers, (iii) performance, payment,
deposit or surety obligations of Company or any of its Subsidiaries, in any case
if required by law or governmental rule or regulation or in accordance with
custom and practice in the industry, and (iv) such other obligations of Company
and its Subsidiaries as may be reasonably acceptable to Administrative Agent;
provided that Standby Letters of Credit may not be issued for the purpose of
supporting (a) trade payables or (b) Indebtedness constituting "antecedent debt"
(as that term is used in Section 547 of the Bankruptcy Code).
"Subordinated Note Documents" means collectively the Existing Subordinated Note
Documents and the New Subordinated Note Documents.
<PAGE>
"Subordinated Note Indentures" means collectively the Existing Subordinated Note
Indenture and the New Subordinated Note Indenture.
"Subordinated Notes" means collectively the Existing Subordinated Notes and the
New Subordinated Notes.
"Subordinated Indebtedness" means (i) the Indebtedness of Company under the
Subordinated Note Documents, (ii) any Indebtedness permitted under subsection
7.l(vi), (iii) the Indebtedness of Company evidenced by any Permitted Seller
Notes, and (iv) any other Indebtedness of Company or any of its Subsidiaries
subordinated in right of payment to the Obligations pursuant to documentation
containing maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and substance
satisfactory to Administrative Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation, partnership,
association, joint venture or other business entity of which more than 50% of
the total voting power of shares of stock or other ownership interests entitled
(without regard to the occurrence of any contingency) to vote in the election of
the Person or Persons (whether directors, managers, trustees or other Persons
performing similar functions) having the power to direct or cause the direction
of the management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
"Subsidiary Guarantor" means any Subsidiary of Company that becomes party to the
Subsidiary Guaranty at any time after the Effective Date pursuant to subsection
6.9.
"Subsidiary Guaranty" means the Subsidiary Guaranty, substantially in the form
of Exhibit IX annexed hereto, executed and delivered by each Subsidiary
Guarantor from time to time after the Effective Date pursuant to subsection 6.9,
as such Subsidiary Guaranty may be amended, restated, supplemented or otherwise
modified from time to time.
"Subsidiary Security Agreements" has the meaning assigned to that term in
subsection 6.9.
"Supplemental Collateral Agent" has the meaning assigned to that term in
subsection 9.lB.
"Swing Line Lender" means Chase, or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender to make
Swing Line Loans to Company pursuant to subsection 2. 1A(v).
<PAGE>
"Swing Line Loans" means the Loans made by Swing Line Lender pursuant to
subsection 2.lA(v).
"Swing Line Note" means (i) the promissory note of Company issued pursuant to
subsection 2.1E(ii) on the Effective Date and (ii) any promissory note issued by
Company to any successor Administrative Agent and Swing Line Lender pursuant to
the last sentence of subsection 9.5B, in each case substantially in the form of
Exhibit VIII annexed hereto, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Swiss Bank" means Swiss Bank Corporation and its successors, including, without
limitation, any successors by merger.
"Syndication Agent" has the meaning assigned to that term in the introduction to
this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature and whatever called, by whomsoever,
on whomsoever and wherever imposed, levied, collected, withheld or assessed;
provided that "Tax on the overall net income" of a Person shall be construed as
a reference to a tax imposed by the jurisdiction in which that Person's
principal office (and/or, in the case of a Lender, its relevant Lending Office)
is located or in which that Person is deemed to be doing business on all or part
of the net income, profits or gains of that Person (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise).
"Term Loan Commitment" means the aggregate commitment of a Lender to make a
Tranche A Term Loan, Tranche B Term Loan and Tranche C Term Loan to Company
pursuant to subsections 2. A(i), 2.lA(ii) and 2.lA(iii), respectively, and "Term
Loan Commitments" means such commitments of all Lenders in the aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any date of
determination (i) prior to the funding of the Term Loans, that Lender's Term
Loan Commitment and (ii) after the funding of the Term Loans, the outstanding
principal amount of the Term Loan of that Lender.
"Term Loans" means the Tranche A Term Loans, Tranche B Term Loans and Tranche C
Term Loans made by Lenders to Company pursuant to subsections 2.lA(i), 2.1 A(ii)
and 2.1 A(iii), respectively.
"Term Notes" means one or more of the Tranche A Term Notes, Tranche B Term Notes
and Tranche C Term Notes, or any combination thereof.
"Title Company" means one or more title insurance companies reasonably
satisfactory to Administrative Agent.
<PAGE>
"Total Utilization of Revolving Loan Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying any
Refunded Swing Line Loans or reimbursing the applicable Issuing Lender for any
amount drawn under any Letter of Credit but not yet so applied) plus (ii) the
aggregate principal amount of all outstanding Swing Line Loans plus (iii) the
Letter of Credit Usage.
"Tranche A Term Loan Commitment" means the commitment of a Lender to make a
Tranche A Term Loan to Company pursuant to subsection 2.1 A(i), and "Tranche A
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the funding of the Tranche A Term Loans, that
Lender's Tranche A Term Loan Commitment and (ii) after the funding of the
Tranche A Term Loans, the outstanding principal amount of the Tranche A Term
Loan of that Lender.
"Tranche A Term Loan Pro Rata Share" means with respect to all payments,
computations and other matters relating to the Tranche A Term Loan Commitment or
the Tranche A Term Loan of any Lender, the percentage obtained by dividing (i)
the Tranche A Term Loan Exposure of that Lender by (ii) the aggregate Tranche A
Term Loan Exposure of all Lenders, in any such case as the applicable percentage
may be adjusted by assignments permitted pursuant to subsection 10.1.
"Tranche A Term Loans" means the Loans made by the Lenders to the Company
pursuant to subsection 2.1A(i).
"Tranche A Term Notes" means (i) the promissory notes of Company issued pursuant
to subsection 2.1E(i)(a) on the Effective Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche A Term Loan Commitments or Tranche A
Term Loans of any Lenders, in each case substantially in the form of Exhibit IV
annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Tranche B Term Loan Commitment" means the commitment of a Lender to make a
Tranche B Term Loan to Company pursuant to subsection 2.IA(ii), and "Tranche B
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the funding of the Tranche B Term Loans, that
Lender's Tranche B Term Loan Commitment and (ii) after the funding of the
Tranche
<PAGE>
B Term Loans, the outstanding principal amount of the Tranche B Term Loan of
that Lender.
"Tranche B Term Loan Pro Rata Share" means with respect to all payments,
computations and other matters relating to the Tranche B Term Loan Commitment or
the Tranche B Term Loan of any Lender, the percentage obtained by dividing (i)
the Tranche B Term Loan Exposure of that Lender by (ii) the aggregate Tranche B
Term Loan Exposure of all Lenders, in any such case as the applicable percentage
may be adjusted by assignments permitted pursuant to subsection 10.1.
"Tranche B Term Loans" means the Loans made by the Lenders to the Company
pursuant to subsection 2. 1A(ii).
"Tranche B Term Notes" means (i) the promissory notes of Company issued pursuant
to subsection 2.1E(i)(b) on the Effective Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche B Term Loan Commitments or Tranche B
Term Loans of any Lenders, in each case substantially in the form of Exhibit V
annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Tranche C Term Loan Commitment" means the commitment of a Lender to make a
Tranche C Term Loan to Company pursuant to subsection 2.1A(iii), and "Tranche C
Term Loan Commitments" means such commitment of all Lenders in the aggregate.
"Tranche C Term Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the funding of the Tranche C Term Loans, that
Lender's Tranche C Term Loan Commitment and (ii) after the funding of the
Tranche C Term Loans, the outstanding principal amount of the Tranche C Term
Loan of that Lender.
"Tranche C Term Loan Pro Rata Share" means with respect to all payments,
computations and other matters relating to the Tranche C Term Loan Commitment or
the Tranche C Term Loan of any Lender, the percentage obtained by dividing (i)
the Tranche C Term Loan Exposure of that Lender by (ii) the aggregate Tranche C
Term Loan Exposure of all Lenders, in any such case as the applicable percentage
may be adjusted by assignments permitted pursuant to subsection 10.1.
"Tranche C Term Loans" means the Loans made by the Lenders to the Company
pursuant to subsection 2.1A(iii).
"Tranche C Term Notes" means (i) the promissory notes of Company issued pursuant
to subsection 2.1E(i)(c) on the Effective Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection
<PAGE>
with assignments of the Tranche C Term Loan Commitments or Tranche C Term Loans
of any Lenders, in each case substantially in the form of Exhibit VI annexed
hereto, as they may be amended, restated, supplemented or otherwise modified
from time to time.
"Transaction Costs" means the fees, costs and expenses payable by Company and
its Subsidiaries on or before the Effective Date in connection with the Duncan
Hines Acquisition.
"Transition Agreements" means, collectively, (i) that certain License Agreement
dated as of December 31, 1996, by and between Seller and Company, as in effect
on the Closing Date and as such agreement may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under subsection 7.12A; (ii) the Shared Technology License Agreement; (iii) the
Patent License Agreement; and (iv) the Quest Agreements.
"Unfunded Current Liability" means, with respect to any Pension Plan, the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under such Pension Plan as of the close of its most recent plan year
exceeds the fair market value of the assets allocable thereto, each determined
in accordance with Statement of Financial Accounting Standards No.35, based upon
the actuarial assumptions used by such Pension Plan's actuary in the most recent
annual valuation of such Pension Plan.
"Wholly Owned Subsidiary" means, with respect to any Person, a Subsidiary of
such Person all of the outstanding capital stock or other ownership interests of
which (other than Regulatory Shares) shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.
1.2 Accounting Terms Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance with GAAP (except, with
respect to interim financial statements, normal year end audit adjustments and
the absence of explanatory footnotes) as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3A.
<PAGE>
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and subsections,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in subsection 1.1 may, unless the context otherwise requires,
be used in the singular or the plural, depending on the reference. The words
"includes", "including" and similar terms used in any Loan Document shall be
construed as if followed by the words "without limitation".
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments, Loans.
A. Commitments. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Loan Parties set forth
herein and in the other Loan Documents, each Lender hereby severally agrees to
make the applicable Loans described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii)
and 2.1A(iv) and Swing Line Lender hereby agrees to make the Swing Line Loans as
described in subsection 2.1A(v).
(i) Tranche A Term Loans. Each Lender with a Tranche A Term Loan Commitment
severally agrees to lend to Company on the Effective Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche A Term
Loan Commitments to be used for the purposes identified in subsection 2.5A.
The amount of each Lender's Tranche A Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
of the Tranche A Term Loan Commitments is $150,000,000; provided that the
Tranche A Term Loan Commitments of Lenders shall be adjusted to give effect
to any assignments of the Tranche A Term Loan Commitments pursuant to
subsection 10.1B. Company may make only one borrowing under the Tranche A
Term Loan Commitments. Amounts borrowed under this subsection 2.IA(i) and
subsequently repaid or prepaid may not be reborrowed.
(ii) Tranche B Term Loans. Each Lender with a Tranche B Term Loan Commitment
severally agrees to lend to Company on the Effective Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche B Term
Loan Commitments to be used for the purposes identified in subsection 2.5A.
The amount of each Lender's Tranche B Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
of the Tranche B Term Loan Commitments is $150,000,000; provided that the
Tranche B Term Loan Commitments of Lenders shall be adjusted to give effect
to any assignments of the Tranche B Term Loan Commitments pursuant to
subsection 10.1B. Company may make only one borrowing under the Tranche B
Term Loan Commitments. Amounts borrowed under this subsection 2. 1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
<PAGE>
(iii) Tranche C Term Loans. Each Lender with a Tranche C Term Loan Commitment
severally agrees to lend to Company on the Effective Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche C
Term Loan Commitments to be used for the purposes identified in
subsection 2.5A. The amount of each Lender's Tranche C Term Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
and the aggregate amount of the Tranche C Term Loan Commitments is
$150,000,000; provided that the Tranche C Term Loan Commitments of
Lenders shall be adjusted to give effect to any assignments of the
Tranche C Term Loan Commitments pursuant to subsection 10.1B. Company
may make only one borrowing under the Tranche C Term Loan Commitments.
Amounts borrowed under this subsection 2. 1A(iii) and subsequently
repaid or prepaid may not be reborrowed.
(iv) Revolving Loans. Each Lender with a Revolving Loan Commitment severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Revolving Loans permitted to be outstanding from time
to time, to maintain such existing Revolving Loans and to lend to
Company from time to time during the period from the Effective Date to
but excluding the Revolving Loan Commitment Termination Date an
aggregate amount which shall not exceed its Pro Rata Share of the
aggregate amount of the Revolving Loan Commitments, to be used for the
purposes identified in subsection 2.5B. The original amount of each
Lender's Revolving Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate original amount of the
Revolving Loan Commitments is $75,000,000; provided that the Revolving
Loan Commitments of Lenders shall be adjusted to give effect to any
assignments of the Revolving Loan Commitments pursuant to subsection
10.1B; provided further, that the amount of the Revolving Loan
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsection 2.4B. Each Lender's
Revolving Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the Revolving Loan
Commitments shall be paid in full no later than that date. Amounts
borrowed under this subsection 2. 1A(iv) may be repaid and reborrowed to
but excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, in no event shall the
Total Utilization of Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect.
(v) Swing Line Loans. Swing Line Lender hereby agrees, subject to the
limitations set forth below with respect to the maximum aggregate amount
of all Swing Line Loans outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Company from time to time
during the period from the Effective Date to but excluding the Revolving
Loan Commitment Termination Date by making Base Rate Loans as Swing Line
Loans to Company in an aggregate amount not to exceed the amount of the
Swing Line Loan Commitment, to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans,
when aggregated with the sum of Swing Line Lender's outstanding
Revolving Loans and Swing Line Lender's Pro Rata Share of the
<PAGE>
Letter of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $2,000,000; provided that the amounts of the Swing Line Loan
Commitment are subject to reduction as provided in clause (b) of the next
paragraph. The Swing Line Loan Commitment shall expire on the Revolving
Loan Commitment Termination Date and all Swing Line Loans and all other
amounts owed hereunder with respect to the Swing Line Loans shall be paid
in full no later than that date. Amounts borrowed under this subsection
2.1A(v) may be repaid and reborrowed to but excluding the Revolving Loan
Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing Line Loans,
and the Swing Line Loan Commitment shall be subject to the following limitations
in the amounts indicated:
(a) in no event shall the Total Utilization of Revolving Loan Commitments at
any time exceed the Revolving Loan Commitments then in effect;
(b) any reduction of the Revolving Loan Commitments made pursuant to subsection
2.4B which reduces the aggregate Revolving Loan Commitments to an amount
less than the then current sum of the Swing Line Loan Commitment shall
result in an automatic corresponding pro rata reduction of the Swing Line
Loan Commitment such that the sum thereof equals the amount of the
Revolving Loan Commitments, as so reduced, without any further action on
the part of Company, Administrative Agent or Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily prepaid by
Company pursuant to subsection 2.4B(i), Swing Line Lender may, at any time in
its sole and absolute discretion, deliver to Administrative Agent (with a copy
to Company), no later than 12:00 Noon (New York time) at least one Business Day
in advance of the proposed Funding Date, a notice (which shall be deemed to be a
Notice of Borrowing given by Company) requesting Lenders to make Revolving Loans
that are Base Rate Loans to Company on such Funding Date in an amount equal to
the amount of such Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date such notice is given which Swing Line Lender requests
Lenders to prepay. Anything contained in this Agreement to the contrary
notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other
than Swing Line Lender shall be immediately delivered by Administrative Agent to
Swing Line Lender (and not to Company) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such Revolving
Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by
Swing Line Lender to Company, and such portion of the Swing Line Loans deemed to
be so paid, shall no longer be outstanding as Swing Line Loans and shall no
longer be due under the Swing Line Note of Swing Line Lender but shall instead
constitute part of Swing Line Lender's outstanding Revolving Loans to Company
and shall be due under the Revolving Note issued by Company to Swing Line
Lender. Company hereby authorizes each of Administrative Agent and Swing Line
Lender to charge Company's accounts with Administrative Agent and Swing Line
Lender (up to the amount available in
<PAGE>
each such account) in order to immediately pay Swing Line Lender the amount of
the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans
made by Lenders, including the Revolving Loan deemed to be made by Swing Line
Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If
any portion of any such amount paid (or deemed to be paid) to Swing Line Lender
should be recovered by or on behalf of Company from Swing Line Lender in
bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of
the amount so recovered shall be ratably shared among all Lenders in the manner
contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this subsection
2.1A(v) in an amount sufficient to repay any amounts owed to Swing Line Lender
in respect of any outstanding Swing Line Loans on or before the third Business
Day after demand for payment thereof by Swing Line Lender, each Lender with a
Revolving Loan Commitment shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans, and in an amount
equal to its Pro Rata Share of the applicable unpaid amount together with
accrued interest thereon. Upon one Business Day's notice from Swing Line Lender,
each such Lender shall deliver to Swing Line Lender an amount equal to its
respective participation in the applicable unpaid amount in same day funds at
the Funding and Payment Office. In order to evidence such participation each
such Lender agrees to enter into a participation agreement at the request of
Swing Line Lender in form and substance satisfactory to Swing Line Lender. In
the event any such Lender fails to make available to Swing Line Lender the
amount of such Lender's participation as provided in this paragraph, Swing Line
Lender shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the rate customarily used by Swing Line Lender
for the correction of errors among banks for three Business Days and thereafter
at the Base Rate, as applicable.
Notwithstanding anything contained herein to the contrary, (i) the obligation of
each Lender with a Revolving Loan Commitment to make Revolving Loans for the
purpose of repaying any Refunded Swing Line Loans pursuant to the second
preceding paragraph and each such Lender's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the immediately
preceding paragraph shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (a) any set-off
counterclaim, recoupment, defense or other right which such Lender may have
against Swing Line Lender, Company or any other Person for any reason
whatsoever; (b) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that no
such Lender shall have any such obligation unless (x) Swing Line Lender believed
in good faith that all conditions under Section 4 to the making of the
applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, were
satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans
were made, or (y) such Lender had actual knowledge, by receipt of any notices
required to be delivered to such Lenders pursuant to subsection 6.1 (ix) or
<PAGE>
otherwise, that any such condition under Section 4 had not been satisfied and
such Lender failed to notify Swing Line Lender and Administrative Agent in
writing that it had no obligation to make Revolving Loans until such condition
was satisfied (any such notice to be effective as of the date of receipt thereof
by Swing Line Lender and Administrative Agent), or (z) the satisfaction of any
such condition under Section 4 not satisfied had been waived by Requisite
Lenders prior to or at the time such Refunded Swing Line Loans or other unpaid
Swing Line Loans were made; and (ii) Swing Line Lender shall not be obligated to
make any Swing Line Loans if it has elected not to do so after the occurrence
and during the continuation of a Potential Event of Default or Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including any such Loans
made as Eurodollar Rate Loans with a particular Interest Period) made on any
Funding Date (other than Revolving Loans made pursuant to a request by Swing
Line Lender pursuant to subsection 2.1A(v) for the purpose of repaying any
Refunded Swing Line Loans or Revolving Loans made pursuant to subsection 3.3B
for the purpose of reimbursing any Issuing Lender for the amount of a drawing or
payment under a Letter of Credit issued by it) shall be in an aggregate minimum
amount of $500,000 and integral multiples of $250,000 in excess of that amount.
Swing Line Loans made on any Funding Date shall be in an aggregate minimum
amount of $250,000 and integral multiples of $100,000 in excess of that amount.
Whenever Company desires that Lenders make Term Loans or Revolving Loans it
shall deliver to Administrative Agent on behalf of Company a Notice of Borrowing
no later than 12:00 Noon New York time), at least three Business Days in advance
of the proposed Funding Date in the case of a Eurodollar Rate Loan, or at least
one Business Day in advance of the proposed Funding Date in the case of a Base
Rate Loan. Whenever Company desires that Swing Line Lender make a Swing Line
Loan, it shall deliver to Administrative Agent a Notice of Borrowing no later
than 12:00 Noon (New York time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing
Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case of any
Loans other than Swing Line Loans, whether such Loans shall be Base Rate Loans
or Eurodollar Rate Loans, and (v) in the case of any Loans requested to be made
as Eurodollar Rate Loans, the initial Interest Period requested therefor. Term
Loans and Revolving Loans may be continued as or converted into Base Rate Loans
and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of
delivering the above-described Notice of Borrowing, Company may give
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to Company
in acting upon any telephonic notice referred to above that Administrative Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Company or for otherwise acting in good
faith under this subsection 2.1B, and upon funding of Loans by Lenders in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected Loans hereunder.
<PAGE>
Company shall notify Administrative Agent prior to the funding of any Loans in
the event that any of the matters to which Company is required to certify in the
applicable Notice of Borrowing are no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of
Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing and of the amount of such
Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to Administrative Agent
not later than 12:00 Noon New York time) on the applicable Funding Date, and
Swing Line Lender shall make the amount of its Swing Line Loan available to
Administrative Agent not later than 12:00 Noon New York time) on the applicable
Funding Date, in each case in same day funds, at the Funding and Payment Office.
Except as provided in subsection 2.1A(v) or subsection 3.3B with respect to
Revolving Loans used to repay Refunded Swing Line Loans or to reimburse any
Issuing Lender for the amount of an honored drawing or payment under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.1 (in the case of Loans made on the Effective Date)
and 4.2 (in the case of all Loans), Administrative Agent shall make the proceeds
of such Loans available to Company on the applicable Funding Date by causing an
amount of same day funds equal to the proceeds of all such Loans received by
Administrative Agent from Lenders or Swing Line Lender, as the case may be, to
be credited to the account of Company at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to the
Funding Date for any Loans that such Lender does not intend to make available to
Administrative Agent the amount of such Lender's Loan requested on such Funding
Date, Administrative Agent may assume that such Lender has made such amount
available to Administrative Agent on such Funding Date and Administrative Agent
may, in its sole discretion, but shall not be obligated to, make available to
Company a corresponding amount
<PAGE>
on such Funding Date. If such corresponding amount is not in fact made available
to Administrative Agent by such Lender, Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the customary rate set by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify Company and Company shall immediately pay such
corresponding amount to Administrative Agent together with interest thereon, for
each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the rate applicable to such Loan. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at the address referred to in
subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "Register"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the Commitments and
the outstanding Loans from time to time of each Lender and each
repayment or prepayment in respect of the principal amount of the
outstanding Loans of each Lender. Any such recordation shall be
conclusive and binding on Company and each Lender, absent manifest
error; provided that failure to make any such recordation, or any error
in such recordation, shall not affect Company's Obligations in respect
of the applicable Loans.
(iii) Each Lender shall record on its internal records (including, without
limitation, the Notes held by such Lender) the amount of each Loan made
by it and each payment in respect thereof. Any such recordation shall be
prima facie evidence of the amount of such Loans; provided that failure
to make any such recordation, or any error in such recordation, shall
not affect Company's Obligations in respect of the applicable Loans; and
provided, further that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register
shall govern, absent manifest error.
(iv) Company, Agents and Lenders shall deem and treat the Persons listed as
Lenders in the Register as the holders and owners of the corresponding
Commitments and Loans listed therein for all purposes hereof, and no
assignment or transfer of any Commitment or Loan shall be effective, in
each case unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in
subsection 10.lB(ii).
<PAGE>
Prior to such recordation, all amounts owed with respect to the
applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of
any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee
of the corresponding Commitments or Loans.
(v) Company hereby designates Chase, and any financial institution serving
as a successor Administrative Agent, to serve as Company's agent solely
for purposes of maintaining the Register as provided in this subsection
2.1D, and Company hereby agrees that, to the extent Chase serves in such
capacity, Chase and its officers, directors, employees, agents and
affiliates shall constitute Indemnities for all purposes under
subsection 10.3.
E. Notes. Company shall execute and deliver on the Effective Date (i) to each
requesting Lender (or to Administrative Agent for that Lender) (a) a Tranche A
Term Note substantially in the form of Exhibit IV annexed hereto, to evidence
that Lender's Tranche A Term Loans in the principal amount of that Lender's
Tranche A Term Loans and with other appropriate insertions, (b) a Tranche B Term
Note substantially in the form of Exhibit V annexed hereto, to evidence that
Lender's Tranche B Term Loans in the principal amount of that Lender's Tranche B
Term Loans and with other appropriate insertions, (c) a Tranche C Term Note
substantially in the form of Exhibit VI annexed hereto, to evidence that
Lender's Tranche C Term Loans in the principal amount of that Lender's Tranche C
Term Loans and with other appropriate insertions and (d) a Revolving Note
substantially in the form of Exhibit VII annexed hereto to evidence that
Lender's Revolving Loans, in the principal amount of that Lender's Revolving
Loan Commitment and with other appropriate insertions, and (ii) to Swing Line
Lender, a Swing Line Note substantially in the form of Exhibit VIII annexed
hereto to evidence Swing Line Lender's Swing Line Loans, in the principal amount
of the Swing Line Commitment and with other appropriate insertions. The Notes
and the Obligations evidenced thereby shall be governed by, subject to and
benefit from all of the terms and conditions of this Agreement and the other
Loan Documents and shall be guaranteed and/or secured by the Collateral as
provided in the Loan Documents.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each
Term Loan and each Revolving Loan shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the Adjusted
Eurodollar Rate, as the case may be, plus the Applicable Margin. Subject to the
provisions of subsection 2.7, each Swing Line Loan shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate,
plus the Applicable Margin. The applicable basis for determining the rate of
interest with respect to any Loan shall be selected by Company initially at the
time a Notice of Borrowing is given with respect to such Loan pursuant to
subsection 2.lB. The basis for
<PAGE>
determining the interest rate with respect to any Term Loan or any Revolving
Loan may be changed from time to time pursuant to subsection 2.2D. If on any day
any Term Loan or Revolving Loan is outstanding with respect to which notice has
not been delivered to Administrative Agent in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate, plus the Applicable Margin for Base Rate Loans.
Subject to the provisions of subsections 2.2E and 2.7, the Term Loans and the
Revolving Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
Applicable Margin for Base Rate Loans; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar
Rate plus the Applicable Margin for Eurodollar Loans.
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans
shall bear interest through maturity at the sum of the Base Rate plus the
Applicable Margin with respect to Base Rate Revolving Loans.
B. Interest Periods. In connection with each Eurodollar Rate Loan, Company may,
pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one-, two-, three- or six-month period;
provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall commence
on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods applicable to a
Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided that, if any Interest Period would otherwise
expire on a day that is not a Business Day but is a day of the month
after which no further Business Day occurs in such month, such Interest
Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day
in the
<PAGE>
calendar month at the end of such Interest Period) shall, subject to
clause (iii) of this subsection 2.2B, end on the last Business Day of a
calendar month;
(v) no Interest Period with respect to any portion of the Tranche A Term
Loans shall extend beyond January 16, 2005, no interest period with
respect to any portion of the Tranche B Term Loans shall extend beyond
January 16, 2006, no interest period with respect to any portion of the
Tranche C Term Loans shall extend beyond July 16, 2006 and no Interest
Period with respect to any portion of the Revolving Loans shall extend
beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term Loans shall
extend beyond a date on which Company is required to make a scheduled
payment of principal of such Term Loans unless the sum of (a) the
aggregate principal amount of such Term Loans that are Base Rate Loans
plus (b) the aggregate principal amount of such Term Loans that are
Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the
Term Loans on such date;
(vii) no Interest Period with respect to any portion of the Revolving Loans
shall extend beyond the date on which a permanent reduction of the
Revolving Loan Commitments is scheduled to occur unless the sum of (a)
the aggregate principal amount of Revolving Loans that are Base Rate
Loans plus (b) the aggregate principal amount of Revolving Loans that
are Eurodollar Rate Loans with Interest Periods expiring on or before
such date plus (c) the excess of the Revolving Loan Commitments then in
effect over the aggregate principal amount of Revolving Loans then
outstanding equals or exceeds the permanent reduction of the Revolving
Loan Commitments that is scheduled to occur on such date;
(viii) there shall be no more than ten (10) Interest Periods outstanding at any
time; and
(ix) in the event Company fails to specify an Interest Period for any
Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E, interest on
each Loan shall be payable in arrears on and to each Interest Payment Date
applicable to that Loan, upon any prepayment of that Loan (to the extent accrued
on the amount being prepaid) and at maturity (including final maturity);
provided that in the event that any Swing Line Loans, any Revolving Loans or any
Term Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans, Revolving Loans or Term Loans through
the date of such prepayment shall be payable on the next succeeding Interest
Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity).
<PAGE>
D. Conversion or Continuation. Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part of its
outstanding Term Loans or Revolving Loans equal to $500,000 and integral
multiples of $250,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $500,000 and integral multiples of $250,000 in
excess of that amount as a Eurodollar Rate Loan; provided however that a
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Administrative
Agent no later than 12:00 Noon New York time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan), and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of; a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Potential Event of Default or Event of Default has occurred and is
continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability to Company
in acting upon any telephonic notice referred to above that Administrative Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Company or for otherwise acting in good
faith under this subsection 2.2D, and upon conversion or continuation of the
applicable basis for determining the interest rate with respect to any Loans in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected a conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of
Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate
Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after
the related Interest Rate Determination Date, and Company shall be bound to
effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. Upon the occurrence and during the continuation of
any Event of Default, the outstanding principal amount of all Loans and, to the
extent
<PAGE>
permitted by applicable law, any interest payments thereon not paid when due and
any fees and other amounts then due and payable hereunder, shall thereafter bear
interest (including post-petition interest in any proceeding under the
Bankruptcy Code, or other applicable bankruptcy or insolvency laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Revolving
Loans bearing interest at a rate determined by reference to the Base Rate);
provided that, in the case of Eurodollar Rate Loans, upon the expiration of the
Interest Period in effect at the time any such increase in interest rate is
effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and
shall thereafter bear interest payable upon demand at a rate equal to 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans that are Term Loans or Revolving Loans, as applicable. Payment
or acceptance of the increased rates of interest provided for in this subsection
2.2E is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of any Agent or Lender.
F. Computation of Interest. Interest on Loans shall be computed on the basis of
a 360-day year and for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of the making of
such Loan or the first day of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan,
the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as
the case may be, shall be included, and the date of payment of such Loan or the
expiration date of an Interest Period applicable to such Loan or, with respect
to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of
conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may
be, shall be excluded; provided that if a Loan is repaid on the same day on
which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Company agrees to pay to Administrative Agent, for
distribution to each Lender having a Revolving Loan Commitment, in proportion to
that Lender's Pro Rata Share of the Revolving Loan Commitments, commitment fees
("Commitment Fees"; each, a "Commitment Fee") for the period from and including
the Effective Date to and excluding the Revolving Loan Commitment Termination
Date equal to (i) the average of the daily excess of the Revolving Loan
Commitments over the sum of (x) the aggregate principal amount of Revolving
Loans outstanding (but not any Swing Line Loans outstanding), and (y) the Letter
of Credit Usage multiplied by (ii) the Applicable Margin for Commitment Fees.
All such Commitment Fees shall be calculated on the basis of a 360-day year and
the actual number of days elapsed and shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, commencing on
March 31, 1998, and on the Revolving Loan Commitment Termination Date.
<PAGE>
B. Other Fees. Company agrees to pay to Agents such other fees in the amounts
and at the times separately agreed upon between Company and the applicable
Agents.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments; Application of Proceeds of Collateral and
Payments under Guaranties.
A. Scheduled Payments of Term Loans and Scheduled Reductions of Revolving Loan
Commitments.
(i) Scheduled Payments of Tranche A Term Loans. Company shall make principal
payments on the Tranche A Term Loans in installments on the dates and in
the amounts set forth below:
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- --------------------------------------------------------------------------------
June 30, 1998 $2,500,000
September 30, 1998 $2,500,000
December 31, 1998 $2,500,000
- --------------------------------------------------------------------------------
March 31, 1999 $2,500,000
June 30, 1999 $4,375,000
September 30, 1999 $4,375,000
December 31, 1999 $4,375,000
- --------------------------------------------------------------------------------
March 31, 2000 $4,375,000
June 30, 2000 $6,125,000
September 30, 2000 $6,125,000
December 31, 2000 $6,125,000
- --------------------------------------------------------------------------------
March 31, 2001 $6,125,000
June 30, 2001 $6,125,000
September 30, 2001 $6,125,000
December 30, 2001 $6,125,000
- --------------------------------------------------------------------------------
March 31, 2002 $6,125,000
June 30, 2002 $6,125,000
September 30, 2002 $6,125,000
December 31, 2002 $6,125,000
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- --------------------------------------------------------------------------------
March 31, 2003 $6,890,625
June 30, 2003 $6,890,625
September 30, 2003 $6,890,625
December 31, 2003 $6,890,625
- --------------------------------------------------------------------------------
March 31, 2004 $6,890,625
June 30, 2004 $6,890,625
September 30, 2004 $6,890,625
December 31, 2004 $6,890,625
- --------------------------------------------------------------------------------
provided that the scheduled installments of principal of the Tranche A Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prep payments of the Tranche A Term Loans in accordance with
subsection 2.4C; and provided further that the final installment payable by
Company in respect of the Tranche A Term Loans shall be in an amount, if such
amount is different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Tranche A Term Loans.
Scheduled Payments of Tranche B Term Loans. Company shall make principal
payments on the Tranche B Term Loans in installments on the dates and in the
amounts set forth below:
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- --------------------------------------------------------------------------------
<S> <C>
June 30,1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $250,000
- --------------------------------------------------------------------------------
March 31, 1999 $250,000
June 30, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $250,000
- --------------------------------------------------------------------------------
March 31, 2000 $250,000
June 30, 2000 $250,000
September 30, 2000 $250,000
December 31, 2000 $250,000
- --------------------------------------------------------------------------------
March 31, 2001 $250,000
June 30, 2001 $250,000
September 30, 2001 $250,000
December 31, 2001 $250,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- --------------------------------------------------------------------------------
<S> <C>
March 31, 2002 $250,000
June 30, 2002 $250,000
September 30, 2002 $250,000
December 31, 2002 $250,000
- ------------------------------------------------------------------------------
March 31, 2003 $250,000
June 30, 2003 $250,000
September 30, 2003 $250,000
December 31, 2003 $250,000
- --------------------------------------------------------------------------------
March 31, 2004 $18,031,250
June 30, 2004 $18,031,250
September 30, 2004 $18,031,250
December 31, 2004 $18,031,250
- --------------------------------------------------------------------------------
March 31, 2005 $18,031,250
June 30, 2005 $18,031,250
September 30, 2005 $18,031,250
December 31, 2005 $18,031,250
- --------------------------------------------------------------------------------
</TABLE>
; provided that the scheduled installments of principal of the Tranche B Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Tranche B Term Loans in accordance with subsection
2.4C; and provided further, that the final installment payable by Company in
respect of the Tranche B Term Loans shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Tranche B Term Loans.
(iii) Scheduled Payments of Tranche C Term Loans. Company shall make principal
payments on the Tranche C Term Loans in installments on the dates and in the
amounts set forth below:
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- -------------------------------------------------------------------------------
<S> <C>
June 30,1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $250,000
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULED REPAYMENT
DATE OF TERM LOANS
- ---------------------------------------------------------------------------
June 30, 1999 $250,000
March 31, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $250,000
- -------------------------------------------------------------------------------
March 31, 2000 $250,000
June 30, 2000 $250,000
September 30, 2000 $250,000
December 31, 2000 $250,000
- -------------------------------------------------------------------------------
March 31, 2001 $250,000
June 30, 2001 $250,000
September 30, 2001 $250,000
December 31, 2001 $250,000
- -------------------------------------------------------------------------------
March 31, 2002 $250,000
June 30, 2002 $250,000
September 30, 2002 $250,000
December 31, 2002 $250,000
- -----------------------------------------------------------------------------
March 31, 2003 $250,000
June 30, 2003 $250,000
September 30, 2003 $250,000
December 31, 2003 $250,000
- -------------------------------------------------------------------------------
March 31, 2004 $18,031,250
June 30, 2004 $18,031,250
September 30, 2004 $18,031,250
December 31, 2004 $18,031,250
- -------------------------------------------------------------------------------
March 31, 2005 $23,875,000
June 30, 2005 $23,875,000
September 30, 2005 $23,875,000
December 31, 2005 $23,875,000
- ------------------------------------------------------------------------------
March 31, 2006 $23,875,000
June 30, 2006 $23,875,000
- -------------------------------------------------------------------------------
; provided that the scheduled installments of principal of the Tranche C Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Tranche C Term Loans in accordance with subsection
2.4C; and provided further, that the final installment payable by Company in
respect of the Tranche C Term Loans shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Tranche C Term Loans.
<PAGE>
(iv) Scheduled Reductions of Revolving Loan Commitments. Except as set forth
in the following proviso, the Revolving Loan Commitments shall be
permanently reduced on the date and in the amount set forth below;
DATE SCHEDULED REDUCTION
OF REVOLVING LOAN COMMITMENTS
- --------------------------------------------------------------------------------
January 16, 2005 $75,000,000
- --------------------------------------------------------------------------------
; and provided further that the scheduled reductions of the Revolving Loan
Commitments set forth above shall be reduced in connection with any voluntary or
mandatory reductions of the Revolving Loan Commitments in accordance with
subsection 2.4C.
B. Prepayments and Voluntary Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Company may, upon written or telephonic notice to
Administrative Agent on or prior to 12:00 Noon (New York time) on the
date of prepayment, which notice, if telephonic, shall be promptly
confirmed in writing, at any time and from time to time prepay, without
premium or penalty, any Swing Line Loan on any Business Day in whole or
in part in an aggregate minimum amount of $250,000 and integral
multiples of $100,000 in excess of that amount. In addition, so long as
no Swing Line Loans are then outstanding, Company may, upon not less
than one Business Day's prior written or telephonic notice, in the case
of Base Rate Loans, and three Business Days' prior written or telephonic
notice, in the case of Eurodollar Rate Loans, in each case confirmed in
writing to Administrative Agent (which notice Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay, without premium or penalty, the Loans
other than Swing Line Loans on any Business Day in whole or in part in
an aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount; provided, however that prepayment of
a Eurodollar Rate Loan on any day other than the expiration of the
Interest Period applicable thereto shall be subject to compliance with
subsection 2.6D. Notice of prepayment having been given as aforesaid,
the Loans shall become due and payable on the prepayment date specified
in such notice and in the aggregate principal amount specified therein.
Any voluntary prepayments pursuant to this subsection 2.4B(i) shall be
applied as specified in subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon
not less than three Business Days' prior written or telephonic notice
confirmed in writing to Administrative Agent (which notice
Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate
in whole or permanently reduce in part, without premium or penalty, the
Revolving Loan Commitments in an amount up to the amount by which the
Revolving Loan Commitments exceed the Total Utilization of Revolving
Loan Commitments at the time of such proposed
<PAGE>
termination or reduction; provided that any such partial reduction of
the Revolving Loan Commitments shall be in an aggregate minimum amount
of $500,000 and integral multiples of $250,000 in excess of that amount.
Company's notice to Administrative Agent shall designate the date (which
shall be a Business Day) of such termination or reduction and the amount
of any partial reduction, and such termination or reduction of the
Revolving Loan Commitments shall be effective on the date specified in
such notice and shall reduce the Revolving Loan Commitment of each
Lender proportionately to its Pro Rata Share. Any such voluntary
reduction of the Revolving Loan Commitments shall be applied as
specified in subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
Commitments.
The Loans shall be prepaid and the Revolving Loan Commitments shall be reduced
in the manner provided in subsection 2.4C upon the occurrence of the following
circumstances:
(a) Prepayments and Reductions from Asset Sales No later than the second
Business Day following the date of receipt by Company or any of its
Subsidiaries of the Net Cash Proceeds of any Asset Sale (other than any
portion of such Net Cash Proceeds that is reinvested (or scheduled for
reinvestment) in assets of the general type used in the business of Company
and its Subsidiaries within 360 days from the date of receipt of such Net
Cash Proceeds), Company shall prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in an aggregate amount equal to such Net Cash
Proceeds; provided however that Company may not reinvest (or schedule for
reinvestment) Net Cash Proceeds upon the occurrence and during the
continuation of an Event of Default. Company shall, no later than 360 days
after receipt of any such Net Cash Proceeds that have not theretofore been
applied to the Obligations, make an additional prepayment of the Loans
(and/or the Revolving Loan Commitments shall be reduced) in the full amount
of all such proceeds that have not therefore been so reinvested.
Concurrently with any prepayment of the Loans and/or reduction of the
Commitments pursuant to this subsection 2.4B(iii)(a), Company shall deliver
to Administrative Agent an Officer's Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from the
gross sales price thereof. In the event that Company shall, at any time
after receipt of Net Cash Proceeds of any Asset Sale requiring a prepayment
or a reduction of the Revolving Loan Commitments pursuant to this
subsection 2.4B(iii)(a), determine that the prepayments and/or reductions
of the Revolving Loan Commitments previously made in respect of such Asset
Sale were in an aggregate amount less than that required by the terms of
this subsection 2.4B(iii)(a), Company shall promptly cause to be made an
additional prepayment of the Loans (and/or reduction in the Revolving Loan
Commitments) in an amount equal to the amount of any such deficit, and
Company shall concurrently therewith deliver to Administrative Agent an
Officer's Certificate demonstrating the derivation of the additional Net
Cash Proceeds resulting in such deficit.
<PAGE>
(b) Prepayments and Reductions Due to Issuance of Debt. On or prior to the
first Business Day after receipt by Company or any of its Subsidiaries of
any proceeds of any Indebtedness (other than the Loans and any other
Indebtedness permitted under subsection 7.1(i), (ii), (iii), (iv), (v),
(vii), (viii) or (ix)), Company shall prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) in an amount equal to the
amount of such proceeds; provided however, that such proceeds from
Indebtedness permitted under subsection 7.1 (vi) shall not be applied to
prepay Loans pursuant to this subsection if and to the extent such proceeds
are applied by Company to repay the Indebtedness with respect to the
Subordinated Notes; and provided further that payment or acceptance of the
amounts provided for in this subsection 2.4B(iii)(b) shall not constitute a
waiver of any Event of Default resulting from the incurrence of such
Indebtedness or otherwise prejudice any fights or remedies of Agents or
Lenders.
(c) Prepayments and Reductions Due to Issuance of Equity Securities. On or
prior to the first Business Day after receipt by Holdings or Company or any
of its Subsidiaries of any Equity Proceeds after the Effective Date,
Company shall prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) in an amount equal to such Equity Proceeds; provided however,
that such Equity Proceeds shall not be applied to prepay Loans pursuant to
this subsection if and to the extent such Equity Proceeds were derived (x)
directly or indirectly from a sale of Securities to any of the MDC
Entities, Dartford, Fenway, the Management Investors and their respective
Affiliates, or to employees or directors of Holdings and its Subsidiaries
pursuant to any employee stock option or stock purchase plan or other
employee benefit plan, and (y) from sales of Securities to management
officers and directors after the Effective Date to the extent the
consideration paid therefor does not exceed $1,000,000; and provided
further however that at least 50% of Equity Proceeds from an initial public
offering of Holdings Common Stock shall be applied to prepay the Loans
and/or reduce the Revolving Loan Commitments, except that if the Senior
Leverage Ratio is less than 3.25:1.00 after giving effect to such initial
public offering and the anticipated prepayment of the Loans, then less than
50% of such Equity Proceeds may be applied to prepay the Loans; provided
further, however that in any event at least $25,000,000 of such Equity
Proceeds must be applied to prepay the Loans and/or reduce the Revolving
Loan Commitments and not more than $70,000,000 of such Equity Proceeds
shall be applied to repay or prepay Subordinated Indebtedness. Holdings
shall contribute to Company any Equity Proceeds received by Holdings as are
necessary to enable Company to comply with this subsection.
(d) Prepayments and Reductions from Insurance and Condemnation Proceeds. No
later than the second Business Day following the date of receipt by Company
or any of its Subsidiaries of any cash payments under any of the casualty
insurance policies covering damage to or loss of property maintained
pursuant to subsection 6.4 resulting from damage to or loss of all or any
portion of the Collateral or any other tangible asset (net of actual and
documented reasonable costs incurred by Company or any of its Subsidiaries
in connection with adjustment and settlement
<PAGE>
thereof; "Insurance Proceeds") or any proceeds resulting from the taking of
assets by the power of eminent domain, condemnation or otherwise (net of
actual and documented reasonable costs incurred by Company or any of its
Subsidiaries in connection with adjustment and settlement thereof;
"Condemnation Proceeds") (other than, if no Event of Default shall have
occurred and be continuing or shall be caused thereby, any portion of any
such proceeds that is reinvested (or scheduled for reinvestment) in assets
of the general type used in the business of Company and its Subsidiaries
within 360 days from the date of receipt of such proceeds), Company shall
prepay the Loans (and/or the Revolving Loan Commitments shall be reduced)
in the amount of such proceeds not so reinvested (or scheduled for such
reinvestment). Company shall, no later than 360 days after receipt of any
such Insurance Proceeds or Condemnation Proceeds that have not theretofore
been applied to the Obligations, make an additional prepayment of the Loans
(and/or the Revolving Loan Commitments shall be reduced) in the full amount
of all such proceeds that have not therefore been reinvested in such
assets.
(e) Prepayments and Reductions from Consolidated Excess Cash Flow. In the event
that there shall be Consolidated Excess Cash Flow for any Fiscal Year
(commencing with the Fiscal Year ending in December 1998), Company shall,
no later than 100 days after the end of such Fiscal Year, prepay the Loans
(and/or the Revolving Loan Commitments shall be reduced) in an aggregate
amount equal to 50% of such Consolidated Excess Cash Flow for such Fiscal
Year; provided however, that if the Leverage Ratio is less than or equal to
4.00:1.00, then such prepayment of the Loans and/or reduction of the
Revolving Loan Commitments shall be in an aggregate amount equal to 25% of
such Consolidated Excess Cash Flow for such Fiscal Year.
(f) Prepayments Due to Reductions or Restrictions of Revolving Loan
Commitments. Company shall prepay the Swing Line Loans and/or the Revolving
Loans from time to time to the extent necessary so that (y) the Total
Utilization of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect, and (z) the aggregate principal
amount of all outstanding Swing Line Loans shall not at any time exceed the
Swing Line Loan Commitment then in effect. All Swing Line Loans shall be
prepaid in full prior to the prepayment of any Revolving Loans pursuant to
this subsection 2.4B(iii)(f).
C. Application of Prepayments and Unscheduled
Reductions of Revolving Loan Commitments.
(i) Application of Voluntary Prepayments by Type of Loans. Any voluntary
prepayments pursuant to subsection 2.4B(i) shall be applied: first to
repay outstanding Swing Line Loans to the full extent thereof; second to
repay outstanding Revolving Loans to the full extent thereof; and third
to repay outstanding Tranche A Term Loans, Tranche B Term Loans and
Tranche C Term Loans pro rata and shall be applied to the remaining
installments thereof on a pro rata basis to the full extent thereof.
<PAGE>
(ii) Application of Mandatory Prepayments by Type of Loans. Any amount (the
"Applied Amount") required to be applied as a mandatory prepayment of
the Loans and/or a reduction of the Revolving Loan Commitments pursuant
to subsections 2.4B(iii)(a)-(e) shall be applied: first to prepay the
Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans pro
rata and shall be applied to the remaining installments thereof on a pro
rata basis to the full extent thereof, second to the extent of any
remaining portion of the Applied Amount, to prepay the Swing Line Loans
to the full extent thereof and to permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, third to the extent of any
remaining portion of the Applied Amount, to prepay the Revolving Loans
to the full extent thereof and to further permanently reduce the
Revolving Loan Commitments by the amount of such prepayment, and fourth
to the extent of any remaining portion of the Applied Amount, to further
permanently reduce the Revolving Loan Commitments to the full extent
thereof; provided however that so long as any Tranche A Term Loans are
outstanding, each Lender of Tranche B Term Loans and Tranche C Term
Loans shall have the right to refuse all or any portion of any mandatory
prepayment allocable to it, and the amount so refused shall be applied
to prepay the Tranche A Term Loans. Notwithstanding the foregoing or
anything herein to the contrary, no portion of the proceeds of
Indebtedness permitted under subsection 7.1 (vi) which are applied to
prepay the Loans shall be applied to permanently reduce the Revolving
Loan Commitments.
(iii) Application of Prepayments of Term Loans to the Scheduled Installments
of Principal Thereof. Any prepayments of the Tranche A Term Loans,
Tranche B Term Loans or Tranche C Term Loans pursuant to subsection
2.4B(i) or 2.4B(iii) shall be applied to prepay the Tranche A Term
Loans, Tranche B Term Loans or Tranche C Term Loans on a pro rata basis
in accordance with the outstanding principal amounts thereof. Any
mandatory prepayments applied to the Tranche A Term Loans, Tranche B
Term Loans or Tranche C Term Loans pursuant to this subsection shall be
applied on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) to each scheduled installment of
principal of the Tranche A Term Loans, Tranche B Term Loans or Tranche C
Term Loans set forth in subsection 2.4A(i) that is unpaid at the time of
such prepayment.
(iv) Application of Prepayments to Base Rate Loans and Eurodollar Rate Loans.
Considering Term Loans and Revolving Loans being prepaid separately, any
prepayment thereof shall be applied first to Base Rate Loans to the full
extent thereof before application to Eurodollar Rate Loans, in each case
in a manner which minimizes the amount of any payments required to be
made by Company pursuant to subsection 2.6D.
(v) Application of Unscheduled Reductions of Revolving Loan Commitments. Any
voluntary or mandatory reduction of the Revolving Loan Commitments
pursuant to subsection 2.4B(ii) or 2.4B(iii) shall be applied to reduce
the scheduled reductions of the Revolving Loan Commitments set forth in
subsection 2.4A(ii) in reverse chronological order.
<PAGE>
D. Application of Proceeds of
Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. Except as provided in subsection
2.4B(iii)(a) with respect to prepayments from Net Cash Proceeds of Asset
Sales, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of
the Collateral under any Collateral Document may, in the discretion of
Administrative Agent, be held by Administrative Agent as Collateral for,
and/or (then or at any time thereafter) applied in full or in part by
Administrative Agent against, the applicable Secured Obligations (as
defined in such Collateral Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale, collection or other
realization, including without limitation reasonable compensation to
Administrative Agent and its agents and counsel, and all other reasonable
expenses, liabilities and advances made or incurred by Administrative Agent
in connection therewith, and all amounts for which Administrative Agent is
entitled to indemnification under such Collateral Document and all advances
made by Administrative Agent thereunder for the account of the applicable
Loan Party, and to the payment of all reasonable costs and expenses paid or
incurred by Administrative Agent in connection with the exercise of any
right or remedy under such Collateral Document, all in accordance with the
terms of this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the payment of
all other such Secured Obligations for the ratable benefit of the holders
thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the payment to or
upon the order of such Loan Party or to whosoever may be lawfully entitled
to receive the same or as a court of competent jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received by
Administrative Agent under any Guaranty shall be applied promptly from
time to time by Administrative Agent in the following order of priority:
(a) To the payment of the reasonable costs and expenses of any collection or
other realization under such Guaranty, including without limitation
reasonable compensation to Administrative Agent and its agents and counsel,
and all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with the
terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess of such payments, to the payment of
all other Guarantied Obligations (as defined in such Guaranty) for the
ratable benefit of the holders thereof; and
<PAGE>
(c) thereafter, to the extent of any excess of such payments, to the payment to
Holdings or the applicable Subsidiary Guarantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of principal,
interest, fees and other Obligations hereunder and under the Notes shall
be made in same day funds and without defense, setoff or counterclaim,
free of any restriction or condition, and delivered to Administrative
Agent not later than 12:00 Noon New York time) on the date due at the
Funding and Payment Office for the account of Lenders; funds received by
Administrative Agent after that time on such due date shall be deemed to
have been paid by Company on the next succeeding Business Day. Company
hereby authorizes Administrative Agent to charge its accounts with such
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts
for that purpose).
(ii) Application of Payments to Principal and Interest. Except as provided in
subsection 2.2C, all payments in respect of the principal amount of any
Loan shall include payment of accrued interest on the principal amount
being repaid or prepaid, and all such payments (and in any event any
payments made in respect of any Loan on a date when interest is due and
payable with respect to such Loan) shall be applied to the payment of
interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest payments
shall be apportioned among all outstanding Loans to which such payments
relate, in each case proportionately to Lenders' respective Pro Rata
Shares. Administrative Agent shall promptly distribute to each Lender,
at its applicable Lending Office specified on Schedule 2.1 or at such
other address as such Lender may request, its Pro Rata Share of all such
payments received by Administrative Agent and the commitment fees of
such Lender when received by Administrative Agent pursuant to subsection
2.3. Notwithstanding the foregoing provisions of this subsection
2.4E(iii) if, pursuant to the provisions of subsection 2.6C, any Notice
of Conversion/Continuation is withdrawn as to any Affected Lender or if
any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share
of any Eurodollar Rate Loans, Administrative Agent shall give effect
thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
(v) Notation of Payment. Each Lender agrees that before disposing of any
Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments
<PAGE>
previously made thereon and of the date to which interest thereon has been
paid; provided that the failure to make (or any error in the making of) a
notation of any Loan made under such Note shall not limit or otherwise
affect the obligations of Company hereunder or under such Note with respect
to any Loan or any payments of principal or interest on such Note.
2.5 Use of Proceeds.
A. Term Loans. The proceeds of the Term Loans, together with the proceeds of
the Revolving Loans made on the Effective Date and the proceeds of the equity
capitalization of Company described in subsection 4.lC, shall be applied to (i)
finance the Duncan Hines Acquisition, (ii) refinance indebtedness under the
Existing Credit Agreement and (iii) pay Transaction Costs.
B. Revolving Loans; Swing Line Loans. The proceeds of the Revolving Loans and
any Swing Line Loans shall be applied by Company as provided in subsection 2.5A
and to finance expenditures which are included in the definition of Consolidated
Capital Expenditures and for working capital and general corporate purposes,
including acquisitions in accordance with subsection 7.7(vii), and which may
include the making of intercompany loans to any of Company's Wholly Owned
Subsidiaries, in accordance with subsection 7.1 (iv), for their own working
capital and general corporate purposes.
C. Compliance With Laws. Company hereby undertakes that no portion of the
proceeds of any Loans or other extensions of credit under this Agreement shall
be used by any Loan Party in any manner which would be illegal under, or which
would cause the invalidity or unenforceability (in each case in whole or in
part) of any Loan Document under, any applicable law.
D. Margin Regulations. Without limiting the generality of subsection 2.5C, no
portion of the proceeds of any borrowing under this Agreement shall be used by
Company or any of its Subsidiaries in any manner that might cause the borrowing
or the application of such proceeds to violate Regulation G, Regulation U,
Regulation T or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board or to violate the Exchange Act, in
each case as in effect on the date or dates of such borrowing and such use of
proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
11:00 A. M. New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for
<PAGE>
which an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Company and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have reasonably determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances arising after the date of this Agreement affecting the
London interbank market, adequate and fair means do not exist for ascertaining
the interest rate applicable to such Loans on the basis provided for in the
definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date
give notice (by telecopy or by telephone confirmed in writing) to Company and
each Lender of such determination, whereupon (i) no Loans may be made as, or
converted to, Eurodollar Rate Loans, until such time as Administrative Agent
notifies Company and Lenders that the circumstances giving rise to such notice
no longer exist (such notification not to be unreasonably withheld or delayed)
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that
on any date any Lender shall have reasonably determined (which determination
shall be final and conclusive and binding upon all parties hereto but shall be
made only after consultation with Company and Administrative Agent) that the
making, maintaining or continuation of its Eurodollar Rate Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market,
then, and in any such event, such Lender shall be an "Affected Lender" and it
shall on that day give notice (by telecopy or by telephone confirmed in writing)
to Company and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to, Eurodollar Rate Loans, shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of
<PAGE>
Borrowing or a Notice of Conversion/Continuation, Company shall have the option,
subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by giving
notice (by telecopy or by telephone confirmed in writing) to Administrative
Agent of such rescission on the date on which the Affected Lender gives notice
of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods. Company
shall compensate each Lender, upon written request by that Lender (which request
shall set forth the basis for requesting such amounts), for all reasonable
losses, expenses and liabilities (including, without limitation, any interest
paid by that Lender to lenders of funds borrowed by it to make or carry its
Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or reemployment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment
(including without limitation any prepayment pursuant to subsection 2.4B(i)) or
conversion of any of its Eurodollar Rate Loans occurs on a date that is not the
last day of an Interest Period applicable to that Loan, (iii) if any prepayment
of any of its Eurodollar Rate Loans is not made on any date specified in a
notice of prepayment given by Company, or (iv) as a consequence of any other
default by Company in the repayment of its Eurodollar Rate Loans when required
by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer
Eurodollar Rate Loans at, to, or for the account of any of its branch offices or
the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all
amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A
shall be made as though that Lender had actually funded each of its relevant
Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing
interest at the rate obtained pursuant to clause (i) of the definition of
Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however that each Lender may fund each of its Eurodollar Rate Loans in
any manner it sees fit and the foregoing assumptions shall be utilized only for
the purposes of calculating amounts payable under this subsection 2.6 and under
subsection 2.7A.
<PAGE>
G. Eurodollar Rate Loans After Default. After the occurrence of and during the
continuation of a Potential Event of Default or an Event of Default, (i) Company
may not elect to have a Loan be made or maintained as, or converted to, a
Eurodollar Rate Loan after the expiration of any Interest Period then in effect
for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice
of Borrowing or Notice of Conversion/Continuation given by Company with respect
to a requested borrowing or conversion/continuation that has not yet occurred
shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions of
subsection 2.7B (which shall be controlling with respect to the matters covered
thereby), in the event that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasigovernmental authority (whether or not having the force of law):
(i) results in a change in the basis of taxation of such Lender (or its
applicable lending office) (other than a change with respect to any Tax
on the overall net income of such Lender) with respect to this Agreement
or any of its obligations hereunder or any payments to such Lender (or
its applicable lending office) of principal, interest, fees or any other
amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including, without
limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in
or for the account of, or advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Lender
(other than any such reserve or other requirements with respect to
Eurodollar Rate Loans that are reflected in the definition of Adjusted
Eurodollar Rate; or
(iii) imposes any other condition (other than with respect to a Tax matter)
on or affecting such Lender (or its applicable lending office) or its
obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Lender shall
promptly notify Company and Administrative Agent thereof and Company shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender
<PAGE>
shall reasonably determine) as may be necessary to compensate such Lender for
any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be prima facie evidence of such additional
amounts.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under this
Agreement and the other Loan Documents shall (except to the extent required
by law) be paid free and clear of; and without any deduction or withholding
on account of, any Tax (other than a Tax on the overall net income of any
Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United
States of America or any other jurisdiction from which a payment is made by
or on behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person is required by law to
make any deduction or withholding on account of any such Tax from any sum
paid or payable by Company to Administrative Agent or any Lender under any
of the Loan Documents:
(a) Company shall notify Administrative Agent of any such requirement or any
change in any such requirement as soon as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on which penalties attach
thereto, such payment to be made (if the liability to pay is imposed on
Company) for its own account or (if that liability is imposed on
Administrative Agent or such Lender, as the case may be) on behalf of and
in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant deduction,
withholding or payment is required shall be increased to the extent
necessary to ensure that, after the making of that deduction, withholding
or payment, Administrative Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would have received had
no such deduction, withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is required by law to
make any deduction or withholding, and within 30 days after the due date of
payment of any Tax which it is required by clause (b) above to pay, Company
shall deliver to Administrative Agent evidence of such deduction,
withholding or payment and of the remittance thereof to the relevant taxing
or other authority;
<PAGE>
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that in
effect at the date of this Agreement or at the date of such Assignment
Agreement, as the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction other than
the United States or any state or other political subdivision thereof (for
purposes of this subsection 2.7B(iii), a "Non-US Lender") shall deliver to
Administrative Agent for transmission to Company, on or prior to the
Closing Date (in the case of each Existing Lender), on or prior to the
Effective Date (in the case of each New Lender) or on or prior to the date
of the Assignment Agreement pursuant to which it becomes a Lender (in the
case of each other Lender), and at such other times as may be necessary in
the determination of Company or Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies of Internal
Revenue Service Form 1001 or 4224 (or any successor forms), accurately
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal income tax
with respect to any payments to such Lender of principal, interest, fees or
other amounts payable under any of the Loan Documents or (2) if such Lender
is not a "bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 (or any successor forms) pursuant to clause (1) above, a
Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8 (or any successor form), properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal income tax
with respect to any payments to such Lender of interest payable under any
of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or other evidence
with respect to United States federal income tax withholding matters
pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to time after
the initial delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances renders such
forms, certificates or other evidence obsolete or inaccurate in any
material respect, such Lender shall (1) deliver to Administrative Agent for
transmission to Company two new original copies of Internal Revenue Service
Form 1001 or 4224 (or any successor forms), or a Certificate re Non-Bank
Status and two original copies of Internal Revenue Service Form W-8 (or any
<PAGE>
successor form), as the case may be, accurately completed and duly executed
by such Lender, together with any other certificate or statement of
exemption required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal income tax
with respect to payments to such Lender under the Loan Documents or (2)
immediately notify Administrative Agent and Company of its inability to
deliver any such forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount to any Non-US
Lender under clause (c) of subsection 2.7B(ii) in respect of deductions or
withholdings of United States federal income taxes if such Lender shall
have failed to satisfy the requirements of subsection 2.7B(iii)(a) or
2.7B(iii)(b); provided that if such Lender shall have satisfied such
requirements on the Closing Date (in the case of each Existing Lender), on
the Effective Date (in the case of each New Lender) or on the date of the
Assignment Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection 2.7B(iii)(c) shall relieve
Company of its obligation to pay any additional amounts pursuant to clause
(c) of subsection 2.7B(ii) in the event that, as a result of any change in
any applicable law, treaty or governmental rule, regulation or order, or
any change in the interpretation, administration or application thereof
such Lender is no longer properly entitled to deliver forms, certificates
or other evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described in subsection
2.7B(iii)(a) or 2.7B(iii)(b).
C. Capital Adequacy Adjustment. If any Lender shall have determined that the
adoption, effectiveness, phase-in or applicability after the date hereof of any
law, rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or in the interpretation or administration thereof by the
National Association of Insurance Commissioners, any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by any Lender (or its applicable lending
office) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of the National Association of
Insurance Commissioners, any such governmental authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender or any corporation controlling such Lender as a
consequence of or with reference to, such Lender's Loans or Commitments or
Letters of Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that which such
Lender reasonably determines such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in, applicability,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time to
time, within fifteen Business Days after receipt by Company from such Lender of
the statement referred to in the next sentence, Company shall pay to such Lender
such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts,
<PAGE>
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.
D. Substitute Lenders. In the event Company is required under the provisions of
this subsection 2.7 to make payments in a material amount to any Lender or in
the event any Lender fails to lend to Company in accordance with this Agreement,
Company may, so long as no Event of Default or Potential Event of Default shall
have occurred and be continuing, elect to terminate such Lender as a party to
this Agreement; provided that, concurrently with such termination, (i) Company
shall pay that Lender all principal interest and fees and other amounts
(including without limitation amounts, if any, owed under this subsection 2.7)
due to be paid to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
Administrative Agent shall agree, as of such date, to become a Lender for all
purposes under this Agreement (whether by assignment or amendment) and to assume
all obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of Administrative
Agent to evidence the substitution of such Lender shall have been received and
approved by Administrative Agent as of such date.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable after the
officer of such Lender or Issuing Lender responsible for administering the Loans
or Letters of Credit of such Lender or Issuing Lender, as the case may be,
becomes aware of the occurrence of an event or the existence of a condition that
would cause such Lender to become an Affected Lender or that would entitle such
Lender or Issuing Lender to receive payments under subsection 2.7 or subsection
3.6, it will, to the extent not inconsistent with the internal policies of such
Lender or Issuing Lender and any applicable legal or regulatory restrictions,
use reasonable efforts (i) to make, issue, fund or maintain the Commitments of
such Lender or the affected Loans or Letters of Credit of such Lender or Issuing
Lender through another lending or letter of credit office of such Lender or
Issuing Lender, or (ii) take such other measures as such Lender or Issuing
Lender may deem reasonable, if as a result thereof the circumstances which would
cause such Lender to be an Affected Lender would cease to exist or the
additional amounts which would otherwise be required to be paid to such Lender
or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office. A certificate
as to the amount of any such expenses payable by Company pursuant to this
subsection 2.8 (setting forth in reasonable
<PAGE>
detail the basis for requesting such amount) submitted by such Lender or Issuing
Lender to Company (with a copy to Administrative Agent) shall be conclusive
absent manifest error.
SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. In addition to Company requesting that Lenders make
Revolving Loans pursuant to subsection 2.1A(iv), and that Swing Line Lender make
Swing Line Loans pursuant to subsection 2. 1A(v), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Effective Date to but excluding the Revolving Loan
Commitment Termination Date, that one or more Lenders issue Letters of Credit
for the account of Company for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, any one or more Lenders may, but (except
as provided in subsection 3.1B(ii)) shall not be obligated to, issue such
Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
shall issue):
(i) any Letter of Credit if, after giving effect to such issuance, the Total
Utilization of Revolving Loan Commitments would exceed the Revolving
Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance, the
Letter of Credit Usage would exceed $7,500,000;
(iii) any Standby Letter of Credit having an expiration date later than the
earlier of (a) the Revolving Loan Commitment Termination Date and (b)
the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b)
shall not prevent any Issuing Lender from agreeing that a Standby Letter
of Credit will automatically be extended for one or more successive
periods not to exceed one year each unless such Issuing Lender elects
not to extend for any such additional period; provided further that,
unless Requisite Lenders otherwise consent, such Issuing Lender shall
give notice that it will not extend such Standby Letter of Credit if it
has knowledge that an Event of Default has occurred and is continuing on
the last day on which such Issuing Lender may give notice to the
beneficiary that it will not extend such Standby Letter of Credit;
(iv) any Commercial Letter of Credit (a) having an expiration date later than
the earlier of (X) 30 days prior to the Revolving Loan Commitment
Termination Date and (Y) the date which is 180 days from the date of
issuance of such Commercial Letter of Credit or (b) that is otherwise
unacceptable to the applicable Issuing Lender in its reasonable
discretion;
<PAGE>
(v) any Letter of Credit denominated in a currency other than Dollars; or
(vi) any Letter of Credit during any period when a Lender Default exists,
unless each Issuing Lender has entered into arrangements satisfactory to
it and Company to eliminate such Issuing Lender's risk with respect to
the Defaulting Lender, including by cash collateralizing such Defaulting
Lender's Pro Rata Share of the Letter of Credit Usage (after giving
effect to the issuance of the proposed Letter of Credit).
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance of a Letter of
Credit, it shall deliver to Administrative Agent, at the Funding and
Payment Office, a Notice of Issuance of Letter of Credit no later than
12:00 Noon New York time) at least five Business Days, or such shorter
period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance. The Notice of
Issuance of Letter of Credit shall specify (a) the proposed date of
issuance (which shall be a Business Day), (b) the face amount of or
maximum aggregate liability under, as applicable, the Letter of Credit,
(c) the expiration date of the Letter of Credit, (d) the name and
address of the beneficiary, and (e) the verbatim text of the proposed
Letter of Credit or the proposed terms and conditions thereof, including
a precise description of any documents and the verbatim text of any
certificates to be presented by the beneficiary which, if presented by
the beneficiary prior to the expiration date of the Letter of Credit,
would require the Issuing Lender to make payment under the Letter of
Credit; provided that the Issuing Lender, in its reasonable discretion,
may require changes in the text of the proposed Letter of Credit or any
such documents or certificates; provided further that no Letter of
Credit shall require payment against a conforming draft or other request
for payment to be made thereunder on the same Business Day (under the
laws of the jurisdiction in which the office of the Issuing Lender to
which such draft or other request for payment is required to be
presented is located) that such draft or other request for payment is
presented if such presentation is made after 10:00 A.M. (in the time
zone of such office of the Issuing Lender) on such Business Day.
Company shall notify the applicable Issuing Lender (and Administrative Agent, if
Administrative Agent is not such Issuing Lender) prior to the issuance of any
Letter of Credit in the event that any of the matters to which Company is
required to certify in the applicable Notice of Issuance of Letter of Credit is
no longer true and correct as of the proposed date of issuance of such Letter of
Credit, and upon the issuance of any Letter of Credit, Company shall be deemed
to have recertified, as of the date of such issuance, as to the matters to which
Company is required to certify in the applicable Notice of Issuance of Letter of
Credit.
(ii) Determination of Issuing Lender. Upon receipt by Administrative Agent of
a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i)
requesting the issuance of a Letter of Credit, in the event
Administrative Agent elects to issue such Letter of Credit,
Administrative Agent shall promptly so notify Company, and such
Administrative Agent shall
<PAGE>
be the Issuing Lender with respect thereto.
In the event that Administrative Agent, in its sole discretion, elects
not to issue such Letter of Credit, Administrative Agent shall promptly
so notify Company, whereupon Company may request any other Lender to
issue such Letter of Credit by delivering to such Lender a copy of the
applicable Notice of Issuance of Letter of Credit. Any Lender so
requested to issue such Letter of Credit shall promptly notify Company
and Administrative Agent whether or not, in its sole discretion, it has
elected to issue such Letter of Credit, and any such Lender which so
elects to issue such Letter of Credit shall be the Issuing Lender with
respect thereto. In the event that all other Lenders shall have declined
to issue such Letter of Credit, notwithstanding the prior election of
Administrative Agent not to issue such Letter of Credit, Administrative
Agent shall be obligated to issue such Letter of Credit and shall be the
Issuing Lender with respect thereto, notwithstanding the fact that the
sum of the Letter of Credit Usage with respect to such Letter of Credit
and with respect to all other Letters of Credit issued by Administrative
when aggregated with Administrative Agent's outstanding Revolving Loans
and Swing Line Loans, may exceed Administrative Agent's Revolving Loan
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in accordance
with subsection 10.6) of the conditions set forth in subsection 4.3, the
Issuing Lender shall issue the requested Letter of Credit in accordance
with the Issuing Lender's standard operating procedures (any such
issuance by Administrative Agent being effected through the Funding and
Payment Office), and upon its issuance of such Letter of Credit the
Issuing Lender shall promptly notify Administrative Agent and each
Lender of such issuance, which notice shall be accompanied by a copy of
such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end of each calendar
quarter ending after the Closing Date, so long as any Letter of Credit
shall have been outstanding during such calendar quarter, each Issuing
Lender shall deliver to Administrative Agent and Administrative Agent
shall deliver to each Lender a report setting forth for such calendar
quarter the daily maximum amount available to be drawn under the Letters
of Credit that were outstanding during such calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit. Immediately upon
the issuance of each Letter of Credit, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Issuing Lender a participation in such Letter of Credit and any
drawings honored or payments made thereunder in an amount equal to such Lender's
Pro Rata Share (with respect to the Revolving Loan Commitments) of the maximum
amount which is or at any time may become available to be drawn or required to
be paid thereunder.
3.2 Letter of Credit Fees.
Company agrees to pay the following amounts to each Issuing Lender with respect
to Letters of Credit issued by it for the account of Company:
<PAGE>
(i) with respect to each Letter of Credit, (a) a fronting fee equal to 1/4 of
1% per annum of the daily maximum amount available to be drawn under such
Letter of Credit and (b) a Letter of Credit fee equal to the product of (x)
the Applicable Margin with respect to Eurodollar Rate Revolving Loans and
(b) the daily maximum amount available to be drawn under such Letter of
Credit, in each case payable in arrears on and to each March 31, June 30,
September 30 and December 31 of each year, commencing on March 31, 1998,
and computed on the basis of a 360-day year for the actual number of days
elapsed; and
(ii) with respect to the issuance, amendment or transfer of each Letter of
Credit and each drawing made thereunder (without duplication of the fees
payable under clause (i) above), documentary and processing charges in
accordance with such Issuing Lender's standard schedule for such charges in
effect at the time of such issuance, amendment, transfer or drawing, as the
case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Lender shall distribute to each
other Lender its Pro Rata Share of such amount.
3.3 Drawings and Payments and Reimbursement of Amounts Paid
Under Letters of Credit.
A. Responsibility of Issuing Lender With Respect to Requests For Drawings and
Payments. In determining whether to honor any drawing or request for payment
under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall
be responsible only to determine that the documents and certificates required to
be delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In the
event an Issuing Lender has determined to honor a drawing or request for payment
under a Letter of Credit issued by it, such Issuing Lender shall immediately
notify Company and Administrative Agent, and Company shall reimburse such
Issuing Lender on or before the Business Day immediately following the date on
which such drawing is honored or such payment is made (the applicable
"Reimbursement Date"), in an amount in same day funds equal to the amount of
such drawing; provided that, anything contained in this Agreement to the
contrary notwithstanding, (i) unless Company shall have notified Administrative
Agent and such Issuing Lender prior to 12:00 Noon New York time) on the date of
such drawing or request for payment that Company intends to reimburse such
Issuing Lender for the amount of such honored drawing or payment with funds
other than the proceeds of Revolving Loans, Company shall be deemed to have
given a timely Notice of Borrowing to Administrative Agent requesting Lenders to
make Revolving Loans which are Base Rate Loans, on the applicable Reimbursement
Date in an amount equal to the amount of such honored drawing or payment and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the applicable Reimbursement Date, make
<PAGE>
Revolving Loans and in the amount of such honored drawing or payment, the
proceeds of which shall be applied directly by Administrative Agent to reimburse
such Issuing Lender for the amount of such honored drawing or payment; provided
further that if for any reason proceeds of Revolving Loans are not received by
such Issuing Lender on the applicable Reimbursement Date in an amount equal to
the amount of such honored drawing or payment, Company shall reimburse such
Issuing Lender, on demand, in an amount in Dollars and in same day funds equal
to the excess of the amount of such honored drawing or payment over the
aggregate amount of such Revolving Loans, if any, which are so received. Nothing
in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Company shall retain any and all fights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Payments Under Letters of Credit.
(i) Payment by Lenders. In the event that Company shall fail for any reason to
reimburse any Issuing Lender as provided in subsection 3.3B in an amount
equal to the amount of any honored drawing or payment made by such Issuing
Lender under a Letter of Credit issued by it, such Issuing Lender shall
promptly notify each other Lender of the unreimbursed amount of such
honored drawing or payment and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share of the
Revolving Loan Commitments. Each Lender shall make available to such
Issuing Lender an amount equal to its respective participation, in same day
funds, at the office of such Issuing Lender specified in such notice, not
later than 12:00 Noon (New York time) on the first Business Day (under the
laws of the jurisdiction in which such office of such Issuing Lender is
located) after the date notified by such Issuing Lender. In the event that
any Lender fails to make available to such Issuing Lender on such Business
Day the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice
the fight of any Lender to recover from any Issuing Lender any amounts made
available by such Lender to such Issuing Lender pursuant to this subsection
3 .3C in the event that it is determined by the final judgment of a court
of competent jurisdiction that the payment with respect to a Letter of
Credit by such Issuing Lender in respect of which payment was made by such
Lender constituted gross negligence or willful misconduct on the part of
such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From Company. In the
event any Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any honored
drawing or payment made by such Issuing Lender under a Letter of Credit
issued by it, such Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such honored drawing or payment such other Lender's Pro Rata
Share of all payments
<PAGE>
subsequently received by such Issuing Lender from Company in reimbursement
of such honored drawing or payment when such payments are received. Any
such distribution shall be made to a Lender at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to each Issuing
Lender, with respect to drawings honored or payments made under any Letters
of Credit issued by it, interest on the amount paid by such Issuing Lender
in respect of each such drawing or payment from the date such drawing is
honored or payment is made to but excluding the date such amount is
reimbursed by Company (including any such reimbursement out of the proceeds
of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for
the period from the date such drawing is honored or payment is made to but
excluding the applicable Reimbursement Date, the Base Rate plus the
Applicable Margin with respect to Base Rate Revolving Loans, and (b)
thereafter, a rate which is 2% per annum in excess of the rate of interest
described in the foregoing clause (a). Interest payable pursuant to this
subsection 3.3D(i) shall be computed on the basis of a 360-day year for the
actual number of days elapsed in the period during which it accrues and
shall be payable on demand or, if no demand is made, on the date on which
the related drawing or payment under a Letter of Credit is reimbursed in
full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly upon receipt
by any Issuing Lender of any payment of interest pursuant to subsection
3.3D(i), (a) such Issuing Lender shall distribute to each other Lender, out
of the interest received by such Issuing Lender in respect of the period
from the date of the applicable honored drawing or payment under a Letter
of Credit issued by such Issuing Lender to but excluding the date on which
such Issuing Lender is reimbursed for the amount of such drawing or payment
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such other Lender would have
been entitled to receive in respect of the Letter of Credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored or payment had
been made under such Letter of Credit, and (b) in the event such Issuing
Lender shall have been reimbursed by other Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing or payment, such Issuing
Lender shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing or
payment such other Lender's Pro Rata Share of any interest received by such
Issuing Lender in respect of that portion of such drawing or payment so
reimbursed by other Lenders for the period from the date on which such
Issuing Lender was so reimbursed by other Lenders to and including the date
on which such portion of such drawing or payment is reimbursed by Company.
Any such distribution shall be made to a Lender at its Lending Office set
forth on Schedule 2.1 or at such other address as such Lender may request.
<PAGE>
3.4 Obligations Absolute.
The obligation of Company to reimburse each Issuing Lender for drawings honored
or payments made under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which
Company or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any
other Person or, in the case of a Lender, against Company whether in
connection with this Agreement, the transactions contemplated herein or
any unrelated transaction (including any underlying transaction between
Company or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not substantially comply with the terms of such Letter of
Credit;
(v) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Company or any of its
Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any party
thereto;
(vii) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of Default shall
have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
<PAGE>
3.5 Indemnification Nature of Issuing Lender's Duties.
A. Indemnification. In addition to amounts payable as provided in subsection
3.6, Company hereby agrees to protect, indemnify, pay and save harmless each
Issuing Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and allocated costs of internal counsel)
which such Issuing Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender,
other than as a result of (a) the gross negligence or willful misconduct of such
Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing or other request for payment under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing or
payment under such Letter of Credit; or (viii) any consequences arising from
causes beyond the control of such Issuing Lender, including, without limitation,
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific provisions
set forth in the first paragraph of this subsection 3.5B, any action taken or
omitted by any Issuing Lender under or in connection with the Letters of Credit
issued by it or any documents and certificates delivered thereunder, if taken or
omitted in good faith, shall not put such Issuing Lender under any resulting
liability to Company.
<PAGE>
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Lender
for any liability arising solely out of the gross negligence or willful
misconduct of such issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
In the event that any law, treaty or governmental rule, regulation or order, or
any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by any
Issuing Lender or Lender with any guideline, request or directive issued or made
after the date hereof by any central bank or other governmental or quasi-
governmental authority (whether or not having the force of law):
(i) results in any change in the basis of taxation of such Issuing Lender or
Lender (or its applicable lending or letter of credit office) (other
than a change with respect to any Tax on the overall net income of such
Issuing Lender or Lender) with respect to the issuing or maintaining of
any Letters of Credit or the purchasing or maintaining of any
participations therein or any other obligations under this Section 3,
whether directly or by such being imposed on or suffered by any
particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including, without
limitation, any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition on or affecting such Issuing Lender or
Lender (or its applicable lending or letter of credit office) regarding
this Section 3 or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be prima facie evidence of such additional amounts.
<PAGE>
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of Credit
hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Term Loans and Revolving Loans.
The obligations of Lenders to make the Term Loans and the Revolving Loans are,
in addition to the conditions precedent specified in subsection 4.2, subject to
prior or concurrent satisfaction of the following conditions:
A. Holdings and Company Documents.
On or before the Effective Date, each of Holdings and Company shall deliver or
cause to be delivered to Lenders (or to Administrative Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Effective
Date:
(i) Certified copies of its Certificate of Incorporation, together with a
good standing certificate from the Secretary of State of the State of
Delaware and each other state in which it is qualified as a foreign
corporation to do business, each dated a recent date prior to the
Effective Date;
(ii) Copies of its Bylaws, certified as of the Effective Date by its
corporate secretary or an assistant secretary as being in full force and
effect without modification or amendment;
(iii) Resolutions of its Board of Directors approving and authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents and the Duncan Hines Related Agreements to which it is a
party, certified as of the Effective Date by its corporate secretary or
an assistant secretary as being in full force and effect without
modification or amendment;
(iv) Signature and incumbency certificates of its officers executing this
Agreement and the other Loan Documents;
(v) Executed originals of this Agreement and the other Loan Documents to
which it is a party; and
(vi) Such other documents as Agents may reasonably request.
B. No Material Adverse Effect. Since September 30, 1997, no Material Adverse
Effect (in the opinions of Administrative Agent or Lenders) shall have occurred.
<PAGE>
C. Corporate and Capital Structure; Capitalization of MBW LLC. Holdings and
Company; Equity Contribution.
(i) Corporate Structure. The corporate organizational structure, capital
structure and ownership of MBW LLC and Holdings and its Subsidiaries,
after giving effect to the Duncan Hines Acquisition, shall be as set
forth on Schedule 4.1 C annexed hereto. MBW LLC shall have no
Subsidiaries on the Effective Date other than Holdings and Company.
(ii) Capital Structure and Ownership: Capitalization of MBW LLC Holdings and
Company. The capital structure and ownership of MBW LLC, Holdings and
Company, both before and after giving effect to the Duncan Hines
Acquisition, shall be as set forth on Schedule 4.1 C annexed hereto.
(iii) Equity Contribution. On or before the Effective Date, Holdings shall
have contributed approximately $99,000,000 in equity to the Company.
D. Duncan Hines Acquisition Agreement. On the Effective Date (i) Administrative
Agent shall have received executed or conformed copies of the Duncan Hines
Acquisition Agreement and any amendments thereto and documents executed in
connection therewith, (ii) such Duncan Hines Acquisition Agreement shall be in
full force and effect and, no material term or condition thereof shall have been
amended, modified or waived after the execution thereof except with the prior
written consent of Administrative Agent, (iii) the parties thereto shall not
have failed in any material respect to perform any material obligation or
covenant required by any such Duncan Hines Acquisition Agreement to be performed
or complied with by any of them on or before the Effective Date, and (iv)
Administrative Agent shall have received an Officer's Certificate from Company
to the effect set forth in clauses (ii) and (iii).
E. Duncan Hines Related Agreements. Administrative Agent shall have received
(i) a fully executed or conformed copy of each Duncan Hines Related Agreement
and all principal documents executed in connection therewith, and each Duncan
Hines Related Agreement shall be in full force and effect (except for those
Duncan Hines Related Agreements not executed on or prior to the Effective Date)
and no provision thereof shall have been modified or waived in any respect
determined by Administrative Agent to be material, in each case without consent
of Administrative Agent and (ii) an Officer's Certificate from Company to the
effect set forth in clause (i), and each such Duncan Hines Related Agreement
(including without limitation the Duncan Hines Transition Agreements) shall be
reasonably satisfactory in form and substance to Administrative Agent.
F. Consummation of Duncan Hines Acquisition.
(i) All conditions to the Duncan Hines Acquisition set forth in the Duncan
Hines Acquisition Agreement shall have been satisfied or the fulfillment
of any such conditions shall have been waived with the consent of
Administrative Agent;
<PAGE>
(ii) Administrative Agent shall have received evidence in form and substance
satisfactory to Administrative Agent that the Duncan Hines Acquisition
shall become effective in accordance with the terms of the Duncan Hines
Acquisition Agreement immediately upon the making of the initial Loans;
(iii) the aggregate cash consideration paid to P&G in connection with the
Duncan Hines Acquisition shall not exceed $445,000,000;
(iv) Transaction Costs shall not exceed $16,000,000, and Administrative Agent
shall have received evidence satisfactory in form and substance to
Administrative Agent to such effect; and
(v) Administrative Agent shall have received an Officer's Certificate of
Company to the effect set forth in clauses (i)-(iv) above and stating
that Company will proceed to consummate the Duncan Hines Acquisition
immediately upon the making of the initial Loans.
G. Existing Liens; No Other Indebtedness Outstanding. All security interests
attaching to any of the assets of the Duncan Hines Business created to secure
obligations under any Indebtedness of P&G shall have been terminated, and
Company shall have delivered to Administrative Agent UCC-3 termination
statements or assignments (or comparable forms) and any and all other
instruments of release, satisfaction, assignment and/or reconveyance (or
evidence of the filing thereof) as may be necessary or advisable to terminate
all such security interests and all other security interests in the Collateral.
Administrative Agent shall have received an Officers' Certificate of Company
stating that, after giving effect to the transactions described in this
subsection 4.1G, Loan Parties shall have no Indebtedness outstanding other than
Indebtedness permitted under the Loan Documents.
H. Necessary Consents. Company shall have obtained all consents necessary or
advisable in connection with the Duncan Hines Acquisition, the transactions
contemplated by the Loan Documents and Duncan Hines Related Agreements and the
continued operation of the business conducted by Company and its Subsidiaries,
and each of the foregoing shall be in full force and effect and in form and
substance satisfactory to Administrative Agent (except as disclosed to and
approved by Administrative Agent). All applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
Duncan Hines Acquisition or the financing thereof, and no action, request for
stay, petition for review or rehearing, reconsideration or appeal shall be
pending and any time for agency action to set aside its consent on its own
motion shall have expired.
I. Collateral Access Agreements. Administrative Agent shall have received from
Company Collateral Access Agreements in form and substance satisfactory to
Administrative Agent executed by P&G with respect to any facility of P&G at
which equipment of Company is located on the Effective Date. Neither Holdings
nor Company
<PAGE>
shall own interest in any real property on the Effective Date other than its
Leasehold Property interest in its offices in Columbus, Ohio.
J. Perfection of Security Interests in Personal Property and Mixed Collateral
Holdings and Company shall have taken or caused to be taken such actions in such
a manner so that Administrative Agent has, for the benefit of Agents and
Lenders, a valid and perfected First Priority security interest in the entire
personal property and mixed Collateral. Such actions shall include, without
limitation: (i) the delivery pursuant to the applicable Collateral Documents of
(a) certificates (which certificates shall be properly endorsed in blank for
transfer or accompanied by irrevocable undated stock powers duly endorsed in
blank all in form and substance satisfactory to Administrative Agent)
representing all of the shares of capital stock required to be pledged pursuant
to the Collateral Documents, and (b) all promissory notes or other instruments
(duly endorsed, where appropriate, in a manner satisfactory to Administrative
Agent) evidencing any Collateral; (d) delivery to Agents of (a) the results of a
recent search, by a Person satisfactory to Agents, of all effective Uniform
Commercial Code financing statements and fixture filings and all judgment and
tax lien filings which may have been made with respect to any personal or mixed
property of any Loan Party, together with copies of all such filings disclosed
by such search; (iii) the delivery to Administrative Agent of Uniform Commercial
Code financing statements and fixture filings executed by the applicable Loan
Parties as to all such Collateral granted by such Loan Parties for all
jurisdictions as may be necessary or desirable to perfect Administrative Agent's
security interest in such Collateral; (iv) the delivery to Administrative Agent
of all cover sheets or other documents or instruments required to be filed with
the PTO or the United States Copyright Office in order to create or perfect
Liens in respect of any IP Collateral or any registered copyrights of Company;
and (v) the delivery to Administrative Agent of evidence reasonably satisfactory
to Administrative Agent that all other filings (including, without limitation,
filings of Uniform Commercial Code termination statements and termination
statements with respect to prior Liens on IP Collateral), recordings and other
actions that Administrative Agent deems necessary or advisable to establish,
preserve and perfect the First Priority Liens granted to Administrative Agent in
personal and mixed property shall have been made.
K. Solvency Appraisal; Appraisal of Fixed Assets, Trademarks and Tradenames.
Administrative Agent shall have received a letter from American Appraisal
Associates, Inc. dated the Effective Date and addressed to Administrative Agent
and Lenders, in form, scope and substance reasonably satisfactory to
Administrative Agent and with appropriate attachments, demonstrating that, after
giving effect to the consummation of the Duncan Hines Acquisition and the
financing transactions contemplated hereby, Holdings and its Subsidiaries are
Solvent. Administrative Agent shall have received an appraisal of the fixed
assets, trademarks and tradenames acquired by Company in the Duncan Hines
Acquisition, prepared by American Appraisal Associates, Inc. and dated not
earlier than 30 days before the Effective Date, in form and substance reasonably
satisfactory to Administrative Agent.
<PAGE>
L. Transaction Costs. Prior to the Effective Date, Company shall have delivered
to Administrative Agent and Lenders a schedule, in a form satisfactory to
Administrative Agent, setting forth Company's reasonable best estimate of the
Transaction Costs (other than amounts payable to Agents and Lenders).
M. Opinions of Loan Parties' Counsel. Lenders and their respective counsel
shall have received (i) originally executed copies of one or more favorable
written opinions of White & Case, counsel for the Loan Parties, in form and
substance reasonably satisfactory to Administrative Agent and its counsel, dated
as of the Effective Date and setting forth substantially the matters in the
opinion designated in Exhibit XV annexed hereto and as to such other matters as
Administrative Agent acting on behalf of Lenders may reasonably request, and
(ii) evidence satisfactory to Administrative Agent that Loan Parties have
instructed such counsel to deliver such opinion to Lenders.
N. Opinions of Agents' Counsel. Lenders shall have received originally executed
copies of one or more favorable written opinions of Simpson Thacher & Bartlett,
counsel to Agents, dated as of the Effective Date, substantially in the form of
Exhibit XVI annexed hereto and as to such other matters as Agents acting on
behalf of Lenders may reasonably request.
0. Fees. Company shall have paid to Agents, for distribution (as appropriate)
to Agents and Lenders, the fees payable on the Effective Date referred to in
subsection 2.3.
P. Financial Statements Pro Forma Consolidated Balance Sheet. On or before the
Effective Date, Lenders shall have received from Company (i) audited financial
statements of the Duncan Hines Business for the years ending June 30 of 1995,
1996 and 1997, consisting of statements of direct revenues and expenses for such
years, (ii) unaudited financial statements of the Duncan Hines Business as at
September 30, 1997, consisting of a statement of direct revenues and expenses
for the three-month period ending on such date, (iii) a statement of book value
of equipment and intangibles acquired as of June 30, 1997, in reasonable detail,
and (iv) a pro forma consolidated balance sheet of Holdings and its Subsidiaries
as at September 30, 1997 prepared in accordance with GAAP and reflecting the
consummation of the Duncan Hines Acquisition, the related financings and the
other transactions contemplated by the Loan Documents and the Related
Agreements, which pro forma statement of assets shall be in form and substance
satisfactory to Lenders and shall be certified by the chief financial officer of
Company as (a) prepared based on good faith assumptions and on the best
information available to Company as of the date of delivery thereof and (b)
fairly presenting on a pro forma basis the financial position of Holdings and
Company as at September 30,1997, as adjusted as described in this clause (iv),
assuming that such events had occurred at such date.
Q. Insurance Appraisal Evidence of Insurance. Administrative Agent shall have
received (i) a copy of the insurance report prepared by Aon Risk Services with
respect to Company and its Subsidiaries and such report shall be in form and
substance satisfactory to
<PAGE>
Agents, and (ii) satisfactory certificates of insurance with respect to each of
the insurance policies required pursuant to subsection 6.4, and Agents shall be
satisfied with the nature and scope of these insurance policies.
R. Representations and Warranties; Performance of Agreements. Company shall
have delivered to Administrative Agent an Officer's Certificate, in form and
substance satisfactory to Administrative Agent, to the effect that the
representations and warranties in Section 5 hereof are true and correct in all
material respects on and as of the Effective Date to the same extent as though
made on and as of that date and that Company shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by them on or before the
Effective Date, except as otherwise disclosed to and agreed to in writing by
Administrative Agent.
S. Completion of Proceedings. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and their counsel shall be satisfactory in
form and substance to Administrative Agent and such counsel, and Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent may reasonably
request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are subject to the
following further conditions precedent:
A. Administrative Agent shall have received on or before that Funding Date, in
accordance with the provisions of subsection 2.lB, an originally executed Notice
of Borrowing, signed by the chief executive officer, the chief financial officer
or the controller of Company or by any executive officer of Company designated
by any of the above-described officers on behalf of Company in a writing
delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the other Loan
Documents shall be true and correct in all material respects on and as of
that Funding Date to the same extent as though made on and as of that date,
except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and
as of such earlier date;
(ii) No event shall have occurred and be continuing or would result from the
consummation of the borrowing contemplated by such Notice of Borrowing that
would constitute an Event of Default or a Potential Event of Default;
<PAGE>
(iii) Each Loan Party shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement and the
other Loan Documents provide shall be performed or satisfied by it on or
before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or governmental
authority shall purport to enjoin or restrain any Lender from making the
Loans to be made by it, on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not violate
any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company, threatened,
any action, suit, proceeding, governmental investigation or arbitration
against or affecting Holdings or any of its Subsidiaries or any property
of Holdings or any of its Subsidiaries that has not been disclosed by
Company in writing and that is required to be so disclosed pursuant to
subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans
(or, in the case of the initial Loans, prior to the execution of this
Agreement), and there shall have occurred no development not so
disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed that, in either event, in the
opinion of Administrative Agent or of Requisite Lenders, would be
expected to have a Material Adverse Effect; and no injunction or other
restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin
or otherwise prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by this
Agreement or the making of Loans hereunder.
4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not the applicable
Issuing Lender is obligated to issue such Letter of Credit) is subject to the
following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit pursuant
to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit, Administrative
Agent shall have received, in accordance with the provisions of subsection
3.1B(i), an originally executed Notice of Issuance of Letter of Credit, signed
by the chief executive officer, the chief financial officer or the controller of
Company or by any executive officer of Company designated by any of the above-
described officers on behalf of Company in a writing delivered to Administrative
Agent, together with all other information specified in
<PAGE>
subsection 3.1 B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions precedent
described in subsection 4.2B shall be satisfied to the same extent as if the
issuance of such Letter of Credit were the making of a Loan and the date of
issuance of such Letter of Credit were a Funding Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the Loans,
to induce Issuing Lender to issue Letters of Credit and to induce other Lenders
to purchase participations therein, each of Holdings and Company represents and
warrants to each Lender, on the date of this Agreement, on each Funding Date,
and on the date of issuance of each Letter of Credit, that the following
statements are true and correct:
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Each Loan Party is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation. Each Loan Party has all requisite corporate power and authority
to own and operate its properties, to carry on its business as now conducted and
as proposed to be conducted, to enter into the Loan Documents and to carry out
the transactions contemplated thereby. Company has all requisite corporate power
and authority to issue and pay the Notes.
B. Qualification and Good Standing. Each Loan Party is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified, authorized or in good
standing has not had and will not have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged only in the
businesses permitted to be engaged in pursuant to subsection 7.11.
D. Company and Subsidiaries. All of the Subsidiaries of Holdings as of the
Effective Date after giving effect to the Duncan Hines Acquisition are
identified in Schedule 5.1 annexed hereto. The capital stock of each of the
Subsidiaries of Company identified in Schedule 5.1 annexed hereto is duly
authorized, validly issued, fully paid and nonassessable and none of such
capital stock constitutes Margin Stock. Company and each of the Subsidiaries of
Holdings identified in Schedule 5.1 annexed hereto are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation or formation set forth therein, have full corporate power and
authority to own their assets and properties and to operate their business as
presently owned and conducted and as proposed to be conducted, and are qualified
to do business and in good standing in every
<PAGE>
jurisdiction where their assets are located and wherever necessary to carry out
their business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
hereto correctly sets forth the ownership interest of Company in each of its
Subsidiaries identified therein.
E. Acquisitions. Each Loan Party shall have, upon consummation thereof, all
requisite corporate power and authority to consummate, on the terms set forth in
the applicable acquisition agreement and related documents, each Permitted
Acquisition consummated by it pursuant to subsection 7.7(vii). Upon consummation
of any such Permitted Acquisition, such Permitted Acquisition shall have been
duly authorized by all necessary corporate action of such Loan Party.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of the
Loan Documents and the Related Agreements and the issuance, delivery and payment
of the Notes have been duly authorized by all necessary corporate or other
action on the part of each of the Loan Parties thereto.
B. No Conflict. After giving effect to the consummation of the transactions
contemplated hereby to occur on the Effective Date, the execution, delivery and
performance by each of the Loan Parties of the Loan Document and the Related
Agreements to which they are parties, the issuance, delivery and payment of the
Notes and the consummation of the transactions contemplated by the Loan
Documents do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to MBW LLC or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws (or other
analogous organizational document) of any Loan Party or any of its Subsidiaries
or any order, judgment or decree of any court or other agency of government
binding on any Loan Party or any of its Subsidiaries, (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any Contractual Obligation of any Loan Party or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of any Loan Party or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Administrative Agent on behalf of Lenders), or (iv) require any
approval of stockholders or partners or any approval or consent of any Person
under any Contractual Obligation of any Loan Party or any of its Subsidiaries,
except for such approvals or consents which will be obtained on or before the
Effective Date.
C. Governmental Consents. The execution, delivery and performance by the Loan
Parties of the Loan Documents and Related Agreements to which they are party,
the issuance, delivery and payment of the Notes and the consummation of the
transactions contemplated by the Loan Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except for such registrations, consents, approvals,
<PAGE>
notices or other actions which will be made, obtained or taken on or before the
Effective Date.
D. Binding Obligation. Each of the Loan Documents and the Related Agreements
has been duly executed and delivered by each of the Loan Parties party thereto
and is the legally valid and binding obligation of each such Loan Party,
enforceable against such Loan Party in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
E Valid Issuance of Holdings Common Stock and Subordinated Notes.
(i) Holdings Common Stock. The Holdings Common Stock to be sold on or before
the Effective Date, when issued and delivered, will be duly and validly
issued, fully paid and nonassessable. The issuance and sale of such
Holdings Common Stock, upon such issuance and sale, will either (a) have
been registered or qualified under applicable federal and state securities
laws or (b) be exempt therefrom.
(ii) Subordinated Notes. Company has the corporate power and authority to issue
the Subordinated Notes. The Subordinated Notes are the legally valid and
binding obligations of Company, enforceable against Company in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Subordinated Note
Indentures, the Subordinated Notes and the other Subordinated Note
Documents are enforceable against the holders of the Subordinated Notes,
and the Loans and all other monetary Obligations hereunder are and will be
within the definition of "Senior Indebtedness" included in such provisions.
The Subordinated Notes (a) have been registered or qualified under
applicable federal and state securities laws or (b) are exempt therefrom.
5.3 Financial Condition.
A. Financial Statements. Company has heretofore delivered to Lenders, at
Lenders' request, the following financial statements and information: (i) the
audited statements of direct revenues and expenses of the Duncan Hines Business
for the years ended June 30, 1995,1996 and 1997, together with the report on
such statements of direct revenues and expenses of Deloitte & Touche LLP, and
(ii) the unaudited statement of direct revenues and expenses of the Duncan Hines
Business as at September 30, 1997 for the three months then ended. All such
statements were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position of the entities described in such
financial statements as at the respective dates thereof and the results of
operations of the entities described therein for each of the periods then ended.
Neither Company nor the Duncan Hines Business has (and will not immediately
following the funding of the initial Loans have) any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the most recent financial
statements
<PAGE>
delivered pursuant to subsection 6.1, the notes thereto and which in any such
case is material in relation to the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Holdings and its Subsidiaries
taken as a whole.
(ii) The balance sheets of Company as at December 31, 1996 and September 30,
1997 and the related unaudited statements of income and changes in
stockholder's equity and of cash flows of Company for the operating
period from December 31, 1996 through September 30, 1997, copies of
which have heretofore been furnished to each Lender, present fairly in
all respects the financial condition of Company as at such dates, and
the results of its operations and its cash flows for the operating
period from December 31,1996 through September 30, 1997 (subject to
normal year-end audit adjustments). All such financial statements have
been prepared in accordance with GAAP consistently applied throughout
the period presented. At the date of the most recent balance sheet
referred to above, Company did not have any material liability or
material obligation which would be required to be included in the
financial statements referred to in this subsection in accordance with
GAAP which was not so included. Except as reflected in the financial
statements referred to in this subsection 5.3, during the period from
December 31, 1996 to and including the date hereof there has been no
sale, transfer or other disposition by any Loan Party of any material
part of its business or property, no material liabilities were incurred
by any Loan Party and there has been no purchase or other acquisition
(other than the Duncan Hines Acquisition) of any business or property
(including capital stock of any other Person) by any Loan Party material
in relation to the financial condition of Company at December 31, 1996.
5.4 No Material Adverse Change; No Restricted Junior Payments.
Since September 30, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5.
5.5 Title to Properties; Liens; Intellectual Property.
A. After giving effect to the transactions contemplated by this Agreement to
occur on the Effective Date, Holdings and its Subsidiaries have good, sufficient
and legal title to all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7.7.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
<PAGE>
B. Company has acquired, pursuant to the Acquisition Agreement, that which
Seller has represented is the ownership of all patents, copyrights (whether
registered or unregistered), trademarks (whether registered or unregistered),
trade names, trade dress, service marks, assumed names and know-how (such items,
together with all applications therefor and all other intellectual property and
proprietary fights, whether or not subject to statutory registration or
protection, being collectively referred to herein as "MBW Intellectual
Property") relating exclusively to, or used exclusively in connection with, the
Business which (i) are owned by Seller on the Closing Date and (ii) are
necessary, together with the fights licensed to Company under the Shared
Technology License Agreement and the Patent License Agreement, for the operation
of the Business as conducted on the Closing Date, except as set forth on
Schedule S SB annexed hereto; provided, however, that such MBW Intellectual
Property does not include any rights to the brand name "Country Crock,"
"Pennant" or "Bakers Source."
C. Company has acquired, pursuant to the Log Cabin Acquisition Agreement, that
which Kraft has represented is the ownership of all patents, copyrights (whether
registered or unregistered), trademarks (whether registered or unregistered),
trade names, trade dress, service marks, assumed names and know-how (such items,
together with all applications therefor and all other intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection, being collectively referred to herein as "Log Cabin Intellectual
Property") relating exclusively to, or used exclusively in connection with, the
Log Cabin Business which (i) are owned by Kraft on July 1,1997 and (ii) are
necessary, together with the rights licensed to Company under the Log Cabin
Patent License Agreement, for the operation of the Log Cabin Business as
conducted on July 1, 1997, except as set forth on Schedule 5.5C annexed hereto.
D. After giving effect to the Duncan Hines Acquisition, Company has acquired,
pursuant to the Duncan Hines Acquisition Agreement, that which P&G has
represented is the ownership of all patents, copyrights (whether registered or
unregistered), trademarks (whether registered or unregistered), trade names,
trade dress, service marks, assumed names and know-how (such items, together
with all applications therefor and all other intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection, being collectively referred to herein as "Duncan Hines Intellectual
Property") relating exclusively to, or used exclusively in connection with, the
Duncan Hines Business which (i) are owned by P&G on the Effective Date and (ii)
are necessary, together with the fights licensed to Company under the Duncan
Hines Patent License Agreement, for the operation of the Duncan Hines Business
as conducted on the Effective Date, except as set forth on Schedule 5.5D annexed
hereto.
E. Each Loan Party owns, or is licensed to use, all Intellectual Property
necessary for the operation of its business as conducted except for Intellectual
Property the failure to own or license which could not reasonably be expected to
have a Material Adverse Effect. No claim of which any Loan Party has been given
notice has been asserted and is pending by any Person challenging or questioning
the use by any Loan Party of any such Intellectual Property the validity or
effectiveness of any such Intellectual Property, nor does
<PAGE>
Holdings or Company know of any valid basis for any such claim, except for such
claims that in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
5.6 Litigation: Adverse Facts.
There is no action, suit, proceeding, arbitration or governmental investigation
(whether or not purportedly on behalf of Holdings or any of its Subsidiaries) at
law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Company, threatened against
or affecting Holdings or any of its Subsidiaries or any property of Holdings or
any of its Subsidiaries that, either individually or in the aggregate together
with all other such actions, proceedings and investigations, has had, or could
reasonably be expected to result in, a Material Adverse Effect. Neither Holdings
nor any of its Subsidiaries is or has been (i) in violation of any applicable
law (including any Pure Food and Drug Laws that has had, or could reasonably be
expected to result in, a Material Adverse Effect or (ii) subject to or in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that has had, or could reasonably be expected to result in, a Material
Adverse Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all material tax returns and
reports of Holdings and its Subsidiaries required to be filed by any of them
have been timely filed, and all material taxes, assessments, fees and other
governmental charges upon Holdings and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Company does not know of any
proposed tax assessment against Holdings or any of its Subsidiaries other than
those which are being actively contested by Holdings or such Subsidiary in good
faith and by appropriate proceedings and for which reserves or other appropriate
provisions, if any, as may be required in conformity with GAAP shall have been
made or provided therefor.
5.8 Performance of Agreements: Materially Adverse Agreements: Material
Contracts.
A. Neither Holdings nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Holdings nor any of its Subsidiaries is a party to or is otherwise
subject to any agreement or instrument or any charter or other internal
restriction which has
<PAGE>
had, or could reasonably be expected (based upon assumptions that are reasonable
at the time made) to result in, individually or in the aggregate, a Material
Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all the Material
Contracts in effect on the Effective Date. All such Material Contracts are in
full force and effect and no defaults currently exist thereunder, except where
the failure to be in full force and effect, and except for such defaults which,
could not reasonably be expected to have a Material Adverse Effect.
5.9 Governmental Regulation.
Neither Holdings nor any of its Subsidiaries is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
Neither Holdings nor any of its Subsidiaries is engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
A. Holdings and each of its ERISA Affiliates are in substantial compliance with
all applicable provisions and requirements of ERISA with respect to each
Employee Benefit Plan, and have substantially performed all their obligations
under each Employee Benefit Plan, except to the extent that any non-compliance
with ERISA or any such failure to perform would not result in material liability
of Holdings or any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or is reasonably likely to
result in any material liability to the PBGC or to any other Person.
C. Except to the extent required under Section 4980B of the Internal Revenue
Code and/or Section 601 of ERISA, neither Holdings nor any of its Subsidiaries
maintains or contributes to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of
Holdings or any of its Subsidiaries, except to the extent that the provision of
such benefits would not have a Material Adverse Effect.
D. No Pension Plan has an Unfunded Current Liability in an amount that would
have a Material Adverse Effect.
<PAGE>
5.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to this
Agreement or any of the loan transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 Environmental Protection.
(i) The operations of Holdings and each of its Subsidiaries (including,
without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws;
(ii) Holdings and each of its Subsidiaries have obtained all material
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are in
good standing, and Holdings and each of its Subsidiaries are in
compliance with all material terms and conditions of such Governmental
Authorizations;
(iii) Neither Holdings nor any of its Subsidiaries has received (a) any notice
or claim to the effect that it is or may be liable to any Person as a
result of or in connection with any Hazardous Materials or (b) any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. /s/
9604) or comparable state laws, and, to the best knowledge of Company,
none of the operations of Holdings or any of its Subsidiaries is the
subject of any federal or state investigation relating to or in
connection with any Hazardous Materials at any Facility or at any other
location;
(iv) None of the operations of Holdings or any of its Subsidiaries is subject
to any judicial or administrative proceeding alleging the violation of
or liability under any Environmental Laws which could reasonably be
expected to have a Material Adverse Effect;
(v) To the knowledge of Company, neither Holdings nor any of its
Subsidiaries nor any of their respective Facilities or operations are
subject to any outstanding written order or agreement with any
governmental authority or private party relating to (a) any
Environmental Laws or (b) any Environmental Claims that could reasonably
be expected to have a Material Adverse Effect;
(vi) Neither Holdings nor any of its Subsidiaries has any material contingent
liability in connection with any Release of any Hazardous Materials by
Holdings or any of its Subsidiaries;
<PAGE>
(vii) Neither Holdings nor any of its Subsidiaries nor, to the knowledge of
Company, any predecessor of Holdings or any of its Subsidiaries has
filed any notice under any Environmental Law indicating past or present
treatment or Release of Hazardous Materials at any Facility, and none of
Holdings' or any of its Subsidiaries operations involves the generation,
transportation, treatment, storage or disposal of hazardous waste, as
defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) To the knowledge of Company, no Hazardous Materials exist on or under
any Facility in a manner that has a reasonable possibility of giving
rise to an Environmental Claim having a Material Adverse Effect, and
neither Holdings nor any of its Subsidiaries has filed any notice or
report of a Release of any Hazardous Materials that has a reasonable
possibility of giving rise to an Environmental Claim having a Material
Adverse Effect;
(ix) Neither Holdings nor any of its Subsidiaries nor, to the knowledge of
Company, any of their respective predecessors has disposed of any
Hazardous Materials in a manner that has a reasonable possibility of
giving rise to an Environmental Claim having a Material Adverse Effect;
(x) To the knowledge of Company, no underground storage tanks or surface
impoundments are on or at any Facility; and
(xi) To the knowledge of Company, no Lien in favor of any Person relating to
or in connection with any Environmental Claim has been filed or has been
attached to any Facility.
5.14 Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Holdings or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.15 Solvency.
Each Loan Party is, and Company and its Subsidiaries, taken as a whole, are,
and, upon the incurrence of any Obligations by any Loan Party on any date on
which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
A. Creation Perfection and Priority of Liens. The execution and delivery of the
Collateral Documents by Loan Parties, together with (i) the actions taken on or
prior to the date hereof pursuant to subsections 4. 1L, 6.9 and 6.10 and (ii)
the delivery to Administrative Agent of any Pledged Collateral not delivered to
Administrative Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered) are
effective to create in favor of Administrative Agent for the benefit of Agents
and Lenders, as security for the respective Secured Obligations (as
<PAGE>
defined in the applicable Collateral Document in respect of any Collateral), a
valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than the filing of any UCC financing
statements delivered to Administrative Agent for filing (but not yet filed) and
the periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent.
B. Governmental Authorizations. No authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for either (i) the pledge or grant by any Loan Party of the Liens
purported to be created in favor of Administrative Agent pursuant to any of the
Collateral Documents or (ii) the exercise by Administrative Agent of any rights
or remedies in respect of any Collateral (whether specifically granted or
created pursuant to any of the Collateral Documents or created or provided for
by applicable law), except for filings or recordings contemplated by subsection
5.1 6A and except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of
securities.
C. Absence of Third-Party Filings. Except such as may have been filed in favor
of Administrative Agent as contemplated by subsection 5.16A, (i) no effective
UCC financing statement, fixture filing or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or recording
office and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO or the United States Copyright Office.
D. Margin Regulations. The pledge of the Pledged Collateral pursuant to the
Collateral Documents does not violate Regulation G, Regulation T, Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to any Agent by
or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
5.17 Related Agreements.
A. Delivery of Related Agreements. Company has delivered to Administrative
Agent complete and correct copies of each Related Agreement and of all exhibits
and schedules thereto.
B. P&G's Warranties. Except to the extent otherwise set forth herein or in the
schedules hereto, to Holdings' and Company's knowledge each of the
representations and warranties given by P&G to Company in the Duncan Hines
Acquisition Agreement is true and correct in all material respects as of the
date hereof (or as of any earlier date to which such representation and warranty
specifically relates) and will be true and correct in all
<PAGE>
material respects as of the Effective Date (or as of such earlier date, as the
case may be), in each case subject to the qualifications set forth in the
schedules to the Duncan Hines Acquisition Agreement.
C. Warranties of Company to P&G. Subject to the qualifications and the schedules
set forth therein, each of the representations and warranties given by Company
to P&G in the Duncan Hines Acquisition Agreement is true and correct in all
material respects as of the date hereof and will be true and correct in all
material respects as of the Effective Date.
D. Survival. Notwithstanding anything in the Duncan Hines Acquisition Agreement
to the contrary, the representations and warranties of Company set forth in
subsections 5.17B and 5.1 7C shall, solely for purposes of this Agreement,
survive the Effective Date for the benefit of Agents and Lenders.
5.18 Disclosure.
The representations of Holdings and its Subsidiaries contained in the Loan
Documents, the Related Agreements and in any other document, certificate or
written statement furnished to Lenders by or on behalf of Holdings or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement, when taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact (known to Holdings or the
applicable Subsidiary, in the case of any document not furnished by Holdings or
such Subsidiary) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
material are based upon good faith estimates and assumptions believed by Company
to be reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There is no fact known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that has had, or could reasonably be expected to result
in, a Material Adverse Effect and that has not been disclosed herein or in such
other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
5.19 Subordination of Seller Notes.
The subordination provisions of any Permitted Seller Notes, if any, will be
enforceable against the holders thereof, and the Loans and other monetary
obligations hereunder are and will be within the definition of "Senior
Indebtedness" included in such provisions.
<PAGE>
SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
obligations and the cancellation or expiration of all Letters of Credit, unless
Requisite Lenders shall otherwise give prior written consent, Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.
6.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to maintain, a system
of accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
Company will deliver to Administrative Agent (and Administrative Agent will,
after receipt thereof, deliver to each Lender):
(i) Monthly Financials: (a) as soon as available after fiscal month-end January
1998 and February 1998, (b) as soon as available and in any event within 45
days after fiscal month-end April 1998 and May 1998 and (c) as soon as
available and in any event within 30 days after each fiscal month-end
(other than March, June, September and December) thereafter, the
consolidated and consolidating statements of income (through the "Earnings
Before Tax" line) of Company and its Subsidiaries for such fiscal month and
for the period from the beginning of the then current Fiscal Year to the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous fiscal
year and the corresponding figures from the consolidated plan and financial
forecast for the current Fiscal Year delivered pursuant to subsection
6.1(xiii), all in reasonable detail and certified by the chief financial
officer of Company as being fairly stated in all material respects, subject
to changes resulting from audit and normal year-end adjustments;
(ii) Quarterly Financials: as soon as available and in any event within 45 days
after the end of each Fiscal Quarter, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such Fiscal Quarter and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year and the
corresponding figures from the consolidated plan and financial forecast for
the current Fiscal Year delivered pursuant to subsection 6.1 (xi ii), all
in reasonable detail and certified by the chief financial officer of
Company that they fairly present, in all material respects, the financial
condition of Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
and (b) a narrative
<PAGE>
report describing the operations of Company and its Subsidiaries in the
form prepared for presentation to senior management for such Fiscal
Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter;
(iii) Year-End Financials: as soon as available and in any event within 90
days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6.1 (xiii) for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management
for such Fiscal Year, and (c) in the case of such consolidated financial
statements, a report thereon of independent certified public accountants
of recognized national standing selected by Company and reasonably
satisfactory to Administrative Agent, which report shall be unqualified
as to the ability of Company and its Subsidiaries to continue as a going
concern and as to scope of audit, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each delivery of
financial statements of Company and its Subsidiaries pursuant to
subdivisions (ii) and (iii) above, (a) an Officer's Certificate of
Company stating that the signer has reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signer does not
have knowledge of the existence as at the date of such Officer's
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action Company has taken, is taking and proposes to
take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
<PAGE>
Section 7, in each case to the extent compliance with such restrictions
is required to be tested during or at the end of the applicable
accounting period;
(v) Reconciliation Statements: if, as a result of any change in accounting
principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries
delivered pursuant to subdivisions (i), (ii), (iii) or (xiii) of this
subsection 6.1 will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies
been made, then (a) together with the first delivery of financial
statements pursuant to subdivision (i), (ii), (iii) or (xiii) of this
subsection 6.1 following such change, consolidated financial statements
of Company and its Subsidiaries for (y) the current Fiscal Year to the
effective date of such change and (z) the two full Fiscal Years
immediately preceding the Fiscal Year in which such change is made, in
each case prepared on a pro forma basis as if such change had been in
effect during such periods, and (b) together with each delivery of
financial statements pursuant to subdivision (i), (ii), (iii) or (xiii)
of this subsection 6.1 following such change, a written statement of the
chief accounting officer or chief financial officer of Company setting
forth the differences which would have resulted if such financial
statements had been prepared without giving effect to such change;
(vi) Accountants' Certification: together with each delivery of consolidated
financial statements of Company and its Subsidiaries pursuant to
subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon stating whether,
in connection with their audit examination, any condition or event,
insofar as such condition or event relates to the covenants set forth in
subsection 7.6, that constitutes an Event of Default or Potential Event
of Default has come to their attention and, if such a condition or event
has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Event of Default
or Potential Event of Default that would not be disclosed in the course
of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless restricted
by applicable professional standards), copies of all reports submitted
to Company by independent certified public accountants in connection
with each annual, interim or special audit of the financial statements
of Company and its Subsidiaries made by such accountants, including,
without limitation, any comment letter submitted by such accountants to
management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming available,
copies of (a) all financial statements, reports, notices and proxy
statements sent or made available generally by Company to its security
holders, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses,
if any, filed by Holdings or any of its Subsidiaries
<PAGE>
with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority, and (c)
all press releases and other statements made available generally by
Holdings or any of its Subsidiaries to the public concerning material
developments in the business of Holdings or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company obtaining
knowledge (a) of any condition or event that constitutes an Event of
Default or Potential Event of Default, or becoming aware that any Lender
has given any notice (other than to Administrative Agent) or taken any
other action with respect to a claimed Event of Default or Potential
Event of Default, (b) that any Person has given any notice to Company or
any of its Subsidiaries or taken any other action with respect to a
claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to
be disclosed in a current report filed by Company with the Securities
and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form
as in effect on the date hereof) if Company were required to file such
reports under the Exchange Act, or (d) of the occurrence of any event or
change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officer's Certificate
specifying the nature and period of existence of such condition, event
or change, or specifying the notice given or action taken by any such
Person and the nature of such claimed Event of Default, Potential Event
of Default, default, event or condition, and what action Company has
taken, is taking and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer of
Company obtaining knowledge of the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration
against or affecting Holdings or any of its Subsidiaries or any property
of Holdings or any of its Subsidiaries (collectively, "Proceedings") not
previously disclosed in writing by Company to Lenders or Administrative
Agent any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of giving rise to a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, the transactions contemplated
hereby;
written notice thereof together with such other information as may be reasonably
available to Company to enable Lenders and their counsel to evaluate such
matters; and (b) within 45 days after the end of each Fiscal Quarter, a schedule
of all Proceedings involving an alleged liability of, or claims against or
affecting, Holdings or any of its Subsidiaries equal to or greater than $500,000
and promptly after request by Administrative Agent such
<PAGE>
other information as may be reasonably requested by Administrative Agent to
enable Administrative Agent and its counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of any
ERISA Event that could reasonably be expected to result in a material
liability, a written notice specifying the nature thereof what action
Holdings or any of its ERISA Affiliates has taken, is taking or proposes
to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all written
notices received by Holdings or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (b) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as available and in any event no later than 90
days after the beginning of Fiscal Year 1998, and thereafter as soon as
practicable and in any event no later than 60 days after the beginning
of each subsequent Fiscal Year, a monthly consolidated and consolidating
plan and financial forecast for such Fiscal Year, including, without
limitation, (a) forecasted consolidated and consolidating balance sheets
and forecasted consolidated and consolidating statements of income and
cash flows of Company and its Subsidiaries for such Fiscal Year,
together with a pro forma Compliance Certificate for such Fiscal Year
--- -----
and an explanation of the assumptions on which such forecasts are based,
and (b) such other information and projections as Administrative Agent
may reasonably request;
(xiv) Insurance: upon request by Administrative Agent, as soon as practicable
and in any event not less than once each Fiscal Year, a report in form
and substance satisfactory to Administrative Agent outlining all
material insurance coverage maintained as of the date of such report by
Holdings and its Subsidiaries and all material insurance coverage
planned to be maintained by Holdings and its Subsidiaries in the
immediately succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as practicable following
receipt thereof, copies of all environmental audits and reports, whether
prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental
matters at any Facility or which relate to an Environmental Claim which
could result in a Material Adverse Effect;
(xvi) Board of Directors: with reasonable promptness, written notice of any
change in the Board of Directors of Company;
<PAGE>
(xvii) New Subsidiaries: promptly upon any Person becoming a Subsidiary of
Company, a written notice setting forth with respect to such Person (a)
the date on which such Person became a Subsidiary of Company and (b) all
of the data required to be set forth in Schedule 5.1 annexed hereto with
-------- ---
respect to all Subsidiaries of Company (it being understood that such
written notice shall be deemed to supplement Schedule 5.1 annexed hereto
-------- ---
for all purposes of this Agreement); and
(xviii) Other Information: with reasonable promptness, such other information
and data with respect to Holdings or any of its Subsidiaries as from
time to time may be reasonably requested by Administrative Agent.
6.2 Corporate Existence, etc.
Except as permitted under subsection 7.7, Company will, and will cause each of
its Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to the business of
Holdings and its Subsidiaries (on a consolidated basis).
6.3 Payment of Taxes and Claims: Tax Consolidation.
A. Company will, and will cause each of its Subsidiaries to, pay all material
taxes and all assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
timely instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to, file or
consent to the filing of any consolidated income tax return with any Person
(other than Holdings and its Subsidiaries).
6.4 Maintenance of Properties; Insurance.
Company will, and will cause each of its Subsidiaries to, maintain or cause to
be maintained in good repair, working order and condition, ordinary wear and
tear excepted, all material properties used or useful in the business of Company
and its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Company will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
<PAGE>
engaged in similar businesses. Each such policy of casualty insurance covering
damage to or loss of property shall name Administrative Agent for the benefit of
Agents and Lenders as the loss payee thereunder for all losses, subject to
application of proceeds as required by subsection 2.4B(iii)(d), and shall
provide for at least 30 days' prior written notice to Administrative Agent of
any modification or cancellation of such policy.
6.5 Inspection; Lender Meeting.
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Agent or Lender to visit and
inspect any of the properties of Company or any of its Subsidiaries, including
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers independent public accountants, all upon reasonable
advance notice and at such reasonable times during normal business hours and as
often as may be reasonably requested. Without in any way limiting the foregoing,
Company will, upon the request of Administrative Agent, participate in a meeting
of Agents and Lenders once during each Fiscal Year to be held at Company's 5
corporate offices (or such other location as may be agreed to by Company and
Administrative Agent) at such time as may be agreed to by Company and
Administrative Agent.
6.6 Compliance with Laws. etc.
Company shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including all Pure Food and Drug Laws), noncompliance
with which could reasonably be expected to cause a Material Adverse Effect.
6.7 Environmental Disclosure and Inspection.
A. Company shall, and shall cause each of its Subsidiaries to, exercise all due
diligence in order to comply and cause (i) all tenants under any leases or
occupancy agreements affecting any portion of the Facilities and (ii) all other
Persons on or occupying such property, to comply with all Environmental Laws.
B. Company agrees that Administrative Agent may, from time to time and in its
reasonable discretion, retain, at Company's expense, an independent professional
consultant to review any report relating to Hazardous Materials prepared by or
for Company and to conduct its own investigation of any Facility currently
owned, leased, operated or used by Company or any of its Subsidiaries, and
Company agrees to use all reasonable efforts to obtain permission for
Administrative Agent's professional consultant to conduct its own investigation
of any such Facility previously owned, leased, operated or used by Company or
any of its Subsidiaries. Company shall use its reasonable efforts to obtain for
Administrative Agent and its agents, employees, consultants and contractors the
right, upon reasonable notice to Company, to enter into or on to the Facilities
currently owned, leased, operated or used by Company or any of its Subsidiaries
to perform such tests on such property as are reasonably
<PAGE>
necessary to conduct such a review and/or investigation. Any such investigation
of any Facility shall be conducted, unless otherwise agreed to by Company and
Administrative Agent, during normal business hours and, to the extent reasonably
practicable, shall be conducted so as not to interfere with the ongoing
operations at any such Facility or to cause any damage or loss to any property
at such Facility. Company and Administrative Agent hereby acknowledge and agree
that any report of any investigation conducted at the request of Administrative
Agent pursuant to this subsection 6.7B will be obtained and shall be used by
Administrative Agent and Lenders for the purposes of Lenders' internal credit
decisions, to monitor and police the Loans and to protect Lenders' security
interests, if any, created by the Loan Documents. Administrative Agent agrees to
deliver a copy of any such report to Company with the understanding that Company
acknowledges and agrees that (i) it will indemnify and hold harmless each Agent
and Lender from any costs, losses or liabilities relating to any Loan Party's
use of or reliance on such report, (ii) no Agent nor any Lender makes any
representation or warranty with respect to such report, and (iii) by delivering
such report to Company, no Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.
C. Company shall promptly advise Administrative Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Materials required to be
reported to any federal, state, local or foreign governmental or regulatory
agency under any applicable Environmental Laws, (ii) any and all written
communications with respect to any Environmental Claims that have a reasonable
possibility of giving rise to a Material Adverse Effect or with respect to any
Release of Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency, (iii) any remedial action taken by
Company or any other Person in response to (x) any Hazardous Materials on, under
or about any Facility, the existence of which has a reasonable possibility of
resulting in an Environmental Claim having a Material Adverse Effect, or (y) any
Environmental Claim that could have a Material Adverse Effect, (iv) Company's
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of any Facility that could cause such Facility or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use thereof under any Environmental Laws, and (v) any request for information
from any governmental agency that suggests such agency is investigating whether
Company or any of its Subsidiaries may be potentially responsible for a Release
of Hazardous Materials.
D. Company shall promptly notify Administrative Agent of (i) any proposed
acquisition of stock, assets, or property by Company or any of its Subsidiaries
that could reasonably be expected to expose Company or any of its Subsidiaries
to, or result in, Environmental Claims that could have a Material Adverse Effect
or that could reasonably be expected to have a material adverse effect on any
Governmental Authorization then held by Company or any of its Subsidiaries and
(ii) any proposed action to be taken by Company or any of its Subsidiaries to
commence manufacturing, industrial or other similar operations that could
reasonably be expected to subject Company or any of its Subsidiaries to
additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
<PAGE>
E. Company shall, at its own expense, provide copies of such documents or
information as Administrative Agent may reasonably request in relation to any
matters disclosed pursuant to this subsection 6.7.
6.8 Company's Remedial Action Regarding Hazardous Materials.
Company shall promptly take, and shall cause each of its Subsidiaries promptly
to take, any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on
or under any Facility in order to comply with all applicable Environmental Laws
and Governmental Authorizations unless the failure to so comply could not
reasonably be expected to have a Material Adverse Effect. In the event Company
or any of its Subsidiaries takes any remedial action with respect to any
Hazardous Materials on or under any Facility, Company or such Subsidiary shall
conduct and complete such remedial action in material compliance with all
applicable Environmental Laws, and in accordance with the policies, orders and
directives of all federal, state and local governmental authorities except when,
and only to the extent that, Company's or such Subsidiary's liability for such
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials is being contested in good faith by Company or such Subsidiary.
6.9 Execution of Subsidiary Guaranty and Subsidiary Security Agreements by
Subsidiaries and Future Subsidiaries.
In the event that any Person becomes a Subsidiary of Company after the date
hereof, Company will promptly notify Administrative Agent of that fact and cause
each such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security
Agreement and a new patent and trademark agreement substantially similar to the
Patent and Trademark Security Agreement, the Log Cabin Patent and Trademark
Security Agreement and the Duncan Hines Patent and Trademark Security Agreement
(collectively, the "Subsidiary Security Agreements"), and to take all such
further actions and execute all such further documents and instruments as may be
required to grant and perfect in favor of Administrative Agent, for the benefit
of Lenders, a First Priority security interest in all of the personal property
assets of such Subsidiary described in the Subsidiary Security Agreements.
Company shall deliver to Administrative Agent, together with such Loan
Documents, (i) certified copies of such Subsidiary's Articles or Certificate of
Incorporation (or comparable constituent documents), together, if applicable,
with a good standing certificate from the Secretary of State of the jurisdiction
of its incorporation, each to be dated a recent date prior to their delivery to
Administrative Agent, (ii) a copy, if applicable, of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant corporate secretary as of a
recent date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the incumbency and signatures of the officers of such Subsidiary executing the
Subsidiary Guaranty and to which such Subsidiary is a party and (b) the fact
that the attached resolutions of the Board of Directors of such Subsidiary
authorizing the execution, delivery and performance of the Subsidiary Guaranty
and the Subsidiary Security Agreements to which
<PAGE>
such Subsidiary is a party are in full force and effect and have not been
modified or rescinded, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Administrative Agent and its
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of the
Subsidiary Guaranty and the Subsidiary Security Agreements to which such
Subsidiary is a party, (c) the enforceability of the Subsidiary Guaranty and the
Subsidiary Security Agreements to which such Subsidiary is a party against such
Subsidiary, and (d) such other matters as Administrative Agent may reasonably
request, all of the foregoing to be reasonably satisfactory in form and
substance to Administrative Agent and its counsel.
6.10 Conforming Leasehold Interests; Matters Relating to Additional Real
Property Collateral.
A. Conforming Leasehold Interests. If Company or any of its Subsidiaries
acquires any Leasehold Property, Company shall, or shall cause such Subsidiary
to, use its best efforts (without requiring Company or such Subsidiary to
relinquish any material rights or incur any material obligations or to expend
more than a nominal amount of money over and above the reimbursement, if
required, of the landlord's out-of-pocket costs, including attorneys fees) to
cause such Leasehold Property to be a Conforming Leasehold Interest.
B. Additional Mortgages etc. From and after the Closing Date, in the event
that (i) Company or any Subsidiary Guarantor acquires any fee interest in real
property or any Leasehold Property or (ii) at the time any Person becomes a
Subsidiary Guarantor, such Person owns or holds any fee interest in real
property or any Leasehold Property, in either case excluding any such Real
Property Asset the encumbrancing of which requires the consent of any applicable
lessor or (in the case of clause (ii) above) then-existing senior lienholder,
where Company and its Subsidiaries are unable to obtain such lessor's or senior
lienholder's consent (any such non-excluded Real Property Asset described in the
foregoing clause (i) or (ii) being a ("Mortgaged Property"), Company or such
Subsidiary Guarantor shall deliver to Administrative Agent, as soon as
practicable after such Person acquires such Mortgaged Property or becomes a
Subsidiary Guarantor, as the case may be, the following:
(i) Additional Mortgage. A fully executed and notarized Mortgage in proper form
for recording in all appropriate places in all applicable jurisdictions,
encumbering the interest of such Loan Party in such Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to such Loan Party,
in form and substance satisfactory to Administrative Agent and its counsel,
as to the due authorization, execution and delivery by such Loan Party of
such Mortgage and such other matters as Administrative Agent may reasonably
request, and (b) if required by Administrative Agent, an opinion of counsel
(which counsel shall be reasonably satisfactory to Administrative Agent) in
the state in which such Mortgaged Property is located with respect to the
enforceability of the form of Mortgage to be recorded in such state and
such other matters (including any matters governed by the laws of such
state regarding personal property security interests in respect of any
<PAGE>
Collateral) as Administrative Agent may reasonably request, in each case
in form and substance reasonably satisfactory to Administrative Agent;
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest. In the case
of a Mortgaged Property consisting of a Leasehold Property, (a) a
Landlord Consent and Estoppel and (b) evidence that such Leasehold
Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent, an ALTA
mortgagee title insurance policy or an unconditional commitment therefor
(a "Mortgage Policy") issued by the Title Company with respect to such
Mortgaged Property, in an amount satisfactory to Administrative Agent,
insuring fee simple title to, or a valid leasehold interest in, such
Mortgaged Property vested in such Loan Party and assuring Administrative
Agent that such Mortgage creates a valid and enforceable First Priority
mortgage Lien on such Mortgaged Property, subject only to a standard
survey exception, which Mortgage Policy (1) shall include an endorsement
for mechanics' liens, for future advances under this Agreement and for
any other matters reasonably requested by Administrative Agent and (2)
shall provide for affirmative insurance and such reinsurance as
Administrative Agent may reasonably request, all of the foregoing in
form and substance reasonably satisfactory to Administrative Agent; and
(b) evidence satisfactory to Administrative Agent that such Loan Party
has (i) delivered to the Title Company all certificates and affidavits
required by the Title Company in connection with the issuance of the
Mortgage Policy and (ii) paid to the Title Company or to the appropriate
governmental authorities all expenses and premiums of the Title Company
in connection with the issuance of the Mortgage Policy and all recording
and stamp taxes (including mortgage recording and intangible taxes)
payable in connection with recording the Mortgage in the appropriate
real estate records;
(v) Title Report. If no Mortgage Policy is required with respect to such
Mortgaged Property, a title report issued by the Title Company with
respect thereto, dated not more than 30 days prior to the date such
Mortgage is to be recorded and satisfactory in form and substance to
Administrative Agent;
(vi) Conies of Documents Relating to Title Exceptions. Copies of all recorded
documents listed as exceptions to title or otherwise referred to in the
Mortgage Policy or title report delivered pursuant to clause (v) or (vi)
above;
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence, which may be
in the form of a letter from an insurance broker or a municipal
engineer, as to (1) whether such Mortgaged Property is a Flood Hazard
Property and (2) if so, whether the community in which such Flood Hazard
Property is located is participating in the National Flood Insurance
Program, (b) if such Mortgaged Property is a Flood Hazard Property, such
Loan Party's written acknowledgment of receipt of written notification
from Administrative Agent (1) that such Mortgaged Property is a Flood
Hazard
<PAGE>
Property and (2) as to whether the community in which such Flood
Hazard Property is located is participating in the National Flood
Insurance Program, and (c) in the event such Mortgaged Property is a
Flood Hazard Property that is located in a community that participates
in the National Flood Insurance Program, evidence that Company has
obtained flood insurance in respect of such Flood Hazard Property to the
extent required under the applicable regulations of the Board of
Governors of the Federal Reserve System; and
(viii) Environmental Audit. If required by Administrative Agent, reports and
other information, in form, scope and substance satisfactory to
Administrative Agent and prepared by environmental consultants
satisfactory to Administrative Agent, concerning any environmental
hazards or liabilities to which Company or any of its Subsidiaries may
be subject with respect to such Mortgaged Property.
6.11 Interest Rate Protection.
Within 180 days after the Effective Date, Company shall enter into one or more
Interest Rate Agreements with respect to the Loans, in an amount of not less
than 50% of the aggregate amount of Consolidated Total Debt, which Interest Rate
Agreements shall have the effect of establishing a maximum interest rate of not
more than 10% per annum with respect to such notional principal amount, each
such Interest Rate Agreement to be in form and substance satisfactory to
Administrative Agent and with a term of not less than three years from the
Effective Date.
6.12 Further Assurances.
At any time or from time to time upon the request of Administrative Agent,
Company will, at its expense, promptly execute, acknowledge and deliver such
further documents and do such other acts and things as Administrative Agent may
reasonably request in order to effect fully the purposes of the Loan Documents
and to provide for payment of the Obligations in accordance with the terms of
this Agreement, the Notes and the other Loan Documents. In furtherance and not
in limitation of the foregoing, each of Holdings and Company shall take, and
cause each of its Subsidiaries to take, such actions as Administrative Agent may
reasonably request from time to time (including, without limitation, the
execution and delivery of guaranties, security agreements, pledge agreements,
Mortgages, stock powers, financing statements and other documents, the filing or
recording of any of the foregoing, title insurance with respect to any of the
foregoing that relates to an interest in real property, the delivery of stock
certificates and other collateral with respect to which perfection is obtained
by possession, and the obtaining of Collateral Access Agreements, in form and
substance satisfactory to Administrative Agent, executed by any Person which is
party to a co-packing agreement with Company or any of its Subsidiaries under
which equipment of Company or its Subsidiaries is maintained at a facility of
such Person) to ensure that the Obligations are guarantied by Holdings and
Subsidiary Guarantors and are secured by substantially all of the assets of
Company and its Subsidiaries and all of the capital stock of Company and
Subsidiary Guarantors. In the event that Company or any of its Subsidiaries
creates a new
<PAGE>
Subsidiary, all of the capital stock or partnership interests of such new
Subsidiary shall be duly and validly pledged to Administrative Agent for the
benefit of Agents and Lenders pursuant to the Collateral Documents, subject to
no other Liens.
SECTION 7.
NEGATIVE COVENANTS
Each of Holdings and Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Holdings and Company, as applicable, shall perform, and shall cause
each of its Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to the Obligations;
(ii) Holdings and its Subsidiaries may become and remain liable with respect
to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished (other than
any such Indebtedness corresponding to extinguished Contingent
Obligations permitted under subsections 7.4(i)(b) and (c));
(iii) Company and its Subsidiaries may become and remain liable with respect
to Indebtedness (a) under Capital Leases capitalized on the
consolidated balance sheet of Company as liabilities, (b) in respect
of sale and lease-back transactions expressly permitted under
subsection 7.8 and (c) secured by Liens permitted under subsection
7.2A(iii); provided that the aggregate amount of Indebtedness
--------
permitted under this clause (iii) shall not exceed $10,000,000 at any
time outstanding;
(iv) Company may become and remain liable with respect to Indebtedness to any
of its domestic Wholly Owned Subsidiaries, and any domestic Wholly Owned
Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other domestic Wholly Owned Subsidiary of
Company, provided that (a) all such intercompany Indebtedness shall be
--------
evidenced by promissory notes, (b) all such intercompany Indebtedness
owed by Company to any of its respective Subsidiaries shall be
subordinated in right of payment to the payment in full of the
<PAGE>
Obligations pursuant to the terms of the applicable promissory notes or
an intercompany subordination agreement, in each case in form and
substance satisfactory to Administrative Agent, and (c) any payment by
Company or by any Subsidiary of Company under any guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
--- -----
intercompany Indebtedness owed by Company or by such Subsidiary to
Company or to any of its Subsidiaries for whose benefit such payment is
made;
(v) Company may become and remain liable with respect to Indebtedness under
the Subordinated Note Documents;
(vi) Company may become and remain liable with respect to Indebtedness the
proceeds of which are applied to refinance all or a portion of the Term
Loans, the Revolving Loans and the Subordinated Notes; provided, that
--------
such Indebtedness shall be subordinated in right of payment to the
Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms which taken as a whole are no less
favorable to Company, its Subsidiaries and Lenders than the
corresponding terms of the Subordinated Note Documents, with interest
payable thereon in amounts consistent with the then prevailing rate in
the market for comparable debt Securities;
(vii) Company may become and remain liable with respect to Permitted Seller
Notes; provided that the aggregate principal amount of such Permitted
--------
Seller Notes issued after the Closing Date shall not exceed $10,000,000;
and
(viii) Holdings may become and remain liable with respect to Indebtedness to
Company in respect of advances permitted under subsection 7.3(vi);
provided that (a) the aggregate principal amount of such Indebtedness
--------
shall not exceed the amount of such advances, (b) all such Indebtedness
shall be evidenced by promissory notes, and (c) any payment by Holdings
under the Holdings Guaranty or any other guaranty of the Obligations
shall result in a pro tanto reduction of the amount of such Indebtedness
--- -----
owed by Holdings to Company; and
(ix) Company and its Subsidiaries may become and remain liable with respect
to other Indebtedness in an aggregate principal amount not to exceed at
any time outstanding $15,000,000.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Holdings and Company shall not, and shall not permit
any of their respective Subsidiaries to, directly or indirectly, create, incur,
assume or permit to exist any Lien on or with respect to any property or asset
of any kind (including any document or instrument in respect of goods or
accounts receivable) of Holdings or any of its Subsidiaries, whether now owned
or hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing
<PAGE>
statement, or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
state or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens securing Indebtedness permitted by subsection 7.1(iii)(c) incurred
(a) to finance the acquisition, construction or improvement of any
tangible personal property assets, provided that (1) such Liens shall be
--------
created within 180 days after the acquisition, construction or
improvement of such assets, and (2) the principal amount of Indebtedness
secured by any such Liens shall at no time exceed 100%, and the proceeds
of such Indebtedness shall be used to provide not less than 80%, of the
original purchase price of such asset or the amount expended to
construct or improve such asset, as the case may be; or (b) to renew,
extend or refinance any Indebtedness described in clause (a), provided
--------
that the amount of any such Indebtedness does not exceed the amount of
Indebtedness so renewed, extended or refinanced which is unpaid and
outstanding immediately prior to such renewal, extension or refinancing;
provided that in the case of clause (a) or (b) such Liens attach solely
--------
the assets financed with such Indebtedness;
(iv) Liens on any asset securing Indebtedness permitted by Section
7.l(iii)(b); provided that (a) the proceeds of such Indebtedness shall
--------
be at least equal to 80% of the fair market value (as determined in good
faith by the Board of Directors, or any duly authorized committee
thereof, of Company) of such asset and (b) at the time of incurrence of
such Indebtedness, no Event of Default shall have occurred and be
continuing or would result therefrom;
(v) Liens on assets held under Capital Leases permitted under subsection 7.1
(iii)(a); and
(vi) Other Liens on assets of Company and its Subsidiaries securing
Indebtedness in an aggregate amount not to exceed $2,500,000 at any time
outstanding.
B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries
shall create or assume any consensual Lien upon any of its properties or assets,
whether now owned or hereafter acquired, other than Liens excepted by the
provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
--------
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
<PAGE>
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
7.3 Investments; Joint Ventures.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in Cash
Equivalents;
(ii) Holdings may continue to own the Investments owned by it as of the
Effective Date (after giving effect to the Duncan Hines Acquisition) in
Company;
(iii) Company and its Subsidiaries may make intercompany loans to the extent
permitted under subsection 7.1(iv);
(iv) Company and its Subsidiaries may make Consolidated Capital Expenditures
permitted by subsection 7.6D;
(v) Company and its Subsidiaries may make and own Investments in connection
with a Permitted Acquisition;
(vi) Company may make advances to Holdings, in lieu of the payment of cash
dividends, to enable Holdings to make the payments contemplated by
subsections 7.5(v)(a) and (b);
(vii) Company may make loans and advances to employees and directors of
Holdings or Company to purchase limited liability interests of MBW LLC,
provided that the aggregate amount of such loans and advances shall not
--------
exceed $1,500,000 at any time outstanding; and
<PAGE>
(viii) Company and its Subsidiaries may make and own other Investments in an
aggregate amount not to exceed at any time $7,500,000.
7.4 Contingent Obligations.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Holdings and Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations arising under (a) their respective
Guaranties and (b) guarantees of Indebtedness under the Subordinated
Note Documents or permitted under subsection 7.l(vi);
(ii) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit;
(iii) Company may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements entered into with Lenders or
Affiliates of Lenders with respect to which the aggregate net amount
which Company would be liable to pay to counterparties thereunder in the
event all such Interest Rate Agreements were terminated at the time of
determination shall not exceed $2,500,000 at any time;
(iv) Company and its Subsidiaries may become and remain liable with respect
to Contingent Obligations in respect of customary indemnification and
purchase price adjustment obligations incurred in the ordinary course of
business in connection with Asset Sales or other sales of assets;
(v) Company and its Subsidiaries may become and remain liable with respect
to Contingent Obligations under guarantees in the ordinary course of
business of the obligations of suppliers, landlords, customers,
franchisees and licensees of Company and its Subsidiaries in an
aggregate amount not to exceed at any time $500,000;
(vi) Company and its Subsidiaries may become and remain liable with respect
to Contingent Obligations under food product futures arrangements
consistent with past practices of the Business, the Log Cabin Business
and the Duncan Hines Business and of any business acquired under
subsection 7.7(vii) for the supply of food products used in the business
of Company and its Subsidiaries; and
(vii) Company and its Subsidiaries may become and remain liable with respect
to other Contingent Obligations; provided that the maximum aggregate
--------
liability, contingent or otherwise, of Company and its Subsidiaries in
respect of all such Contingent Obligations shall at no time exceed
$500,000.
<PAGE>
7.5 Restricted Junior Payments.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that (i) Company may make
--------
scheduled interest payments in respect of the Subordinated Notes in accordance
with the terms thereof and of the Subordinated Note Indentures; provided that to
--------
the extent the Subordinated Note Indentures permit Company to pay interest
thereon or liquidated damages in like-kind instruments in a principal amount
equal to the amount of such interest or liquidated damages, Company shall pay
such interest or liquidated damages in such like-kind instruments; (ii) Company
and/or Holdings, as applicable, may make Restricted Junior Payments to the
extent necessary to redeem or defease all or any portion of the Indebtedness
under the Subordinated Note Documents with proceeds from Indebtedness permitted
under subsection 7.1(vi) and/or an initial public offering of Holdings Common
Stock (provided, that in the case of an initial public offering of Holdings
--------
Common Stock, at least 50% of the Equity Proceeds from such initial public
offering shall be applied to prepay the Loans and/or reduce the Revolving Credit
Commitments, except that if the Senior Leverage Ratio is less than 3.25:1.00
after giving effect to such initial public offering and the anticipated
prepayment of the Loans, then less than 50% of such Equity Proceeds may be
applied to prepay the Loans; provided further, however, that in any event at
-------- -------
least $25,000,000 of such Equity Proceeds shall be applied to prepay the Loans
and/or reduce the Revolving Credit Commitments and not more than $70,000,000 of
such Equity Proceeds shall be applied to repay or prepay Subordinated
Indebtedness); (iii) Company may make scheduled interest payments in respect of
Permitted Seller Notes permitted under subsection 7.1(vii) in accordance with
the terms of such Permitted Seller Notes; (iv) Company may make regularly
scheduled payments of interest in respect of any Subordinated Indebtedness in
accordance with the terms of, and only to the extent required by, and subject to
the subordination provisions contained in, the indenture or other agreement
pursuant to which such Subordinated Indebtedness was issued, as such indenture
or other agreement may be amended from time to time to the extent permitted
under subsection 7.12B; provided, that to the extent the terms of such
--------
Subordinated Indebtedness permit Company to pay interest or liquidated damages
on such Subordinated Indebtedness in like-kind instruments in a principal amount
equal to the amount of such interest or liquidated damages, Company shall pay
such interest or liquidated damages with such like-kind instruments; (v) Company
may make Restricted Junior Payments to Holdings (a) in an aggregate amount not
to exceed $500,000 in any Fiscal Year, to the extent necessary to permit MBW LLC
and Holdings to pay general administrative costs and expenses, (b) to the extent
necessary to permit Holdings to discharge the consolidated tax liabilities of
Holdings and its Subsidiaries, and (c) to the extent necessary to permit
Holdings or MBW LLC to pay transaction fees to the MDC Entities and/or Dartford
and/or Fenway in connection with acquisitions made after the Closing Date in
accordance with the terms of the MDC Advisory Services Agreement, the Dartford
Management Agreement and the Fenway Agreement, in each case so long as Holdings
or MBW LLC applies the amount of any such Restricted Junior Payments for such
purposes; (vi) so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing or shall be caused thereby, Company and
Holdings may make Restricted Junior Payments in an aggregate amount not to
exceed
<PAGE>
$2,000,000 to permit MBW LLC to repurchase limited liability interests in MBW
LLC or Holdings to repurchase Holdings Common Stock from officers, directors or
employees of MBW LLC or any of its Subsidiaries or from Dartford following
termination of employment of any such officer, director or employee by reason of
death, disability, retirement or resignation or following other events
customarily requiring or permitting such repurchase, in each case so long as MBW
LLC or Holdings, as applicable, applies the amount of any such Restricted Junior
Payment for such purpose; and (vii) so long as (x) no Event of Default or
Potential Event of Default shall have occurred and be continuing or shall be
caused thereby, (y) Company shall be in compliance, on a pro forma basis giving
effect thereto, with the covenants set forth in subsection 7.6 hereof and (z)
the Leverage Ratio (calculated on a pro forma basis giving effect thereto) shall
not be greater than 3.50:1.00 (and Company shall have delivered to
Administrative Agent an Officer's Certificate (together with supporting
information therefor), in form and substance reasonably satisfactory to
Administrative Agent, certifying to the effect of clauses (y) and (z)), Company
and Holdings may make Restricted Junior Payments to the extent necessary to
permit MBW LLC to repurchase limited partnership interests from Dartford upon
Dartford's exercise of the Company Repurchase Option (as such term is defined in
the MBW LLC Agreement) as such option is in effect as of the Closing Date, in
each case so long as MBW LLC applies the amount of such Restricted Junior
Payments for such purposes.
7.6 Financial Covenants.
A. Minimum Consolidated Cash Interest Coverage Ratio. Holdings and Company
shall not permit the Consolidated Cash Interest Coverage Ratio for any four-
Fiscal Quarter period ending during any of the test periods set forth in the
table below to be less than the correlative ratio for such test period set forth
in the table below:
MINIMUM CONSOLIDATED
CASH INTEREST COVERAGE
TEST PERIOD RATIO
- --------------------------------------------------------------------------------
6/30/98 - 12/31/98 1.55:1.00
1/01/99 - 12/31/99 1.75:1.00
1/01/00 - 12/31/00 2.00:1.00
1/01/01 - 12/31/01 2.25:1.00
1/01/02 - 12/31/02 2.50:1.00
1/01/03 - 12/31/03 2.50:1.00
1/01/04 - 12/31/04 2.50:1.00
1/01/05 - 12/31/05 2.50:1.00
1/01/06 - 7/16/06 2.50:1.00
<PAGE>
B. Maximum Leverage Ratio. Holdings and Company shall not permit the ratio of
(i) the excess of (a) Consolidated Total Debt as of the last day of any Fiscal
Quarter ending during any of the test periods set forth in the table below minus
(b) cash on hand of Company to the extent the amount of such cash exceeds
$3,500,000 as of such date, to (ii) Consolidated EBITDA for the four-Fiscal
Quarter period ending on such date to exceed the correlative ratio for such test
period set forth in the table below:
MAXIMUM
TEST PERIOD LEVERAGE RATIO
6/30/98 - 12/31/98 6.00:1.00
1/01/99 - 12/31/99 5.50:1.00
1/01/00 - 12/31/00 5.00:1.00
1/01/01 - 12/31/01 4.50:1.00
1/01/02 - 12/31/02 4.00:1.00
1/01/03 - 12/31/03 4.00:1.00
1/01/04 - 12/31/04 4.00:1.00
1/01/05 - 12/31/05 4.00:1.00
1/01/06 - 7/16/06 4.00:1.00
C. Minimum Fixed Charge Coverage Ratio. Holdings and Company shall not permit
the ratio of (i) Consolidated EBITDA for any four-Fiscal Quarter period ending
during any of the test periods set forth in the table below to (ii) Consolidated
Fixed Charges for such four-Fiscal Quarter period to be less than the
correlative ratio for such test period set forth in the table below:
<PAGE>
MINIMUM FIXED CHARGE
TEST PERIOD COVERAGE RATIO
6/30/98 - 12/31/98 1.15:1.00
1/01/99 - 12/31/99 1.25:1.00
1/01/00 - 12/31/00 1.35:1.00
1/01/01 - 12/31/01 1.55:1.00
1/01/02 - 12/31/02 1.65:1.00
1/01/03 - 12/31/03 1.65:1.00
1/01/04 - 12/31/04 1.65:1.00
1/01/05 - 12/31/05 1.65:1.00
1/01/06 - 7/16/06 1.65:1.00
D. Maximum Consolidated Capital Expenditures. Holdings and Company shall not,
and shall not permit any of their respective Subsidiaries to, make or incur
Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an
aggregate amount in excess of the corresponding amount (the "Maximum
Consolidated Capital Expenditures Amount") set forth below opposite such Fiscal
Year; provided that the Maximum Consolidated Capital Expenditures Amount for any
--------
Fiscal Year shall be increased by an amount equal to the excess, if any (but in
no event more than 50% of the Maximum Consolidated Capital Expenditures Amount
for the previous Fiscal Year), of the Maximum Consolidated Capital Expenditures
Amount for the previous Fiscal Year over the actual amount of Consolidated
Capital Expenditures for such previous Fiscal Year:
MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
(OR PORTION THEREOF) AMOUNT
Fiscal Year ending in December 1998 $7,500,000
and each Fiscal Year thereafter
; provided, however, that for purposes of this subsection 7.6D, Consolidated
-------- -------
Capital Expenditures shall not include (i) expenditures not exceeding $6,000,000
in the aggregate incurred on or prior to September 30, 1998 related to the
Business and the Log Cabin Business (a) to relocate Company's assets, (b) to
purchase computers and computer-related equipment and (c) to pay transition
related expenses in connection with the foregoing and (ii) expenditures not
exceeding $15,000,000 in the aggregate incurred on or prior to June 30, 1999 to
relocate the Company's assets related to the Duncan Hines Business and
transition related expenses in connection therewith.
<PAGE>
E. Certain Calculations.
(i) With respect to calculations of Consolidated Fixed Charges, Consolidated
EBITDA and Consolidated Cash Interest Expense for any four-Fiscal Quarter
period including the Effective Date (each such period being a "Pro Forma
Calculation Period"), such calculations shall be made on a pro forma basis
assuming, in each case, (a) that the Effective Date, the acquisitions and
the related borrowings by Company pursuant to this Agreement occurred on
the first day of the applicable Pro Forma Calculation Period; (b) that
Consolidated EBITDA and Consolidated Capital Expenditures for the two
applicable Fiscal Quarters ending prior to the Effective Date are as set
forth on Schedule 7.6E annexed hereto; and (c) that, with respect to
-------------
calculations of Consolidated Cash Interest Expense and each component of
Consolidated Fixed Charges other than Consolidated Capital Expenditures
(Consolidated Cash Interest Expense and each such component being,
individually, a "Fixed Charge Component"), the amount of each such Fixed
Charge Component for the Pro Forma Calculation Period ending in June 1998
shall equal the product of (i)(x) the amount of such Fixed Charge Component
for the Fiscal Quarter ending in June 1998 plus (y)(l) the Fixed Charged
Component for the Fiscal Quarter ending in March 1998 for the Business and
the Log Cabin Business plus (2) the Fixed Charge Component for the Duncan
----
Hines Business for the period from the Effective Date to March 31, 1998
(multiplied by the product of ninety (90) divided by the number of days
----------
from the Effective Date to March 31, 1998) multiplied by (ii) 2.
-------------
(ii) With respect to any period during which new Subsidiaries, assets or
businesses are acquired pursuant to subsection 7.7(vii), for purposes of
determining compliance with the financial covenants set forth in this
subsection 7.6, Consolidated EBITDA and Consolidated Interest Expense shall
be calculated with respect to such periods and such Subsidiaries, assets or
businesses on a pro forma basis (including (x) any adjustments certified by
the chief financial officer of the Company, that would, in the reasonable
determination of the Company satisfy the requirements of Rule 11-02(a) of
Regulation S-X of the Securities Act as if included in a registration
statement filed with the Securities and Exchange Commission and (y)) any
other operating expense reductions reasonably expected to result from any
acquisition of stock or assets if such expected reductions are (1) set
forth in reasonable detail in a plan approved by and set forth in
resolutions adopted by the Board of Directors of the Company, and (2)
limited to operating expenses specified in such plan (and, if any
reductions are set forth in a range, the lowest amount of such range) that
would otherwise have resulted in the payment of cash within twelve months
after the date of consummation of such transaction, net of any operating
expenses (other than extraordinary items, non-recurring or temporary
charges and other similar one-time expenses) reasonably expected to be
incurred to implement such plan, and that are to be paid in cash during
such twelve-month period, certified by the chief financial officer of the
Company) using the historical financial statements of all entities or
assets so acquired or to be acquired and the consolidated financial
statements of Company and its Subsidiaries which shall be reformulated (i)
as if such acquisition, and any acquisitions which have been consummated
during such period, and any Indebtedness or other liabilities incurred in
connection with any such acquisition had been consummated or incurred at
the beginning
<PAGE>
of such period (and assuming that such Indebtedness bears interest
during any portion of the applicable measurement period prior to the
relevant acquisition at the weighted average of the interest rates
applicable to outstanding Loans during such period), and (a) otherwise
in conformity with certain procedures to be agreed upon between
Administrative Agent and Company, all such calculations to be in form
and substance satisfactory to Administrative Agent.
7.7 Restriction on Fundamental Changes; Asset Sales.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, alter the corporate, capital or legal structure of Holdings or
any of its Subsidiaries, create any new Subsidiaries or enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, sub-lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise any part of the business, property or fixed assets of, or stock or
other evidence of beneficial ownership of, any Person, except:
(i) Company may make the Duncan Hines Acquisition on the Effective Date;
(ii) any Subsidiary of Company may be merged with or into Company or any
wholly owned Subsidiary Guarantor, or be liquidated, wound up or
dissolved, or all or any substantial part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly owned Subsidiary Guarantor; provided that, in the case of such a
--------
merger, Company or such wholly owned Subsidiary Guarantor shall be the
continuing or surviving corporation;
(iii) Company and its Subsidiaries may make Consolidated Capital Expenditures
permitted under subsection 7.6D;
(iv) Company and its Subsidiaries may acquire inventory, equipment and other
assets in the ordinary course of business;
(v) Company and its Subsidiaries may sell or otherwise dispose of assets in
transactions that do not constitute Asset Sales; provided that the
--------
consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the
board of directors of Company);
(vi) Company and its Subsidiaries may make any Asset Sale of assets that
have, in the aggregate, a fair market value (determined in good faith by
the board of directors of Company) not in excess of 10% of Consolidated
EBITDA for the four-Fiscal Quarter period most recently ended prior to
such Asset Sale; provided that
--------
<PAGE>
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof (determined in good faith
by the board of directors of Company); (y) not less than 80% of the
consideration received shall be cash; and (z) the proceeds of such Asset
Sales shall be applied as required by subsection 2.4B(iii)(a); and
(vii) Company or any Subsidiary of Company may make acquisitions of assets and
businesses (including acquisitions of the capital stock or other equity
interests of another Person), provided that:
--------
(a) immediately prior to and after giving effect to any such acquisition,
Company and its Subsidiaries shall be in compliance with the provisions of
subsection 7.11 hereof;
(b) after giving effect to any such acquisition, the sum of (x) the amount of
cash on hand of Company plus (y) the amount by which the Revolving Loan
----
Commitments exceed the Total Utilization of Revolving Loan Commitments,
shall equal or exceed $25,000,000 in the first 12 months after the
Effective Date and $15,000,000 thereafter;
(c) (1) Company shall be in compliance, on a pro forma basis giving effect to
the proposed acquisition, with the covenants set forth in subsection 7.6
hereof, (2) if any such acquisition is made prior to January 16, 1999, the
Leverage Ratio (calculated on a pro forma basis giving effect to the
proposed acquisition) shall not be greater than the ratio set forth in
subsection 7.6B applicable at the time of such acquisition minus 0.25, (3)
the Senior Leverage Ratio (calculated on a pro forma basis giving effect to
the proposed acquisition) shall be less than 3.75:1.00 in Fiscal Years 1998
and 1999, 3.50:1.00 in Fiscal Years 2000 and 2001, and 3.25:1.00 thereafter
and (4) no Event of Default or Potential Event of Default shall have
occurred and be continuing at the time of such acquisition or shall be
caused thereby; and Company shall have delivered to Administrative Agent an
Officer's Certificate (together with supporting information therefor), in
form and substance reasonably satisfactory to Administrative Agent,
certifying as to the foregoing and as to the matters referred to in
subsections 7.7(vii)(a) and (b) above;
(d) any assets acquired pursuant to such acquisition shall be subject to a
First Priority Lien in favor of the Administrative Agent on behalf of
Lenders pursuant to the Collateral Documents; and
(e) each such acquisition shall be made on a fully consensual basis between
Company and its Subsidiaries, on the one hand, and the seller or sellers of
such assets or such business, on the other hand.
7.8 Sales and Lease-Backs.
<PAGE>
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease, whether an Operating
Lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (i) which Company or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Company or any of its Subsidiaries) or (a) which Company or
any of its Subsidiaries intends to use for substantially the same purpose as any
other property which has been or is to be sold or transferred by Company or any
of its Subsidiaries to any Person (other than Company or any of its
Subsidiaries) in connection with such lease, except that Company and its
Subsidiaries may enter into such sale and lease-back transactions so long as the
aggregate sales price under all such transactions in any Fiscal Year does not
exceed $5,000,000.
7.9 Transactions with Shareholders and Affiliates.
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 5% or more of any class of equity
Securities of Company or with any Affiliate of Company or of any such holder, on
terms that are less favorable to Company or that Subsidiary, as the case may be,
than those that might be obtained at the time from Persons who are not such a
holder or Affiliate; provided that the foregoing restriction shall not apply to
--------
(i) any transaction between Company and any of its Wholly Owned Subsidiaries or
between any of its Wholly Owned Subsidiaries, (ii) reasonable and customary fees
paid to members of the boards of directors of Holdings and its Subsidiaries,
(iii) any payment from Company to Holdings expressly permitted under subsection
7.5, (iv) fees, expenses and other amounts payable to the MDC Entities, Fenway
and Dartford on the Effective Date, (v) the Management Fees, (vi) any employment
agreement entered into by Holdings or any of its Subsidiaries in the ordinary
course of business, and (vii) any issuance of capital stock of Holdings in
connection with employment arrangements, stock options and stock ownership plans
of Holdings or any of its Subsidiaries entered into in the ordinary course of
business.
7.10 Disposal of Subsidiary Stock.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber or
dispose of any shares of capital stock or other equity Securities of any of
its Subsidiaries, except as permitted under this Agreement or the
Collateral Documents or to qualify directors if required by applicable law;
or
(ii) permit any of its Subsidiaries directly or indirectly to sell, assign,
pledge or otherwise encumber or dispose of any shares of capital stock or
other equity Securities of any of its Subsidiaries (including such
Subsidiary), except as permitted
<PAGE>
under this Agreement or the Collateral Documents or to Company, another
Wholly Owned Subsidiary of Company, or to qualify directors if required by
applicable law.
7.11 Conduct of Business.
Company shall not, and shall not permit any of its Subsidiaries to, engage in
any business other than (i) the businesses engaged in by Company and its
Subsidiaries on the Effective Date (after giving effect to the Duncan Hines
Acquisition) and those food businesses which are reasonably related to such
businesses, and (ii) such other lines of business as may be consented to by
Administrative Agent and Requisite Lenders.
7.12 Amendments or Waivers of Certain Related Agreements; Amendments of
Documents Relating to Subordinated Indebtedness; Designation of
"Designated Senior Indebtedness"; Preferred Stock.
A. Amendments or Waivers of Certain Related Agreements. Neither Holdings nor
any of its Subsidiaries will agree to any material amendment to, or waive any of
its material rights under, any of the Acquisition Agreement, the Log Cabin
Acquisition Agreement, the Duncan Hines Acquisition Agreement, the Assumption
Agreement, the Log Cabin Assumption Agreement, the Duncan Hines Assumption
Agreement, the MDC Advisory Services Agreement, the Dartford Management
Agreement, the Fenway Agreement, the Transition Agreements, the Log Cabin
Transition Agreements, the Duncan Hines Transition Agreements or the Red Wing
Co-Pack Agreements after the Effective Date if such amendment or waiver would be
adverse to Lenders without in each case obtaining the prior written consent of
Requisite Lenders to such amendment or waiver.
B. Amendments of Documents Relating to Subordinated Indebtedness. Company shall
not, and shall not permit any of its Subsidiaries to, amend or otherwise change
the terms of any Subordinated Indebtedness, or make any payment consistent with
an amendment thereof or change thereto, if the effect of such amendment or
change is to increase the interest rate on such Subordinated Indebtedness,
change (to earlier dates) any dates upon which payments of principal or interest
are due thereon, change any event of default or condition to an event of default
with respect thereto (other than to eliminate any such event of default or
increase any grace period related thereto), change the redemption, prepayment or
defeasance provisions thereof, change the subordination provisions thereof (or
of any guaranty thereof), or change any collateral therefor (other than to
release such collateral), or if the effect of such amendment or change, together
with all other amendments or changes made, is to increase materially the
obligations of the obliger thereunder or to confer any additional rights on the
holders of such Subordinated Indebtedness (or trustee or other representative on
their behalf) which would be adverse to Company or Lenders.
C. Designation of "Designated Senior Indebtedness". Company shall not designate
any Indebtedness as "Designated Senior Indebtedness" (as defined in the
<PAGE>
Subordinated Note Indentures) for purposes of the Subordinated Note Indentures,
without the prior written consent of Requisite Lenders.
D. Preferred Stock. Without the prior written approval of Requisite Lenders,
neither Holdings nor Company shall amend, restate, supplement or otherwise
modify its Certificate of Incorporation if the effect of such amendment,
restatement, supplement or modification is to provide for the issuance of any
preferred stock of Company or of Holdings or the filing or amendment of any
certificate of designation with respect thereto.
7.13 Fiscal Year.
Holdings and Company shall not change their Fiscal Year-end from the last
Saturday of December.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall occur:
8.l Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Lender in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement within five days after the date due; or
8.2 Default in Other Agreements.
(i) Failure of Company or any of its Subsidiaries to pay when due (a) any
principal of or interest on any Indebtedness (other than Indebtedness
referred to in subsection 8.1) in an individual principal amount of
$1,000,000 or more or any items of Indebtedness with an aggregate principal
amount of $2,000,000 or more or (b) any Contingent Obligation in an
individual principal amount of $1,000,000 or more or any Contingent
Obligations with an aggregate principal amount of $2,000,000 or more, in
each case beyond the end of any grace period provided therefor; or (ii)
breach or default by Company or any of its Subsidiaries with respect to any
other material term of (a) any evidence of any Indebtedness in an
individual principal amount of $1,000,000 or more or any items of
Indebtedness with an aggregate principal amount of $2,000,000 or more or
any Contingent Obligation in an individual principal amount of $1,000,000
or more or any Contingent Obligations with an aggregate principal amount of
$2,000,000 or more or (b) any loan agreement, mortgage, indenture or other
agreement relating to such Indebtedness or Contingent Obligation(s), if in
any case under this clause (ii) the effect of such breach or default is to
cause, or to permit the holder or holders of that Indebtedness or
Contingent Obligation(s) (or a trustee on behalf of
<PAGE>
such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case
may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 Breach of Certain Covenants.
Failure of Holdings or Company to perform or comply with any term or condition
contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 Breach of Warranty.
Any material representation, warranty, certification or other statement made by
MBW LLC or Holdings or any of its Subsidiaries in any Loan Document or in any
statement or certificate at any time given by MBW LLC or Holdings or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance with any term
contained in this Agreement or any of the other Loan Documents, other than any
such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Company becoming aware of such default or (ii) receipt by
Company of notice from any Agent or Lender of such default; or
8.6 Involuntary Bankruptcy:. Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or order
for relief in respect of MBW LLC, Holdings or Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, which decree or order
is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be
commenced against MBW LLC, Holdings or Company or any of its Subsidiaries
(other than Immaterial Subsidiaries) under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over MBW LLC, Holdings or
Company or any of its Subsidiaries (other than Immaterial Subsidiaries), or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of MBW LLC, Holdings or Company or any
of its Subsidiaries (other than Immaterial Subsidiaries) for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of
<PAGE>
the property of MBW LLC, Holdings or Company or any of its Subsidiaries
(other than Immaterial Subsidiaries), and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) MBW LLC, Holdings or Company or any of its Subsidiaries (other than
Immaterial Subsidiaries) shall have an order for relief entered with
respect to it or commence a voluntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or MBW LLC, Holdings or Company or any of
its Subsidiaries (other than Immaterial Subsidiaries) shall make any
assignment for the benefit of creditors; or (ii) MBW LLC, Holdings or
Company or any of its Subsidiaries (other than Immaterial Subsidiaries)
shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of
Directors of MBW LLC, Holdings or Company or any of its Subsidiaries (other
than Immaterial Subsidiaries) (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process involving
(i) in any individual case an amount in excess of $1,000,000 or (ii) in the
aggregate at any time an amount in excess of $2,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Holdings or
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or
in any event later than five days prior to the date of any proposed sale
thereunder); or
8.9 Dissolution.
Any order, judgment or decree shall be entered against Holdings or Company or
any of its Subsidiaries decreeing the dissolution or split up of Holdings or
Company or that Subsidiary and such order shall remain undischarged or unstayed
for a period in excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in a Material Adverse Effect; or there shall exist an Unfunded
Current Liability, individually or in the aggregate for all Pension Plans
(excluding for purposes of
<PAGE>
such computation any Pension Plans with respect to which there is no Unfunded
Current Liability), which would have a Material Adverse Effect; or
8.11 Change in Control.
(i) Prior to the consummation of any initial public offering of Holdings Common
Stock, MBW LLC shall cease to own directly 100% of the outstanding capital
stock of Holdings (other than Holdings Common Stock issued to employees or
directors of Holdings and its Subsidiaries pursuant to any employee stock
option or stock purchase plan or other employee benefit plan); or (ii)
Holdings shall at any time cease to own directly 100% of the outstanding
capital stock of Company; or (iii) prior to the consummation of any initial
public offering of Holdings Common Stock, (a) the MDC Entities, Dartford
and Fenway shall at any time not own, in the aggregate, at least 51% of the
combined voting power of Company's voting Securities; or (b) any Person
(other than the MDC Entities, Dartford and Fenway), including a "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
which includes such Person, shall purchase or otherwise acquire, directly
or indirectly, beneficial ownership of Securities of Company and, as a
result of such purchase or acquisition, any Person (together with its
associates and Affiliates), shall directly or indirectly beneficially own
in the aggregate Securities representing more than 30% of the combined
voting power of Company voting Securities; or (iv) at any time after the
consummation of any initial public offering of Holdings Common Stock, (a)
the MDC Entities, Dartford and Fenway together shall own, directly or
indirectly, in the aggregate, a lesser percentage of the combined voting
power of Company voting Securities than any other holder, including a
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act) which includes such holder, of such voting Securities; (b) a majority
of the members of the Board of Directors of Company shall not be Continuing
Directors; or (c) any Person (other than the MDC Entities, Dartford and
Fenway), including a "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) which includes such Person, shall purchase or
otherwise acquire, directly or indirectly, beneficial ownership of
Securities of Company and, as a result of such purchase or acquisition, any
Person (together with its associates and Affiliates), shall directly or
indirectly beneficially own in the aggregate Securities representing more
than 25% of the combined voting power of Company voting Securities; or
8.12 Invalidity of Guaranties.
At any time after the execution and delivery thereof, any Guaranty of the
Obligations of Company, for any reason other than the satisfaction in full of
all Obligations, ceases to be in hill force and effect or is declared to be null
and void (except with respect to the obligations thereunder of Immaterial
Subsidiaries of Company) or any Loan Party (other than Immaterial Subsidiaries
of Company) denies in writing that it has any further liability, including,
without limitation, with respect to future advances by Lenders, under any Loan
Document to which it is a party; or
<PAGE>
8.13 Failure of Security
Any Collateral Document shall, at any time, cease to be in full force and effect
(other than by reason of a release of Collateral thereunder in accordance with
the terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void; or the validity or
enforceability thereof shall be contested in writing by any Loan Party; or Agent
shall not have or shall cease to have a valid security interest in any
Collateral purported to be covered thereby, perfected and with the priority
required by the relevant Collateral Document, for any reason other than the
failure of Agents or any Lender to take any action within its control, subject
only to Liens permitted under the applicable Collateral Documents; or
8.14 Failure to Consummate Duncan Hines Acquisition.
The Duncan Hines Acquisition shall not be consummated in accordance with this
Agreement and the Duncan Hines Related Agreements concurrently with the making
of the Loans, or (i) the Duncan Hines Acquisition, (ii) the Log Cabin
Acquisition or (iii) the Acquisition shall be unwound, reversed or otherwise
rescinded in whole or in pan for any reason; or
8.15 Termination or Breach of Certain Transition Agreements, Log Cabin
Transition Agreements and Duncan Hines Transaction Agreements.
The Log Cabin Co-Pack Agreement, the Duncan Hines Co-Pack Agreement, Red Wing
Co-Pack Agreements or the Flavor Supply Agreement shall terminate for any reason
whatsoever or any such party shall fail to perform its obligations under any
such agreement and such failure could reasonably be expected to result in a
Material Adverse Effect, and, in either case, Company shall not have made
arrangements satisfactory to Requisite Lenders for obtaining any services that
are required to be provided by any such party to Company under such agreement
that are not being so provided as a result of such termination or failure to
perform; or
8.16 Conduct of Business By Holdings and MBW LLC.
(i) Holdings shall (a) engage in any business other than entering into and
performing its obligations under and in accordance with the Loan Documents
and Related Agreements to which it is a party and performing the
transactions contemplated thereby or permitted thereunder or (b) own any
assets other than (1) the capital stock of Company and (2) Cash and Cash
Equivalents in an amount not to exceed $50,000 at any one time for the
purpose of paying general operating expenses of Holdings; or (ii) MBW LLC
shall (a) engage in any business other than entering into and performing
its obligations under and in accordance with the MBW LLC Agreement and the
Loan Documents to which it is a party or (b) own any assets other than (1)
the capital stock of Holdings and (2) Cash and Cash
<PAGE>
Equivalents in an amount not to exceed $50,000 at any one time for the
purpose of paying general operating expenses of MBW LLC; or
8.17 Default Under Subordination Provisions.
Company or any guarantor of Subordinated Indebtedness shall fail to comply with
the subordination provisions contained in the Subordinated Note Indentures or
any other instrument, indenture or agreement pursuant to which such Subordinated
Indebtedness is issued;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request of Requisite
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) through (c) above to be, and the same shall forthwith
become, immediately due and payable, and the obligation of each Lender to make
any Loan, the obligation of Administrative Agent to issue any Letter of Credit
and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate; provided that the foregoing shall not affect in any way the
--------
obligations of Lenders under subsection 3.3C(i).
Any amounts described in clause (b) above, when received by Administrative
Agent, shall be held by Administrative Agent pursuant to the terms of the
Collateral Account Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph, if at any
time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision
<PAGE>
which may be made at the election of Requisite Lenders and are not intended to
benefit Company and do not grant Company the right to require Lenders to rescind
or annul any acceleration hereunder or preclude Agents or Lenders from
exercising any of the rights or remedies available to them under any of the Loan
Documents, even if the conditions set forth in this paragraph are met.
SECTION 9.
AGENTS
9 1 Appointment.
A. Chase is hereby appointed Administrative Agent hereunder and under the other
Loan Documents and each Lender hereby authorizes Administrative Agent to act as
its agent in accordance with the terms of this Agreement and the other Loan
Documents. NatWest is hereby appointed Syndication Agent hereunder and under the
other Loan Documents and each Lender hereby authorizes Syndication Agent to act
as its agent in accordance with the terms of this Agreement and the other Loan
Documents. Swiss Bank is hereby appointed Documentation Agent hereunder and
under the other Loan Documents and each Lender hereby authorizes Documentation
Agent to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. Each Agent agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 9 are solely for the benefit of Agents and Lenders
and Company shall have no rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this Agreement,
each Agent shall act solely as an agent of Lenders and does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for Company or any of its Subsidiaries.
B. Appointment of Supplemental Collateral Agents. It is the purpose of this
Agreement and the other Loan Documents that there shall be no violation of any
law of any jurisdiction denying or restricting the right of banking corporations
or associations to transact business as agent or trustee in such jurisdiction.
It is recognized that in case of litigation under this Agreement or any of the
other Loan Documents, and in particular in case of the enforcement of any of the
Loan Documents, or in case Administrative Agent deems that by reason of any
present or future law of any jurisdiction Administrative Agent may not exercise
any of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral coagent (any such additional individual or
institution being referred to herein individually as a "Supplemental Collateral
Agent" and collectively as "Supplemental Collateral Agents").
In the event that Administrative Agent appoints a Supplemental Collateral Agent
with respect to any Collateral, (i) each and every right, power, privilege or
duty expressed or intended by this Agreement or any of the other Loan Documents
to be exercised
<PAGE>
by or vested in or conveyed to Administrative Agent with respect to such
Collateral shall be exercisable by and vest in such Supplemental Collateral
Agent to the extent, and only to the extent, necessary to enable such
Supplemental Collateral Agent to exercise such rights, powers and privileges
with respect to such Collateral and to perform such duties with respect to such
Collateral, and every covenant and obligation contained in the Loan Documents
and necessary to the exercise or performance thereof by such Supplemental
Collateral Agent shall run to and be enforceable by either Administrative Agent
or such Supplemental Collateral Agent, and (ii) the provisions of this Section 9
and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure
to the benefit of such Supplemental Collateral Agent and all references therein
to Administrative Agent shall be deemed to be references to Administrative Agent
and/or such Supplemental Collateral Agent, as the context may require.
Should any instrument in writing from Company or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Company shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments promptly
upon request by Administrative Agent. In case any Supplemental Collateral Agent,
or a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be exercised
by Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
9.2 Powers: General Immunity.
A. Duties Specified. Each Lender irrevocably authorizes each Agent to take
such action on such Lender's behalf and to exercise such powers hereunder and
under the other Loan Documents as are specifically delegated to such Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents, and
it may perform such duties by or through its agents or employees. No Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible to any
Lender for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any other Loan Document or
for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or other
statements, instruments, reports or certificates or any other documents
furnished by any Agent to Lenders or by or on behalf of Company and/or its
Subsidiaries to any Agent or any Lender in connection with the Loan Documents
and the transactions contemplated thereby or for the financial condition or
business affairs of Company or any other Person liable for the payment of any
Obligations, nor shall any Agent
<PAGE>
be required to ascertain or inquire as to the performance or observance of any
of the terms, conditions, provisions, covenants or agreements contained in any
of the Loan Documents or as to the use of the proceeds of the Loans or the use
of the Letters of Credit or as to the existence or possible existence of any
Event of Default or Potential Event of Default. Anything contained in this
Agreement to the contrary notwithstanding, Administrative Agent shall have no
liability arising from confirmations of the amount of outstanding Loans or the
Total Utilization of Revolving Loan Commitments or the component amounts thereof
C. Exculpatory Provisions. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by such Agent under or in connection with any of
the Loan Documents except to the extent caused by such Agent's gross negligence
or willful misconduct. If any Agent shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders (or
such other Lenders as may be required to give such instructions under subsection
10.6). Without prejudice to the generality of the foregoing, (i) such Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against such Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Such Agent shall be entitled to refrain from exercising
any power, discretion or authority vested in it under this Agreement or any of
the other Loan Documents unless and until it has obtained the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agents Entitled to Act as Lender. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Each Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company and/or its Subsidiaries for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
<PAGE>
133
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or, except as expressly provided elsewhere in this Agreement, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and no Agent shall have any responsibility with respect to the
accuracy of or the completeness of any information provided to Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify
each Agent, to the extent that such Agent shall not have been reimbursed by
Company, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in performing its duties hereunder or under the other Loan Documents or
otherwise in its capacity as such Agent in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent's gross negligence or willful misconduct.
9.5 Successor Agents and Swing Line Lender.
A. Successor Agents. Any Agent may resign at any time by giving 30 days' prior
written notice thereof to the other Agents, Lenders and Company, and any Agent
may be removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Company and Administrative Agent and signed
by Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders shall have the right, upon five Business Days' notice to
Company, to appoint a successor Agent. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, that successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Agent and the retiring or removed Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder as Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
<PAGE>
134
B. Successor Swing Line Lender. Any resignation or removal of Administrative
Agent pursuant to subsection 9.5A shall also constitute the resignation or
removal of Chase or its successor as Swing Line Lender, and any successor
Administrative Agent appointed pursuant to subsection 9.5A shall, upon its
acceptance of such appointment, become the successor Swing Line Lender for all
purposes hereunder. In such event (i) Company shall prepay any outstanding Swing
Line Loans made by the retiring or removed Administrative Agent in its capacity
as Swing Line Lender, (ii) upon such prepayment, the retiring or removed
Administrative Agent and Swing Line Lender shall surrender the Swing Line Note
held by it to Company for cancellation, and (iii) Company shall issue a new
Swing Line Note to the successor Administrative Agent and Swing Line Lender
substantially in the form of Exhibit VIII annexed hereto, in the principal
amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 Collateral Documents.
Each Lender and Agent hereby further authorizes Administrative Agent to enter
into each Collateral Document as secured party on behalf of and for the benefit
of Agents and Lenders and agrees to be bound by the terms of each Collateral
Document; provided that Administrative Agent shall not enter into or consent to
any amendment, modification, termination or waiver of any provision contained in
any Collateral Document without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Requisite Lenders,
Administrative Agent may execute any documents or instruments necessary to
effect the release of any asset constituting Collateral from the Lien of the
applicable Collateral Document in the event that such asset is sold or otherwise
disposed of in a transaction effected in accordance with subsection 7.7.
Anything contained in any of the Loan Documents to the contrary notwithstanding,
each Lender agrees that no Lender shall have any right individually to realize
upon any of the Collateral under any Collateral Document (including, without
limitation, through the exercise of a right of set-off against call deposits of
such Lender in which any funds on deposit in the Collateral Account may from
time to time be invested), it being understood and agreed that all rights and
remedies under the Collateral Documents may be exercised solely by
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof.
SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans. Letters of Credit.
A. General. Subject to subsection l0.1B, each Lender shall have the right
at any time to (i) sell, assign, transfer or negotiate to any Eligible Assignee,
or (ii) sell participations to any Person in, all or any part of its Commitments
(together with its Letters of Credit or participations therein made or arising
pursuant to its Revolving Loan Commitment) or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it; provided that
no such sale, assignment, transfer or participation shall,
<PAGE>
135
without the consent of Company, require Company to file registration
statement with the Securities and Exchange Commission or apply to qualify such
sale, assignment, transfer or participation under the securities laws of any
state; provided further that no such sale, assignment or transfer described in
clause (i) above shall be effective unless and until an Assignment Agreement
effecting such sale, assignment or transfer shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii); provided further, that no such sale, assignment, transfer or
participation of any Letter of Credit or any participation therein may be made
separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving
Loans of the Lender effecting such sale, assignment, transfer or
participation; and provided further that anything contained herein to the
contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line
Loans of Swing Line Lender may not be sold, assigned or transferred as
described in clause (i) above to any Person other than a successor
Administrative Agent and Swing Line Lender to the extent contemplated by
subsection 9.5. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein or
the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter of Credit,
or participation therein or other Obligation may (a) be assigned in any
amount to another Lender who is a Non-Defaulting Lender, to an Approved
Fund of a Non-Defaulting Lender, or to an Affiliate of the assigning Lender
or another Lender who, in either such case, is a Non-Defaulting Lender,
with the consent of Administrative Agent (which consent shall not be
unreasonably withheld) and the giving of notice to Company; provided that,
after giving effect to a proposed assignment to another Lender, the
assigning Lender shall have an aggregate Commitment of at least $5,000,000
unless the proposed assignment constitutes the aggregate amount of the
Commitments, Loans, Letters of Credit, and participations therein and other
Obligations of the assigning Lender, or (b) be assigned in an aggregate
amount of not less than $5,000,000 (or such lesser amount as shall
constitute the aggregate amount of the Commitments, Loans, Letters of
Credit, and participations therein and other Obligations of the assigning
Lender) to any other Eligible Assignee with the consent of Administrative
Agent (which consent shall not be unreasonably withheld) and the giving of
notice to Company. To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved of
its obligations with respect to its Commitments, Loans, Letters of Credit,
or participations therein or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the Register, an
Assignment Agreement, together with a processing fee of $3,500 payable by
the assigning Lender and such certificates, documents or other evidence, if
any, with respect to United States federal income tax withholding matters
as the assignee under such Assignment Agreement may be required to deliver
to Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such
<PAGE>
136
execution, delivery, acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment Agreement, relinquish its rights (other than any
rights which survive the termination of this Agreement under subsection
l0.9B) and be released from its obligations under this Agreement (and, in
the case of an Assignment Agreement covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto; provided that, anything
contained in any of the Loan Documents to the contrary notwithstanding,
if such Lender is the Issuing Lender with respect to any outstanding
Letters of Credit such Lender shall continue to have all rights and
obligations of an Issuing Lender with respect to such Letters of Credit
until the cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments hereunder
shall be modified to reflect the Commitments of such assignee and any
remaining Commitments of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall surrender its applicable Notes and, upon such
surrender, new Notes shall be issued to the assignee and, if applicable,
to the assigning Lender, substantially in the form of Exhibit IV, Exhibit
V, Exhibit VI, Exhibit VII or Exhibit VIII annexed hereto, as the case
may be, with appropriate insertions, to reflect the new Commitments
and/or outstanding Term Loans of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent: Recordation in Register. Upon its
receipt of an Assignment Agreement executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, together with the
processing fee referred to in subsection 10.lB(i) and any certificates,
documents or other evidence with respect to United States federal income
tax withholding matters that such assignee may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a), Administrative
Agent shall, if such Assignment Agreement has been completed and is in
substantially the form of Exhibit XVII hereto and if Administrative Agent
have consented to the assignment evidenced thereby (to the extent such
consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein
(which acceptance shall evidence any required consent of Administrative
Agent to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company. Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection l0.lB(ii).
C. Participations. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take or omit to take any action hereunder except action (i) effecting
the extension of the final maturity of the Loan allocated to such participation,
(ii) effecting a reduction of the principal amount of or affecting the rate of
interest payable on any Loan allocated to such participation, (iii) releasing
all or substantially all of the Collateral, or (iv) releasing all of the
Guarantors from their obligations under the Guaranties, and all amounts payable
by Company hereunder
<PAGE>
137
(including, without limitation, amounts payable to such Lender pursuant to
subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not
sold such participation. Company and each Lender hereby acknowledge and agree
that, solely for purposes of subsections 10.4 and 10.5, (a) any participation
will give rise to a direct obligation of Company to the participant and (b)
the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments and
participations permitted under the foregoing provisions of this subsection 10.1,
any Lender (without having to obtain the consent of Company or Administrative
Agent) may assign and pledge all or any portion of its Loans, the other
Obligations owed to such Lender and its Notes to secure obligations of such
Lender, including, without limitation, assignments and pledges to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank, and any Lender which is an investment fund may pledge
all or any portion of its Notes or Loans to its trustee to secure its
obligations to such trustee; provided that (i) no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a
result of any such assignment and pledge and (ii) in no event shall such Federal
Reserve Bank be considered to be a "Lender" or be entitled to require the
assigning Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning Company
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.20.
F. Limitation. No assignee, participant or other transferee or any Lender's
rights shall be entitled to receive any greater payment under subsection 2.7
than such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with Company's prior written consent
or at a time when the circumstances giving rise to such greater payment did not
exist.
G. Representations of Lenders. Each Lender listed on the signature pages hereof
hereby represents and warrants (i) that it is an Eligible Assignee described in
clause (i) of the definition thereof; (ii) that it has experience and expertise
in the making of loans such as the Loans; and (iii) that it will make its Loans
for its own account in the ordinary course of its business and without a view to
distribution of such Loans within the meaning of the Securities Act or the
Exchange Act or other federal securities laws (it being understood that, subject
to the provisions of this subsection 10.1, the disposition of such Loans or any
interests therein shall at all times remain within its exclusive control). Each
Lender that becomes a party hereto pursuant to an Assignment Agreement shall be
deemed to agree that the representations and warranties of such Lender contained
in Section 2(c) of such Assignment Agreement are incorporated herein by this
reference.
<PAGE>
138
10.2 Expenses
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and out
of pocket expenses of Administrative Agent in connection with the preparation of
the Loan Documents; (ii) all the actual and reasonable costs of furnishing all
opinions by counsel for Company (including, without limitation, any opinions
requested by Lenders as to any legal matters arising hereunder) and of Company's
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including, without limitation, with respect to confirming compliance with
environmental and insurance requirements; (iii) the reasonable fees, expenses
and disbursements of counsel to Agents (including allocated costs of internal
counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loans and any consents, amendments,
waivers or other modifications hereto or thereto and any other documents or
matters requested by Company; (iv) all other actual and reasonable costs and
expenses incurred by Agents in connection with the negotiation, preparation and
execution of the Loan Documents and the transactions contemplated hereby and
thereby; and (v) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Agents and Lenders in
enforcing any Obligations of or in collecting any payments due from Company
hereunder or under the other Loan Documents by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2, whether or
not the transactions contemplated hereby shall be consummated, Company agrees to
defend, indemnify, pay and hold harmless Agents and Lenders, and the officers,
directors, trustees, partners, employees, agents, attorneys and affiliates of
any of Agents and Lenders (collectively called the "Indemnitees") from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including, without limitation, securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby (including, without limitation, Lenders'
agreement to make the Loans hereunder or the use or intended use of the proceeds
of any of the Loans or the issuance of Letters of Credit hereunder or the use or
intended use
<PAGE>
139
of any of the Letters of Credit) (collective called the "Indemnified
Liabilities"); provided that Company shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent, and only to the extent, of any particular liability, obligation, loss,
damage, penalty, claim, cost, expense or disbursement that arose from the
gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
10.4 Set-Off, Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable law and not
by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default each Lender is hereby authorized by Company
at any time or from time to time, without notice to Company or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender (at any office of that
Lender wherever located) to or for the credit or the account of Company against
and on account of the obligations and liabilities of Company to that Lender
under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
each Agent and Lender a security interest in all deposits and accounts
maintained with such Agent or Lender as security for the Obligations.
10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment (other than a voluntary prepayment of Loans made and applied
in accordance with the terms of this Agreement), by realization upon security,
through the exercise of any right of set-off or banker's lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder or
under the other Loan Documents (collectively, the "Aggregate Amounts Due" to
such Lender) which is greater than the proportion received by any other Lender
in respect of
<PAGE>
140
the Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Administrative Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the
other Lenders so that all such recoveries of Aggregate Amounts Due shall be
shared by all Lenders in proportion to the Aggregate Amounts Due to them;
provided that if all or part of such proportionately greater payment received
by such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy reorganization or insolvency proceeding of Company or otherwise,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Company expressly consents to
the foregoing arrangement and agrees that any bolder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that
holder with respect thereto as fully as if that holder were owed the amount of
the participation held by that bolder.
10.6 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any provision of this
Agreement or of the Notes, or consent to any departure by Company or any other
Loan Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: reduces the principal amount
of any of the Loans; changes in any manner the definition of "Requisite Lenders"
(it being understood that, with the consent of the Requisite Lenders, additional
extensions of credit pursuant to this Agreement may be included in the
determination of "Requisite Lenders" on substantially the same basis as the
Tranche A Term Loan Commitments, Tranche A Term Loans, Tranche B Term Loan
Commitments, Tranche B Term Loans, Tranche C Term Loan Commitments, Tranche C
Term Loans, Revolving Loan Commitments and Revolving Loans are included on the
Effective Date); changes in any manner any provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of all Lenders;
postpones the scheduled final maturity date of any of the Loans; postpones the
date or reduces the amount of any scheduled payment (but not prepayment) of
principal of any of the Loans; postpones the date or reduces the amount of any
scheduled reduction (but not prepayment) of the Revolving Loan Commitments;
postpones the date on which any interest or any fees are payable; decreases the
interest rate borne by any of the Loans (other than any waiver of any increase
in the interest rate applicable to any of the Loans pursuant to subsection 2.2E)
or the amount of any fees payable hereunder; increases the maximum duration of
Interest Periods permitted hereunder; releases all or substantially all of the
Collateral; releases Holdings from its obligations under the Holdings Guaranty
or releases all or substantially all of the Subsidiary Guarantors from their
obligations under the Subsidiary Guaranty; reduces the amount or postpones the
due date of any amount payable in respect of, or extends the required expiration
date of, any Letter of Credit; changes the obligations of Lenders relating to
the purchase of participations in Letters of Credit in any manner that could be
adverse to any Issuing Lender; or changes in any
<PAGE>
141
manner the provisions contained in subsection 8.1 or this subsection 10.6;
shall be effective only if evidenced by a writing signed by or on behalf of
all Lenders to whom are owed Obligations being directly affected by such
amendment, modification, termination, waiver or consent. In addition, (i) any
amendment, modification, termination or waiver of any of the provisions
contained in Section 4 shall be effective only if evidenced by a writing
signed by or on behalf of Administrative Agent and Requisite Lenders, (ii) no
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender which is the
holder of that Note, (iii) no amendment, modification, termination or waiver
of any provision of this Agreement which disproportionately and adversely
affects the obligation of any Loan Party to make payments (including without
imitation mandatory prepayments) to the holders of the Term Loans or the
holders of the Revolving Loans and Revolving Loan Commitments, shall be
effective without the written concurrence of the holders of more than 50% in
principal amount of the class (i.e., Tranche A Term Loans, Tranche B Term
Loans, Tranche C Term Loans or Revolving Loans and Revolving Loan Commitments
each being a "class" of Loans) of Loans so disproportionately and adversely
affected; (iv) no increase in the Commitments of any Lender over the amount
thereof then in effect shall be effective without the written concurrence of
that Lender, it being understood and agreed that in no event shall waivers or
modifications of conditions precedent, covenants, Events of Default, Potential
Events of Default or of a mandatory prepayment or a reduction of any or all of
the Commitments be deemed to constitute an increase of the commitment of any
Lender and that an increase in the available portion of any Commitment of any
Lender shall not be deemed to constitute an increase in the Commitment of such
Lender, (v) no amendment, modification, termination or waiver of any provision
of subsection 2.lA(v) or any other provision of this Agreement relating to the
Swing Line Loan Commitment or the Swing Line Loans shall be effective without
the written concurrence of Swing Line Lender, (vi) no amendment, modification,
termination or waiver of any provision of this Agreement shall change the
allocation among the Tranche A Term Loans, Tranche B Term Loans and Tranche C
Term Loans of prepayments to be made pursuant to subsection 2.4C without the
prior written consent of (1) Lenders holding more than 50% of the aggregate
outstanding principal amount of the Tranche A Term Loans, (2) Lenders holding
more than 50% of the aggregate outstanding principal amount of the Tranche B
Term Loans and (3) Lenders holding more than 50% of the aggregate outstanding
principal amount of the Tranche C Term Loans, (vii) no amendment,
modification, termination or waiver of any provision of this Agreement shall
change the application of prepayments of Tranche A Term Loans pursuant to
subsection 2.4C without the prior written consent of Lenders holding more than
50% of the aggregate outstanding principal amount of the Tranche A Term Loans,
(viii) no amendment, modification, termination or waiver of any provision of
this Agreement shall change the application of prepayments of Tranche B Term
Loans pursuant to subsection 2.4C without the prior written consent of Lenders
holding more than 50% of the aggregate outstanding principal amount of the
Tranche B Term Loans, (ix) no amendment, modification, termination or waiver
of any provision of this Agreement shall change the application of prepayments
of Tranche C Term Loans pursuant to subsection 2.4C without the prior written
consent of Lenders holding more than 50% of the aggregate outstanding
principal amount of the Tranche C Term Loans, (x) no amendment, modification,
termination or waiver of any provision of Section 3 relating to the rights or
obligations of any
<PAGE>
142
or all Issuing Lenders shall be effective without the written concurrence of
Administrative Agent and each Lender who is an Issuing Lender with respect to
any Letter of Credit then outstanding, and (xi) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision
of this Agreement which, by its terms, expressly requires the approval or
concurrence of Administrative Agent shall be effective without the written
concurrence of Administrative Agent. Administrative Agent may, but shall have
no obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this subsection 10.6 shall be binding upon
each Lender at the time outstanding, each future Lender and, if signed by
Company, on Company.
B. If, in connection with any proposed change, waiver, discharge or termination
to any of the provision of this Agreement as contemplated by the proviso in the
first sentence of this subsection 10.6, the consent of Requisite Lenders is
obtained but consent of one or more of such other Lenders whose consent is
required is not obtained, then Company may, so long as all non-consenting
Lenders are so treated, elect to terminate such Lender as a party to this
Agreement; provided that, concurrently with such termination, (i) Company shall
pay that Lender all principal, interest and fees and other amounts due to be
paid to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
Administrative Agent (or if Administrative Agent is also a Lender to be
terminated, the successor Administrative Agent) shall agree, as of such date, to
become a Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated as of
such date, and (iii) all documents and supporting materials necessary, in the
judgment of Administrative Agent (or if Administrative Agent is also a Lender to
be terminated, the successor Administrative Agent) to evidence the substitution
of such Lender shall have been received and approved by Administrative Agent as
of such date.
10.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
Unless otherwise specifically provided herein, any notice or other communication
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon
<PAGE>
143
receipt of telecopy or telex, or four Business Days after depositing it in the
United States mail, registered or certified, with postage prepaid and properly
addressed; provided that notices to Administrative Agent shall not be
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other patty, such other address as shall be
designated by such patty in a written notice delivered to Administrative
Agent.
10.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of the Loans and the
issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 3.6, 10.2,
10.3 and 10.4 and the agreements of Lenders set forth in subsections 9.2C, 9.4,
10.4, 10.5 and 10.20 shall survive the payment of the Loans, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amounts drawn
or paid thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver: Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, fight or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 Marshaling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any obligation to
marshal any assets in favor of Company or any other party or against or in
payment of any or all of the obligations. To the extent that Company makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force
<PAGE>
144
and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 Severability.
In case any provision in or obligation under this Agreement or the Notes shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 Obligations Several, Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of Lenders (it being understood that Lenders' rights
of assignment are subject to subsection 10.1). Neither Holdings' nor Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Holdings or Company without the prior written consent of all
Lenders.
<PAGE>
145
10.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDINGS OR COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, EACH OF HOLDINGS AND COMPANY, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO HOLDINGS OR COMPANY, AS APPLICABLE, AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO
CONFER PERSONAL JURISDICTION OVER HOLDINGS OR COMPANY, AS APPLICABLE,
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST HOLDINGS OR
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-
1402 OR OTHERWISE.
10.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP OR OTHER RELATIONSHIP THAT IS BEING
<PAGE>
146
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including, without limitation, contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a
material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
10.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process or by the National
Association of Insurance Commissioners or in connection with the exercise of any
remedy under the Loan Documents; provided that, unless specifically prohibited
by applicable law or court order, each Lender shall notify Company of any
request by any governmental agency or representative thereof (other than any
such request in connection with any examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
<PAGE>
147
10.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto or in
connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
COMPANY AND HOLDINGS: AURORA FOODS INC.
By:
Name:
Title:
AURORA FOODS HOLDINGS INC.
By:
Name:
Title:
Notice Address:
445 Hutchinson Avenue
Columbus, Ohio 43235
Attention: Chief Financial Officer
Facsimile: (415) 982-3023
With a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: Tyler T. Zachem
Facsimile: (212) 355-6283
(712) 355-6945
and a copy to:
Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, California 94133
Attention: M. Laurie Cummings
Facsimile: (415) 982-3023
<PAGE>
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Facsimile: (212) 819-7817
<PAGE>
AGENTS AND LENDERS: THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By: ________________________
Name:
Title:
Notice Address:
270 Park Avenue, 10th Floor
New York, New York 10017
Attention: Karen Sharf
Telephone: (212) 270-5659
Facsimile: (212) 270-5120
with a copy to:
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Amy Labinger
Loan Servicing Group
Telephone: (212) 552-4025
Facsimile: (212) 552-5658
<PAGE>
THE NATIONAL WESTMINSTER
BANK PLC,
individually and as Syndication Agent
By:
Name:
Title:
Notice Address:
Gleacher NatWest Inc.
660 Madison Avenue, 17th Floor
New York, New York 10021
Attention: Stefanie Warner-Grise
Telephone: (212) 418-4528
Facsimile: (212) 418-4596
<PAGE>
SWISS BANK CORPORATION,
individually and as Documentation Agent
By:
Name:
Title:
Notice Address:
SBC Warburg Dillon Read Inc.
535 Madison Avenue
New York, New York 10022
Attention: Michael Leder
Telephone: (212) 9O6-7858
Facsimile: (212) 906-7116
<PAGE>
FLEET NATIONAL BANK
By:
Name:
Title:
Notice Address:
Fleet National Bank
One Federal Street, MA0F0324
Boston, Massachusetts 02110
Attention: Howard J. Diamond
Telephone: (617) 346-0042
Facsimile: (617) 346-5093
With a copy to:
Fleet National Bank
1185 Avenue of the Americas
New York, New York 10036
Attention: Ted Duncan
Telephone: (212) 819-6010
Facsimile: (212) 819-6201
<PAGE>
HELLER FINANCIAL, INC
By:________________________
Name:
Title:
Notice Address:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: Kathi Inorio
Telephone: (312) 441-7775
Facsimile: (312) 441-7367
With a copy to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: Legal Department
Telephone: (312) 441-7000
Facsimile: (312) 442-7367
<PAGE>
BANKBOSTON, N.A.
By
Name:
Title:
Notice Address:
BankBoston, N.A.
100 Federal Street, MS 01-08-05
Boston, Massachusetts 02110
Attention: Drew Piculell
Telephone: (617) 434-4060
Facsimile: (617) 434-4929
<PAGE>
MARINE MIDLAND BANK
By:
Name:
Title:
Notice Address:
Marine Midland Bank
140 Broadway, 5th Floor
New York, New York 10005
Attention: Russell Thomas
Telephone: (212) 658-2749
Facsimile: (212) 658-2586
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
Notice Address:
PNC BANK
201 East Fifth Street
Cincinnati, OH 45202
Attention: Toby B. Rau
Telephone: (513) 651-8689
Facsimile: (513) 651-8951
<PAGE>
SUNTRUST BANK, ATLANTA
By:
Name:
Title:
By:
Name:
Title:
Notice Address:
SunTrust Bank, Atlanta
25 Park Place, 26th Floor, MC 075
Atlanta, Georgia 30303
Attention: Gina Haines
Telephone: (404) 230-5426
Facsimile: (404)575-2693
<PAGE>
WELLS FARGO BANK, N.A.
By:
Name:
Title:
Notice Address:
Wells Fargo Bank, N.A.
555 Montgomery Street, 7th Floor
San Francisco, California 94111
Attention: Kathleen Rosof
Telephone: (415) 396-1274
Facsimile: (415)362-5081
<PAGE>
NATIONAL CITY BANK
By:
Name:
Title:
Notice Address:
National City Bank
1900 East Ninth Street, 10th Floor
Cleveland, Ohio 44114
Attention: Lisa Lisi
Telephone: (216) 575-9166
Facsimile: (216) 222-0003
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:
Name:
Title:
Notice Address:
Harris Trust and Savings Bank
111 West Monroe Street
Floor 18 West
Chicago, Illinois 60690
Attention: Karen Knudsen
Telephone: (312) 461-4085
Facsimile: (312) 765-8095
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By:
Name:
Title:
Notice Address:
Credit Agricole Indosuez (Chicago)
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Attention: Theodore Tice
Telephone: (312) 917-7463
Facsimile: (312) 372-3455
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: INDOSUEZ CAPITAL
By:
Name:
Title:
By:
Name:
Title:
Notice Address:
Indosuez Capital
1211 Avenue of the Americas
New York, New York 10036-8701
Attention: Raymond Wright
Telephone: (212) 278-2512
Facsimile: (212) 278-2502
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
Notice Address:
U.S. Bank National Association
First Blank Place
MPFP 0702
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Elliot Jaffee
Telephone: (612) 973-0543
Facsimile: (612) 973-0825
<PAGE>
BHF-BANK AKTIEGESELLSCHAFT,
GRAND CAYMAN BRANCH
By:
Name:
Title:
Notice Address:
BHF-BANK Aktiegesellschaft,
New York Branch
590 Madison Avenue
New York, New York 10022-2540
Attention: John Sykes
Telephone: (212) 756-5500
Facsimile: (212) 756-5536
<PAGE>
BALANCED HIGH YIELD FUND LTD.
By:
Name:
Title:
By:
Name:
Title:
Notice Address:
BHF-BANK Aktiengesellschaft,
New York Branch
590 Madison Avenue
New York, New York 10022-2540
Attention: John Sykes
Telephone: (212) 756-5500
Facsimile: (212) 756-5536
<PAGE>
FIRST UNION NATIONAL BANK
By:
Name:
Title:
Notice Address:
First Union National
First Union National Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0737
Attention: Brett Cummings
Telephone: (704)383-0028
Facsimile: (704)374-3300
<PAGE>
SUMMIT BANK
By:
Name:
Title:
Notice Address:
Summit Bank
546 Fifth Avenue, 5th Floor
New York, New York 10036
Attention: Vincent Bagarouzza
Telephone: (212) 221-3889
Facsimile: (212) 221-7175
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:
Name:
Title:
Notice Address:
The Long-Term Credit Bank of Japan, Ltd.
190 South LaSalle Street, Suite 800
Chicago, Illinois 60603
Attention: Kris A. Grosshams
Telephone: (312) 704-5474
Facsimile: (312) 704-8505
<PAGE>
DLJ CAPITAL FUNDING, INC.
By:_______________________
Name:
Title:
Notice Address:
DLJ Capital Funding, Inc.
277 Park Avenue
New York, New York 10172
Attention: Tania Holman
Telephone: (212) 892-2970
Facsimile: (212) 892-6031
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
By:_____________________
Name:
Title:
Notice Address:
MetLife
334 Madison Avenue
Convent Station, NJ 07961-0633
Attention: Scottye D. Lindsey
Telephone: (201) 254-3000
Facsimile: (973) 254-3050
With a copy to:
MetLife
Legal Department - Area 7H
One Madison Avenue
New York, New York 10010
Attention: Jennifer Kalb
Telephone: (201) 254-3000
Facsimile: (973) 254-3050
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By:_____________________
Name:
Title:
Notice Address:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Teresa M. Torrey
Telephone: (860) 277-5952
Facsimile: (860) 954-5243
<PAGE>
THE TRAVELERS LIFE AND ANNUITY COMPANY
By:_____________________
Name:
Title:
Notice Address:
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Teresa M. Torrey
Telephone: (860) 277-5952
Facsimile: (860) 954-5243
<PAGE>
AMARA-I FINANCE LTD.
By:
Name:
Title:
Notice Address:
Chancellor LGT Asset Management
1166 Avenue of the Americas, 27th Fl.
New York, New York 10036
Attention: Tim Daileader
Telephone: (212) 278-9374
Facsimile: (212) 278-9619
<PAGE>
CERES FINANCE LTD.
By:
Name:
Title:
Notice Address:
Chancellor LGT Asset Management
1166 Avenue of the Americas, 27th Fl.
New York, New York 10036
Attention: Tim Daileader
Telephone: (212) 278-9374
Facsimile: (212) 278-9619
<PAGE>
WARECONSECO
By:
Name:
Title:
Notice Address:
The Chase Manhattan Bank
260 Park Avenue, Floor 5
New York, New York 10017
Attention: Tom Kozlark
Telephone: (212) 270-3480
Facsimile: (212) 270-1674
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By:
Name:
Title:
Notice Address:
Pilgrim Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: Michael Bacevich
Telephone: (602) 417-8258
Facsimile: (602) 417-8327
<PAGE>
ML CLO XV PILGRIM AMERICA
(Cayman) LTD.
By:
Name:
Title:
Notice Address:
Pilgrim Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: Michael Bacevich
Telephone: (602) 417-8258
Facsimile: (602) 417-8327
<PAGE>
SANKATY HIGH YIELD ASSET PARTNERS, L.P.
By:
Name:
Title:
Notice Address:
Bain Cap Fund VB LP
Two Copley Place
Boston, MA 02116
Attention: Diane Exter
Telephone: (617) 572-3216
Facsimile: (617)572-3274
<PAGE>
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
By:
Name:
Title:
Notice Address:
Octagon Credit Investors
380 Madison Avenue, 12th Fl.
New York, New York 10017
Attention: Rick Stewart
Telephone: (212) 622-3062
Facsimile: (212) 622-3797
<PAGE>
ALLSTATE INSURANCE COMPANY
By:
Name:
Title:
Notice Address:
Allstate Insurance Company
3075 Sanders Road
Northbrook, IL 60062
Attention: Jerry Zinkula
Telephone: (847) 402-8383
Facsimile: (847) 402-3092
<PAGE>
SENIOR DEBT PORTFOLIO
By:
Name:
Title:
Notice Address:
Eaton Vance Management Inc. (Boston)
24 Federal Street, 6th Fl.
Boston, MA 02110
Attention: Scott Page
Telephone: (617) 654-8486
Facsimile: (617) 695-9594
<PAGE>
PRIME IMCOME TRUST
By:
Name:
Title:
Notice Address:
Dean Witter Intercapital (Prime Income
Trust)
Two World Trade Center
New York, New York 10048
Attention: Peter Gewirtz
Telephone: (212) 392-9034
Facsimile: (212)392-5345
<PAGE>
KZH-ING-2 CORPORATION
By:
Name:
Title:
Notice Address:
KZH- 1NG-2 Corporation
c/o The Chase Manhattan Bank
450 West 33rd Street - 15th Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
With copy to:
ING CAPITAL ADVISORS
333 South Grand Avenue, Suite 4250
Los Angeles, CA 90071
Attention: Beth Digati
Telephone: (213) 346-3975
Facsimile: (213) 626-6552
and:
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
New York, New York 10166
Attention: Lee Ann Duffy
Telephone: (212) 351-3809
Facsimile: (212) 351-4035
<PAGE>
KZH HOLDING CORPORATION III
By:
Name:
Title:
Notice Address:
KZH HOLDING CORPORATION III
c/o The Chase Manhattan Bank
450 West 33rd Street - 15th Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
With copy to:
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
New York, New York 10166
Attention: Lee Ann Duffy
Telephone: (212) 351-3809
Facsimile: (212) 351-4035
<PAGE>
HIGH INCOME PRINCIPAL PRESERVATION FUND
By:
Name:
Title:
Notice Address:
ING Capital Advisors (Los Angeles)
333 South Grand Avenue, Suite 4250
Los Angeles, CA 90071
Attention: Kathleen Lenarcic
Telephone: (213) 346-3971
Facsimile: (213) 346-3995
<PAGE>
CYPRESS TREE BOSTON PARTNERS
By:
Name:
Title:
Notice Address:
Cypress Investment Management
Company, Inc.
125 High Street
Boston, MA 02110
Attention: Peter Merrill
Telephone: (617) 946-0600
Facsimile: (617) 946-5681
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
Name:
Title:
Notice Address:
Van Kampen American Capita[ (Oakbrook)
One Parkview Plaza, 5th Floor
Oakbrook Terrace, IL 60181
Attention: Jeffrey Malliet
Telephone: (630) 684-6438
Facsimile: (630) 684-6740
<PAGE>
ACM CREDIT OPPORTUNITIES
MASTER FUND
By: Alliance Capital Management L.P., its
Investment Advisor
By:
Name:
Title:
Notice Address:
ACM CREDIT OPPORTUNITIES
MASTER FUND
c/o Alliance Capital Management L.P.
1345 Avenue of the Americas - 38th Floor
New York, New York 10105
Attention: Joel Serebransky
Telephone: (212) 969-1488
Facsimile: (212) 969-1466
<PAGE>
ANNEX A
TO SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
<TABLE>
<CAPTION>
PRICING GRID
RATIO OF CONSOLIDATED TOTAL
DEBT TO CONSOLIDATED EBITDA
Less than Less than
5.25 but Less than Less than 4.25:1 but
Greater 5:00 but Less than 4.50:1 but Greater
Greater than than or Greater than 4.75:1 but Greater than than or Equal Less
or Equal to Equal or Equal to Greater than or Equal to or Equal to Than
5:25:1 to 5:00:1 4:75:1 4.50:1 4.25:1 3.75: 3.75:1
----------- --------- ------------ ----------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolving Credit Loans and
Tranche A Term Loans:
- --------------------------
ABR Loans 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00%
Eurodollar Loans 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00%
Tranche B Term Loans:
- --------------------
ABR Loans 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.50%
Eurodollar Loans 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.50%
Tranche C Term Loans:
- --------------------
ABR Loans 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.75%
Eurodollar Loans 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.75%
Commitment Fee: 0.50% 0.50% 0.375% 0.375% 0.30% 0.30% 0.30%
- --------------
</TABLE>
<PAGE>
EXHIBIT 10.11
FIRST AMENDMENT TO AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
This First Amendment (this "First Amendment") to the Amended and Restated
Limited Liability Company Agreement of MBW Investors LLC, dated as of December
31,1996 (the "Existing LLC Agreement"), is made as of January 16, 1998.
WHEREAS, the Members of the Company are parties to the Existing LLC Agreement;
and
WHEREAS, in connection with the Duncan Hines Acquisition (as defined below), the
parties hereto desire to amend the Existing LLC Agreement as provided herein.
NOW THEREFORE, in consideration of the agreements and obligations set fort
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto intending to be
legally bound hereby, amend the Existing LLC Agreement as follows:
1. Definitions.
(a) Capitalized terms used in this First Amendment but not otherwise defined
herein shall have the respective meanings given such terms in the Existing
LLC Agreement.
(b) Section 1.1 of the Existing LLC Agreement is hereby amended by inserting
the following additional definitions:
"Additional B Units" has the meaning given such term in Section 8.3 hereof.
"Duncan Hines Acquisition" means the acquisition of the Duncan Hines business by
the Operating Company pursuant to the Asset Sale and Purchase Agreement, dated
November 25, 1997, by and among The Procter & Gamble Company, certain affiliates
thereof, and the Operating Company, as assignee of the Company and MBW Holdings.
"Original B Units" has the meaning given such term in Section 8.3 hereof.
<PAGE>
(c) Section 1.1 of the Existing LLC Agreement is further amended by amending
and restating the definitions set forth below as follows:
"MBW Holdings" means Aurora Foods Holdings Inc., a Delaware corporation formerly
known as MBW Holdings Inc.
"McCown Pa Leeuw" means, collectively, McCown De Leeuw & Co. III, L.P., a
California limited partnership, McCown De Leeuw & Co. Offshore (Europe) III,
L.P., a Bermuda limited partnership, McCown De Leeuw & Co. III (Asia), L.P., a
Bermuda limited partnership, Gamma Fund LLC, a California limited liability
company, McCown De Leeuw & Co. IV, L.P., a California limited partnership, and
Delta Fund LLC, a California limited liability company.
"Operating Company" means Aurora Foods Inc., a Delaware corporation formerly
known as MBW Foods Inc.
2. Section 6.4 shall be amended by inserting the words "voting control of the"
immediately before the words "then outstanding Voting Units."
3. Section 6.13 of the Existing LLC Agreement shall be amended as follows:
(a) subclause (a)(i) shall be amended by inserting the words "voting control of
the" immediately before the words "then outstanding Voting Units".
(b) subclause (b)(i) shall be amended by inserting the words "voting control of
the" immediately before the words "then outstanding Voting Units."
4. Article VIII of the Existing LLC Agreement is hereby amended and restated by
deleting Article VIII in the Existing LLC Agreement and inserting in lieu
thereof Article VIII as set forth on Exhibit I to this First Amendment.
5. Section 15.4(a) is amended as follows:
(a) Section l5(a)(i) is hereby amended by inserting the word "and" at the end
thereof.
(b) Section 15(a)(ii) is amended and restated to read in its entirety as
follows:
<PAGE>
(ii) to the Members pursuant to Section 8.3 hereof after giving effect to all
contributions, distributions and allocations for all periods.
(c) Section 15(a)(iii) is hereby deleted in its entirety.
<PAGE>
Exhibit I to
First Amendment
ARTICLE VIII
DISTRIBUTIONS AND ALLOCATIONS
Section 8.1 General Distribution Rules. Except as provided in Section 8.2
hereof, all distributions to Members shall be made at such times and in such
amounts as shall be determined by the Board. For purposes of this Article VIII,
the term "Member" shall include an Assignee of a Member and their successors and
assigns.
Section 8.2 Tax Liability Distributions. The Board shall make cash distributions
on or prior to April 15th of each Year to the Members in amounts intended to
enable the Members (or any Person whose tax liability is determined by reference
to the income of a Member) to discharge their United States federal, state and
local income tax liabilities arising from the allocations made pursuant to this
Article VIII with respect to the Company's operations in the preceding year (a
"Tax Liability Distribution"). The amount of any such Tax Liability Distribution
shall be equal to 50% of the amount of income and gain allocated to each Member
pursuant to this Article VIII; provided, however, if any distributions are made
with respect to the year in which the Tax Liability Distribution is being
determined pursuant to Sections 8.3(ii) through 8.3(vii) hereof, such
distributions shall reduce, by the amount of the distribution under the relevant
Section, the amount of the Tax Liability Distribution resulting from the
allocation of income and gain to such corresponding Section.
Section 8.3 Other Distributions. Distributions other than Tax Liability
Distributions, including without limitation distributions of Available Cash but
not including distributions upon liquidation pursuant to Section 8.4 hereof,
shall be made to the Members as follows :
(i) First, an amount shall be distributed to the Class A Holders, which amount,
when added to all prior distributions made to such Members with respect to
the Class A Units under this Section 8.3(i), shall be up to the aggregate
Capital Contributions of all Class A Holders at the time such distribution
is made. Such distribution shall be allocated among the Class A Holders in
proportion to their Capital Contributions.
(ii) Next, an amount shall be distributed to the Class B Holders holding Class B
Units outstanding as of January 1, 1998 ("Original B Units"), which amount,
when added to all prior distributions made to such Members with respect to
the Original B Units under Section 8.2 and this Section 8.3(ii), shall be
up to the product of (A) $1,000 multiplied by (B) the number of outstanding
Original
<PAGE>
B Units held by such Class B Holders. Such distribution shall be
allocated among the Class B Holders in proportion to their respective
Original B Units.
(iii) Next, an amount equal to $19,546,500 shall be distributed as follows:
(A) an amount shall be distributed to each Class A Holder and each Class
B Holder holding Original Class B Units, which amount, when added to all
prior distributions made to such Member under Section 8.2 with respect
to such Class A Units and Original B Units (other than those prior
distributions already taken into account in clause (ii) above) and this
Section 8.3(iii) shall produce a return of 10% simple interest per annum
on (i) in the case of a Class A Holder, the Unrecouped Capital
Contribution of such Class A Holder outstanding from time to time from
December 31, 1996 and (ii) in the case of Class B Holders holding
Original B Units, the portion of the amount payable pursuant to Section
8.3(ii) which remains undistributed from time to time from December
31,1996; (B) if any portion of the $19,546,500 distributable under this
clause (iii) remains undistributed after all distributions required
under subclause (A) above have been made, an amount shall be distributed
to the Class C Holders and the Class D Holders holding Vested Class D
Units in accordance with the principles set forth in Section 8.3(vi)
below except that the references to "this Section 8.3(vi)" therein shall
for purposes of this Section 8.3(iii) be references to this Section
8.3(iii) and any references to Section 8.3(v) therein shall be deleted;
and (C) if any portion of the $19,546,500 distributable under this
clause (iii) remains undistributed after all distributions required
under subclauses (A) and (B) above have been make, an amount shall be
distributed to the Class A Holders, the Class B Holders holding Original
B Units, the Class C Holders, and the Class D Holders in accordance with
the principles set forth is Section 8.3(vii) below except that with
respect to any distribution to be made to Class A Holders and Class B
Holders in accordance with the principles set forth in such Section
8.3(vii), such distribution shall be allocated among the Class A Holders
and the Class B Holders in accordance with their respective holdings of
Class A Units and Original B Units. To the extent the amount of any
proposed distribution under subclause (A) or (B) above is not sufficient
to provide a full distribution of the amount required to be distributed
to each Member entitled to receive a distribution with respect thereto,
the amount of such distribution shall be allocated, in the case of
subclause (A), between the Class A Holders as a group and the Class B
Holders holding Original B Units as a group, and in the case of
subclause (B), between the Class C Holders is a group and the Class D
Holders holding Vested Class D Units as a group, based on the respective
amounts which each such group would have received had the total
distribution been made.
(iv) Next, an amount shall be distributed to the Class B Holders with respect
to all Class B Units other than Original B Units ("Additional B Units"),
which amount, when added to all prior distributions made to such Members
with respect to such Additional B Units under Section 8.2 and this
Section 8.3(iv),
2
<PAGE>
shall be up to the product of (A) $1,300 multiplied by (B) the number of
outstanding Additional B Units held by such Class B Holders, Such
distribution shall be allocated among the Class B Holders holding
Additional B Units in proportion to their respective Additional B Units.
(v) Next, an amount shall be distributed to each Class A Holder and each Class
B Holder, which amount, when added to all prior distributions made to such
Member under Section 8.2 with respect to Class A Units or Class B Units,
respectively (other than those prior distributions already taken into
account in clauses (ii) or (iv) above), under Section 8.3(iii)(A) above and
under this Section 8.3(v) shall produce a return of 10% simple interest per
annum and no more on (i) in the case of a Class A Holder, the Unrecouped
Capital Contributions of such Class A Holder outstanding from time to time
from December 31,1996 and (ii) in the case of the Class B Holders, the
portion of the amount payable pursuant to Section 8.3(ii) and Section
8.3(iv) which remains undistributed from time to time from December 31,
1996. To the extent the amount of any proposed distribution under this
Section 8.3(v) is not sufficient to provide a full distribution of the
amount required to be distributed to each Class A Holder and Class B Holder
by this Section 8.3(v), the amount of such distribution shall be allocated
between the Class A Holders as a group and the Class B Holders as a group
based on the respective amounts which each group would have received had
the total distribution been made.
(vi) Next, an amount shall be distributed to the Class C Holders and the Class D
Holders as follows: (A) an amount shall be distributed to the Class C
Holders, which amount, when added to all prior distributions made to such
Members with respect to the Class C Units under Section 8.2, Section
8.3(iii)(B) and this Section 8.3(vi), shall be up to the Outstanding C
Units Percentage multiplied by 16.25% of all prior distributions made
pursuant to Section 8.3(iii)(A) and Section 8.3(v) above, with such
distribution to be allocated among the Class C Holders in proportion to the
Class C Units than held by each of them, and (B) an amount shall be
distributed to the Class D Holders holding Vested Class D units, which
amount, when added to all prior distributions made to such Members with
respect to the Vested Class D Units under section 8.2, Section 8.3(iii)(B)
and this Section 8.3(vi), shall be up to the Outstanding D Units Percentage
multiplied by 8.75% of all prior distributions made pursuant to Section
8.3(iii)(A) and Section 8.3(v) above, with such distribution to be
allocated among the Class D Holders in proportion to the Vested Class D
Units then held by each of them. To the extent the amount of any proposed
distribution under this Section 8.3(vi) is not sufficient to provide a full
distribution of the amount required to be distributed to each Class C
Holder and each Class D Holder holding Vested Class D Units by this Section
8.3(vi), the amount of such distribution shall be allocated between the
Class C Holders as a group and the Class D Holders holding Vested Class D
Units as a group based on the respective
3
<PAGE>
amounts which each group would have received had the total distribution
been made.
(vii) Next, any balance shall be distributed to the Class A Holders, the Class
B Holders, the Class C Holders and the Class D Holders as follows: (A)
80% of such balance shall be distributed to the Class A Holders and the
Class B Holders, with such distribution to be allocated among the Class
A Holders and Class B Holders in accordance with their respective
holdings of Class A Units and Class B Units as if the Class A Units and
Class B Units were Units of a single class; provided, that the portion
of such 80% of such balance to be distributed to each Class A Holder and
Class B Holder shall be the amount necessary so that all distributions
to Class A Holders and Class B Holders under this Section 8.3(vii), when
added to all distributions under clauses (iii) and (v) of this Section
8.3, are proportionate to the number of Class A Units outstanding (with
respect to the Class A Holders) and the number of Class B Units
outstanding (with respect to the Class B Holders (B) 13% of such balance
(such amount the "13% Balance") shall be distributed among the Class C
Holders and the Class A and Class B Holders as follows: (x) an amount
equal to the Outstanding C Units Percentage multiplied by the 13%
Balance shall be distributed to the Class C Holders to be allocated
among the Class C Holders in proportion to the Class C Units then held
by each of them and (y) the portion, if any, of the 13% Balance
remaining on hand after the distribution described in subclause
8.3(vii)(B)(x) above shall be distributed to the Class A and Class B
Holders as a group to be allocated among such Class A and Class B
Holders in proportion to which their respective holdings of Class A
Units and Class B Units as if the Class A Units and Class B Units were
Units or a single class; and (C) 7% of such balance (such amount the "7%
Balance") shall be distributed among the Company on account of the Class
D Units and the Class A, Class B and Class C Holders as follows; (x) an
amount equal to the Outstanding D Units Percentage multiplied by the 7%
Balance shall be distributed to the Class D Holders holding Vested Class
D Units to be allocated among such Class D Holders in proportion to the
Vested Class D Units then held by each of them and (y) the portion, if
any, of the 7% Balance remaining on band after the distribution
described in subclause 8.3(vii)(C)(x) above shall be distributed to the
Class A Holders, the Class B Holders and the Class C Holders to be
allocated among such Holders in proportion to the aggregate amounts
distributed to each of them pursuant to Sections 8.3(vii)(A) and (B)
hereof.
Notwithstanding the foregoing, in the event that distributions have been made
under Sections 8.3(i)-(vi) above and are then eligible to be made under Section
8.3(vii), and the outstanding D Units Percentage is increased from the
percentage in effect at the time distributions were previously made under
Section 8.3(vi) above, additional distributions shall be made under Section
8.3(vi) above to those Class D Holders holding Vested Class D Units to the
4
<PAGE>
extent their holdings of such Units increased the Outstanding D Units
Percentage, respectively, before any further distributions under Section
8.3(vii) are made.
Section 8.4 Distribution of Protocols Upon Liquidation Upon liquidation of the
Company, any distributions shall be made in accordance with the terms and
conditions of Article XV hereof and shall be made by the end of the taxable year
in which the liquidation occurs, or, if later, within ninety (90) days after the
liquidation.
Section 8.5 Tax Withholding. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated as
amounts distributed to the Members pursuant to this Article VIII for all
purposes of this Agreement. The Board is authorized to withhold from
distributions, or with respect to allocations, to the Members and to pay over to
any federal, state or local government any amounts required to be so withheld
pursuant to the Code or any provision ion of any other federal, state or local
law and shall allocate such amounts to those Members or with respect to which
such amounts were withheld.
Section 8.6 limitations on Distribution. Notwithstanding any provision to the
contrary contained in this Agreement, the Company shall not make a distribution
to any Member on account of its interest in the Company if such distribution
would violate Section 18-607 of the Delaware Act or other applicable law.
Section 8.7 Allocation of Profits. Profits of the Company for any Tax Year shall
be allocated in the following order and priority:
(i) First, among the Member in accordance with and in an amount equal to the
cumulative Losses allocated among the Members pursuant to Section
8.8(11) hereof for all prior periods and not previously taken into
account under this clause.
(ii) Next, among the Members in accordance with and in an amount equal to the
cumulative Losses allocated among the Members pursuant to Section 8.8(i)
hereof for all prior periods sand not previously taken into account
under this clause.
(iii) Next, among the Class B Holders in proportion to, and in an amount cc-to
the excess, if any, of (A) the cumulative cash distributions under
Section 8.3(ii) that have previously been made to the Class B Holders
and that each Class B Holder would have received under such Section for
the then current Tax Year of the Company had an amount of cash at least
equal to such Profits been available for such distribution under such
Section over (B) the cumulative allocations previously made to the Class
B Holders pursuant to this Section 8.7(iii) .
5
<PAGE>
(iv) Next, among the Class A Holders, the Class B Holders, the Class C
Holders and the Class D Holders holding Vested Class P Units in
proportion to, and in an amount equal to the excess, if any, of (A) the
cumulative cash distributions under Section 8.3(iii) hereof that have
previously been made to the Class A Holders, the Class B Holders, the
Class C Holders and such Class D Holders and that each Class A Holder,
Class B Holder, and Class C Holder and each such Class D Holder would
have received under Section 8.3(iii) hereof for the then current Tax
Year of the Company had an amount of cash at least equal to such Profits
been available for such distribution under such Section over (B) the
cumulative allocations previously made to the Class A Holders, the Class
B Holders and the Class C Holders and such Class D Holders pursuant to
this Section 8.7(iv).
(v) Next, among the Class B Holders in proportion to, and in an amount equal
to the excess, if any, of (A) the cumulative cash distributions under
that Section 8.3(iv) hereof that have previously been made to the Class
B Holders and Class B Holder would have received under such section for
the then current Tax Year of the Company had an amount of cash at least
equal to such Profits been available for such distributions under such
Section over (B) the cumulative allocations previously made to the Class
B Holders pursuant to this Section 8.7(v).
(vi) Next, among the Class A Holders and the Class B Holders in proportion
to, and in an amount equal to the excess, if any, of (A) the cumulative
cash distributions under Section 8.3(v) hereof that have previously been
made to the Class A Holders and Class B Holders and that each Class A
Holder and Class B Holder would have received under Section 8.3(v)
hereof for the then current Tax Year had an amount of cash at least
equal to such Profits been available for such distribution under such
Section over (3)the cumulative allocations previously made to the Class
A Holders and Class B Holders pursuant to this Section 8.7(vi).
(vii) Next, among the Class C Holders and Class D Holders holding Vested Class
D Units in proportion to, and in an amount equal to the excess, if any,
of (A) the cumulative cash distributions under Section 8.3(vi) that have
previously been made to the Class C Holders and such Class D Holders and
that each Class C Holder and each such Class D Holder would have
received under Section 8.3(vi) hereof for the current Tax Year of the
Company had an amount of cash at last equal to such Profits been
available for distribution under such Section over (B) the cumulative
allocations previously made to the Class C Holders and such Class D
Holders pursuant to this Section 8.7(vii).
(viii) Next, among the Members in proportion to and in an amount equal to the
excess, if any, of (A) the cumulative cash distributions under
6
<PAGE>
Section 8.3(vii) hereof that have previously been made to such Members
and that such Member would have received under Section 8.3(vii) hereof
for the then current Tax Year had an amount at cash at least equal to
such Profits been available for such distribution under such Section
over (B) the cumulative allocations previously made to the Members
pursuant to this Section 8.7(viii).
For purposes of determining Profits allocations under this Section 8.7, amounts
actually distributed under the relevant paragraph of Section 8.3 shall be
increased by the amount of the reduction under such paragraph that was made to
reflect the Section 8.2 distribution referred to therein.
Section 8.8 Allocation of Losses. Losses of the Company for any Tax Year shall
be allocated in the following order and priority;
(i) First, to offset any Profits previously allocated under Section 8.7 in the
inverse order and priority in which such Profits were allocated; and
(ii) Next, in the following order (a) to the Class A Holders to the extent of
their Capital Contributions and (b) to the Class A Holders and the Class B
Holders in accordance with their respective pro rata portion of Class A
Units and Class B Units taken together for this purpose as a single class
or Units.
Section 8.9 Special Allocations. The following special allocations shall be made
in the following order:
(i) Qualified Income Offset. Notwithstanding the foregoing, in the event that
any Member receives any adjustments, allocations or distributions described
in Sections l.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury
Regulations, items of Company income and gain (including gross income)
shall be specially allocated to each such Member in a manner and amount
sufficient to eliminate, to the extent required by such Regulations, the
negative balance in the Capital Account of the Member described in Section
1.704-1(b)(2)(ii)(d)(3) of the Treasury Regulations as quickly as possible.
(ii) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Tax Year, each such Member shall be specially
allocated items of Company income and gain in the amount of such deficit
Capital Account as quickly as possible, provided that an allocations
pursuant to this Section 8.9(ii) shall be made only if and to the extent
that such Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Article 8 have been made
as if Section 8.9(i) and (ii) were not in this Agreement.
7
<PAGE>
Section 8.10 Allocation Rules.
(a) In the event Members are admitted to the Company pursuant to this
Agreement on different dates, the Profits (or Losses) allocated to the
Members for each Tax Year during which Members are so admitted shall be
allocated among the Members in proportion to the respective Units that
each holds from time to time during such Tax Year in accordance with
(S)706 of the Code, using any convention permitted by law and selected by
the Board.
(b) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Board
using any method that is permissible under 4706 or the Code and the
Treasury Regulations thereunder.
(c) Except as otherwise provided in this Agreement, all types of Company
income, gain, loss, deduction and any other allocations not otherwise
provided for shall be divided among the Members in the same proportions as
they share Profits and Losses for the Tax Year in question.
(d) The Members are aware of the income tax consequences of the allocations
made by this Article VIII and hereby agree to be bound by the provisions of
this Article VIII in reporting their shares of Company income and loss for
income tax purposes.
Section 8.11 Tax Allocations of Section 704(c) of the Code.
(a) In accordance with (S)704(c) of the Code and the Treasury Regulations
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for income tax
purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with Section 1.1 hereof).
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to Paragraph (b) of the definition of "Gross Asset Value"
contained in Section 1.1 hereof, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under (S)704(c) of
the Code and the Treasury Regulations thereunder.
(c) Any elections or other decisions relating to allocations under this Article
VIII, including the selection of any allocation method permitted under
proposed Treasury Regulation (S)1.704-1(c), shall be made by the Board in
any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 8.11 are solely for
purposes of federal, state and local taxes and shall not affect, or in any
way be taken into
8
<PAGE>
account in computing, any Member's Capital Account or share of Profits,
Losses, other items or distributions pursuant to any provision of this
Agreement.
9
<PAGE>
EXHIBIT 10.16
FIRST AMENDED AND
RESTATED
PRODUCTION AGREEMENT
--------------------
This First Amended and Restated Production Agreement (the "Agreement") is
made as of the 19th day of November, 1997, by and between Aurora Foods, Inc.
(formerly known as MBW Foods, Inc.), a Delaware corporation ("Buyer"), and The
Red Wing Company, Inc., a Delaware corporation ("Producer").
WITNESSETH
WHEREAS, Buyer and Producer entered into a Production Agreement dated as of
June 9,1997;
WHEREAS, Buyer and Producer desire to amend and restate such Production
Agreement;
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 as of June 9, 1997, (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. My 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.
<PAGE>
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"), Fredonia, New York (the "Fredonia 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 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
-2-
<PAGE>
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 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.
-3-
<PAGE>
c. The non-disclosing party agrees to hold all Confidential Information of
the disclosing party in confidence and not to 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.
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
-4-
<PAGE>
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
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
-5-
<PAGE>
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 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 of 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
-6-
<PAGE>
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 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 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.
-7-
<PAGE>
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 a daily basis for the
Products produced by the Producer during the preceding business day.
Terms of payment for each invoice will be net thirty (30) 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:
Aurora Foods, Inc.
445 Hutchinson Avenue
Suite 960
Columbus, OH 43235
Payments shall be sent to:
SunTrust Bank
P.O. Box 44l8
Atlanta Georgia 30302
For credit to: The Red Wing Company, Inc.
Account Number 8801079982
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
-8-
<PAGE>
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) until such time as each of the Approved
Facilities are 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 each of the Approved Facilities are producing the Products,
such Monthly Production Request shall not for any particular calendar
month exceed in the aggregate [ ]* 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).
* Confidential treatment requested by the Company.
-9-
<PAGE>
11. INVENTORY OF RAW MATERIALS AND PACKAGING MATERIALS.
a. With respect to each Approved Facility, Producer agrees to maintain at
all times during the Agreement Term at each Approved Facility an
inventory of raw materials. packaging materials and supplies utilized in
producing the Products in quantities equal to produce at least five (5)
days of the average quantities of such Products sold to Buyer during the
preceding sixty (60) days.
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
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. Subject to the provisions of Section 13(g) of this Agreement, 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
-10-
<PAGE>
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. Subject to the provisions of Section 13(g) of this Agreement, 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 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.
g. Notwithstanding the provisions of Sections 13(a), 13(b) and 14(b) of
this Agreement, Buyer and Producer agree that Buyer (1) shall be
responsible for all costs related to the moving and reinstallation of
the Manufacturing Equipment for the Mrs. Butterworths/R/ lines to the
designated Approved Facilities; and (2) shall reimburse Producer far all
costs associated with
-11-
<PAGE>
retrofitting Producer Manufacturing Equipment, provided that such
responsibility and reimbursement shall not exceed $3,300,000.00 in the
aggregate. Producer shall be responsible for all costs related to the
moving and reinstallation of the Manufacturing Equipment and the
retrofitting of the Producer Manufacturing Equipment that are in excess
of $3,300,000.00. Buyer and Producer acknowledge and agree that the
removing and packaging of the Manufacturing Equipment for the Mrs.
Butterworths/R/ lines shall also be the responsibility of the Buyer,
and the costs to Buyer of removing and packaging such equipment shall
not be applied in calculating the $3,300,000 cap described previously
in this paragraph.
(h) Upon mutual agreement of Buyer and Producer, Buyer shall purchase
palletizers (at a cost that shall not exceed $200,000) for installation
in connection with the Mrs. Butterworths/R/ lines. Buyer and Producer
acknowledge and agree that such cost shall not be applied in
calculating the $3,300,000 cap described previously in Section 13(g) of
this Agreement. Buyer shall be invoiced directly by the seller of the
palletizers.
(i) Prior to reinstalling the Manufacturing Equipment for the Mrs.
Butterworths/R/ lines at an Approved Facility, Buyer shall cause to be
performed, and shall be responsible for all costs related to, certain
mutually agreed upon maintenance projects relating to certain pieces of
the Manufacturing Equipment. Those maintenance projects include:(i) the
repair and maintenance of two glass cleaners, (ii) the repair and
maintenance of a labeler and (iii) the repair and maintenance of a
homogenizer. In addition, Buyer shall purchase, and shall be
responsible for all costs related to the purchase of parts cabinets as
mutually agreed upon by Buyer and Producer. The current estimated cost
of the repair and maintenance of the foregoing items and the purchase
of the parts cabinets is $132,000. Buyer and Producer acknowledge and
agree that the costs of such repair and maintenance of the foregoing
items and the cost of purchasing the parts cabinets shall be the
responsibility of the Buyer, but such costs shall not be applied in
calculating the $3,300,000 cap described previously in Section 13(g) of
this Agreement
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.
-12-
<PAGE>
b. Subject to the provisions of Section 13(g) of this Agreement, 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, subject to the provisions of Section 13(g) of this Agreement, be
deemed to limit Buyer's obligation to reimburse Producer for all costs
associated with the retrofitting.
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 ketchup's.
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.
-13-
<PAGE>
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 Mrs. Butterworths/R/ Products produced at any Approved
Facility or Substitute Facility in the amount set forth 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
Mrs. Butterworths(R) 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.
-14-
<PAGE>
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.
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.
-15-
<PAGE>
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, it 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 effort 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
incurrence of additional costs in connection with the production of the
Products unless Buyer agrees to pay such additional costs.
-16-
<PAGE>
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 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,
-17-
<PAGE>
the "Producer Indemnified Persons") for, and will pay to the Producer
Indemnified Persons, (i) 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 and (ii) the amount of any Damages incurred by the Producer
Indemnified Persons arising, directly or indirectly, from or in
connection with any infringement, alleged infringement or any other
violation or alleged violation of any patent, trademark, trade dress or
copyright rights or other proprietary rights owned or controlled by
third parties by reason of the manufacture, production, use,
distribution, advertising or sale of the Products.
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 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
-18-
<PAGE>
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 title rights of any person and no affect 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 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
-19-
<PAGE>
(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 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;
-20-
<PAGE>
(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 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.
-21-
<PAGE>
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: Aurora Foods, Inc.
445 Hutchinson Avenue
Suite 960
Columbus, Ohio 43235
Attention: Thomas J. Ferraro
Facsimile: (614) 436-6655
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 relinquishment thereof; nor shall any single or partial
exercise
-22-
<PAGE>
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 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 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. Subject to other provisions of This Section 25,
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. 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.
Notwithstanding the foregoing, Producer shall not have a right of first
opportunity to bid or otherwise quote for the production of the "Portion
Pac" business for Mrs. Butterworths/R/ products, Log Cabin/R/ products or
other branded syrup products.
-23-
<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.
AURORA FOODS, INC. THE RED WING COMPANY, INC.
("Buyer") ("Producer")
By: /s/ Herrar By: /s/ Eugene W. Bailer
------------------------ -------------------------
Its: President Its:President
----------------------- ------------------------
-24-
<PAGE>
SCHEDULE A
LIST OF PRODUCTS
<TABLE>
<CAPTION>
SKU Description - Syrup
- -------------------------------------------------------------------------------
<S> <C>
397162 Display Gallons
- -------------------------------------------------------------------------------
397170 Display Gallons French
- -------------------------------------------------------------------------------
579129 24 Oz. Regular
- -------------------------------------------------------------------------------
529224 24 Oz. Lite
- -------------------------------------------------------------------------------
579412 12 Oz. Regular
- -------------------------------------------------------------------------------
579169 12 Oz. Regular 1.69
- -------------------------------------------------------------------------------
529212 12 Oz. Lite
- -------------------------------------------------------------------------------
529169 12 Oz. Lite 1.69
- -------------------------------------------------------------------------------
579408 36 Oz. Regular
- -------------------------------------------------------------------------------
529208 36 Oz. Lite
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
SPECIFICATIONS
The Buyer's Operating Manual, which has been separately delivered to Producer,
is deemed to be included herein and a pan of the Agreement.
<PAGE>
SCHEDULE C
Confidential treatment for Schedule C has been requested
<PAGE>
SCHEDULE D
<TABLE>
<CAPTION>
BEST EFFORT
COMPLETION DATES
- -----------------------------------------------------------------------------------------------
Production Facility Delivery Installation Produce
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gallons San Jose w/o 07/21/97 w/o 08/11/97 08/18/97
- -----------------------------------------------------------------------------------------------
Glass Streator w/o 12/03/97 w/o 01/01/98 02/01/98
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE E
PRODUCER MANUFACTURING EQUIPMENT
RELOCATION/RETROFIT COST ESTIMATES
<TABLE>
<CAPTION>
ITEM NAME STREATOR SAN JOSE
--------- -------- --------
$ $
- -
<S> <C> <C>
GALLON PRODUCTION
Processing 5,000 38,500
Holding Tank N/A 50,000
Product Cooling 25,500 10,500
Controls 5,500 20,000
Piping 9,500 15,000
Homogenizer 75,500 53,300
Deasrator 18,000 N/A
Mechanical Installation 5,000 12,500
Electrical Installation 10,000 12,500
Contingency 6,500 0
-------- --------
Sub Total Gallon Processing 160,500 212,300
Packaging
Installation of Gallon Line N/A 50,000
Filler Parts 3,000 N/A
Copper Parts N/A N/A
Labeler Parts 2,500 7,500
-------- --------
Sub Total Gallon Packaging 5,500 57,500
TOTAL GALLON PRODUCTION 166,000 269,800
</TABLE>
<PAGE>
RELOCATION/RETROFIT COST ESTIMATES
<TABLE>
<CAPTION>
ITEM NAME STREATOR SAN JOSE SAN JOSE SAN JOSE
ALL SIZES 24 OZ. ONLY 12 & 24 OZ. 12, 24, 36 OZ
$ $ $ $
------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
RETAIL PRODUCTION
Processing Revisions
Gum Induction N/A 34,000 34,000 34,000
Process Control Upgrade 327,980 a N/A N/A N/A
Sweetner Tank(s) 235,000 b 20,000 20,000 20,000
Product Cooling 107,000 50,000 50,000 50,000
------------------ ----------------- ----------------- ----------------
Sub Total Retail Processing 669,980 104,000 104,000 104,000
Packaging Revisions
Glass Cleaner 33,508 d 45,000 c 45,000 c 45,000 c
Filler N/A 21,521 23,880 28,440
Capper N/A 24,515 28,122 31,729
Labeler 38,340 d 42,516 67,344 92,506
Packer N/A 7,141 14,232 21,322
Palletizer 4,163 d 0 0 0
------------------ ----------------- ----------------- ----------------
Sub Total Retail Packaging 76,011 140,693 178,578 218,997
Olathe Equipment
Millwright Dismantle TBD *
Electrical Dismantle TBD *
Equipment Transfer TBD *
Millwright Install 400,000
Electrical Install 300,000
Compressed Air 25,000
Water 25,000
Hot Water 30,000
Line Lube 5,000
Vendor Start-Up Service 20,000 0 0 0
------------------ ----------------- ----------------- ----------------
Sub Total Olathe Equipment 805,000 0 0 0
</TABLE>
<PAGE>
SCHEDULE E
PRODUCER MANUFACTURING EQUIPMENT
RELOCATION/RETROFIT COST ESTIMATES
<TABLE>
<CAPTION>
ITEM NAME STREATOR SAN JOSE SAN JOSE SAN JOSE
ALL SIZES 24 OZ. ONLY 12 & 24 OZ. 12, 24, 36 OZ
$ $ $ $
------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
RETAIL PRODUCTION
Support Services
Electrical
Utility High Viltage Feed 65,000
Primary Switch 50,000
Transformer/Service 150,000
Feeder to MCC's 200,000
Contingency 50,000 0 0 0
------------------ ----------------- ----------------- ----------------
Sub Total 515,000 0 0 0
Steam 15,000 0 0 0
Water
Water Main/Meter 30,000
Charcoal Filters 10,000
Water Softner 50,000 0 0 0
------------------ ----------------- ----------------- ----------------
Sub Total 90,000 0 0 0
Compressed Air
Air Compressor 40,000
New Header 5,000 0 0 0
------------------ ----------------- ----------------- ----------------
Sub Total 45,000 0 0 0
Sub Total Support Services 665,000 0 0 0
TOTAL RETAIL PRODUCTION 2,215,991 244,693 282,578 322,997
</TABLE>
*= To Be Determined
a = discrationary Item to Update obsolete control system.
b = Replacing existing sweetner tanks with outside storage tanks.
c = To provide bottle cleaner; existing will not work.
d = Dalayed P.M.'s discovered 5/29 visit.
<PAGE>
SCHEDULE F
STREATOR BUILDING ADDITION
<TABLE>
<CAPTION>
ITEM NAME STREATOR
$
--------- ---------
<S> <C>
BUILDING CONSTRUCTION
New Building Addition (~13,000 SF) 910,000
Iowa Street Dock Renovations
Enclosure 25,000
Cooler 68,500
Existing Shipping Warehouse Renovations
Sanitary Sewers 131,500
Storm Sewers 10,000
Wall Removals/Modifications 70,000
---------
TOTAL BUILDING CONSTRUCTION 1,185,000
</TABLE>
<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.
(c) Office and Location. Employee shall perform services for the
-------------------
Company from the Company's corporate headquarters.
1
<PAGE>
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) 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.
(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% 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.
2
<PAGE>
(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 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) 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
3
<PAGE>
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 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
4
<PAGE>
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 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. For the purpose of this Agreement, the
5
<PAGE>
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.
(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 Information 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) at 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
6
<PAGE>
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 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
7
<PAGE>
Attention: Charles Ayres
---------
(ii) If to the Employee:
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 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
8
<PAGE>
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
/s/ Dirk C. Grizzle
_____________________________
Dirk C. Grizzle
9
<PAGE>
Exhibit 10.18
PRODUCTION AGREEMENT
--------------------
This Production Agreement (the "Agreement") is made as of the 19th day of
November, 1997, by and between Aurora 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 develope 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 as of November 19, 1997, (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"), Dunkirk, New York (the "Dunkirk Plant"),
Fredonia, New York (the "Fredonia 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").
<PAGE>
3. PRODUCTS; ANNUAL MINIMUM PRODUCTION.
a. 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 in such quantities and
at such Approved Facilities as shall be determined from time to time in
the sole judgment of Buyer.
b. Notwithstanding the foregoing, subject to the terms and conditions of
this Agreement, Buyer agrees that, during the second year of the
Original Term (with the second year being measured from the first
anniversary of the Commencement Date to the day immediately preceding
the second anniversary of the Commencement Date) and during each year of
the Original Term thereafter, Buyer shall order at least three million
three hundred thousand equivalent cases of Products from the Producer
(with an equivalent case being equal to 288 ounces of the Products)
(such number of equivalent cases, as the same may be adjusted in
accordance with this Section 3, is hereafter referred to as the "Annual
Minimum").
c. Buyer has advised Producer that, at some time during the Original Term,
Buyer may redesign the packaging for the entire line of its Country
Kitchen/R/ brand of table syrup, and Producer reserves the right not to
produce any of the redesigned products of the Country Kitchen/R/ brand
of table syrup. If Producer exercises its right not to produce any of
the redesigned products of the Country Kitchen/R/ brand (which shall not
be deemed to be a breach of this Agreement) so that Buyer has another
person produce the Country Kitchen/R/ brand of table syrup, then the
Annual Minimum number of equivalent cases to be ordered by Buyer shall
be adjusted downward as follows:
(i) During the year of the Original Term (with the year being
determined in accordance with Section 3(b) of this Agreement) in
which Buyer has another person commence production of any of the
redesigned products of the Country Kitchen/R/ brand of table syrup,
the Annual Minimum for such year shall equal three million three
hundred thousand equivalent cases of Products minus the Partial
Year Shortfall (as hereinafter defined). The term "Partial Year
Shortfall" shall mean an amount equal to the lesser of (a) seven
hundred thousand equivalent cases of Products divided by 365 times
the number of calendar days remaining in such year or (b) the
actual number of equivalent cases of the Country Kitchen/R/ brand
of table syrup produced by the third party producer in such year.
(ii) During each year of the Original Term following the year of the
Original Term (with the year being determined in accordance with
Section 3(b)
-2-
<PAGE>
of This Agreement) in which Buyer has another person commence
production of any of the redesigned products of the Country
Kitchen/R/ brand of table syrup, the Annual Minimum shall equal
three million three hundred thousand equivalent cases of Products
minus the Subsequent Full Year Shortfall (as hereinafter defined).
The term "Subsequent Full Year Shortfall" shall mean an amount
equal to the lesser of (a) seven hundred thousand equivalent cases
of Products or (b) the actual number of equivalent cases of the
Country Kitchen/R/ brand of table syrup produced by the third party
producer during such subsequent year.
d. If during any year after the first year of the Original Term Buyer shall
order more equivalent cases of Products than the applicable Annual
Minimum number of cases for such year, then, for purposes of determining
under this Agreement whether Buyer has ordered in a particular year the
applicable Annual Minimum number of cases, the excess number of
equivalent cases from such year shall be carried forward (but not
carried back) to be applied against the applicable Annual Minimum number
of cases to be ordered by the Buyer in any subsequent year of the
Original Term. The sum of the number of equivalent cases carried forward
from prior years and the number of equivalent cases actually order
during such year shall be the amount of equivalent cases deemed ordered
for such year by the Buyer for purposes of this Agreement. If the sum of
the number of equivalent cases carried forward from prior years and the
number of equivalent cases actually ordered during such year by the
Buyer shall be less than the applicable Annual Minimum number of cases
for such year, the number of equivalent cases carried forward shall be
included in the number of cases deemed ordered for such year and shall
be utilized to decrease the amount that may be owing to the Producer
pursuant to Section 14(a) of this Agreement.
e. IF DURING ANY YEAR AFTER THE FIRST YEAR OF THE ORIGINAL TERM BUYER SHALL
FAIL TO ORDER THE APPLICABLE ANNUAL MINIMUM NUMBER OF EQUIVALENT CASES
OF PRODUCTS FROM THE PRODUCER FOR SUCH YEAR (WITH SUCH CALCULATION BEING
DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 OF THIS
AGREEMENT, INCLUDING THE PROVISIONS OF PARAGRAPH D OF THIS SECTION 3),
THE SOLE AND EXCLUSIVE REMEDIES FOR PRODUCER FOR SUCH FAILURE SHALL BE
(I) THE REMEDY PROVIDED TO PRODUCER IN SECTION 14(A) OF THIS AGREEMENT
AND (II) IF SUCH FAILURE OCCURS DURING THE SECOND YEAR OF THE ORIGINAL
TERM, AN ADDITIONAL ONE HUNDRED EIGHTY DAYS SHALL BE ADDED TO THE
ORIGINAL TWO YEAR PERIOD SET FORTH IN SECTION 22(B) OF THIS AGREEMENT
-3-
<PAGE>
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 "Specification"), 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 nonexclusive, non-
assignable, indivisible and royalty free right and license to manufacture
and sell the Products to Buyer exclusively. The 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
-4-
<PAGE>
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 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 part's request, the nondisclosing 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 part'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
-5-
<PAGE>
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.
g. The non-disclosing party acknowledges that the Confidential Information
disclosed or to be disclosed by the disclosing party represents the
disclosing part'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
-6-
<PAGE>
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 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. 1f, 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
-7-
<PAGE>
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 far 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 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 of 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 panties 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). My 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
-8-
<PAGE>
Producer's cost of 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 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 Buyers 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 a daily basis for the
Products produced by the Producer during the preceding business day.
Terms of payment for each invoice will be net thirty (30) 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:
Aurora 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
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-
<PAGE>
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) until such time as each of the Approved
Facilities are 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 each of the Approved Facilities are producing the
Products, such Monthly Production Request shall not for any particular
calendar month exceed in the aggregate [ ]* equivalent cases of
Products. Producer shall be obligated to deliver to Buyer the
quantities of the Products set forth in
* Confidential treatment requested by the Company.
-10-
<PAGE>
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 RAW MATERIALS AND PACKAGING MATERIALS.
a. With respect to each Approved Facility, Producer agrees to maintain at
all times during the Agreement Term at each Approved Facility an
inventory of raw materials packaging materials and supplies utilized in
producing the Products in quantities equal to produce at least five (5)
days of the average quantities of such Products sold to Buyer during the
preceding sixty (60) days.
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
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
-11-
<PAGE>
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. Subject to the provisions of Section 13(g) of this Agreement, 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 Facilities 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 moving 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. For purposes of this Agreement,
the Manufacturing Equipment shall include any equipment purchased or
acquired in connection with the moving and reinstallation of the
Manufacturing Equipment to the designated Approved Facilities (the
"Related Equipment"). The general categories and general descriptions of
the Related Equipment that the parties currently contemplate will be
purchased or acquired in connection with the moving and reinstallation
of the Manufacturing Equipment to the designated Approved Facilities is
set forth in Schedule D-1. At such time as the actual purchases or
------------
acquisitions are made, Buyer and Producer will substitute Schedule D-1
------------
with a revised Schedule D-1 that shall identify with specificity such
------------
equipment and shall contain such information as Buyer may reasonably
request so that Buyer may appropriately account for such assets on its
books and records. Such equipment shall be owned by Buyer, and the
allocation of the costs of purchasing such equipment shall be determined
in accordance with the provisions set forth in Section 13(g) of this
Agreement.
b. Subject to the provisions of Section 13(g) of this Agreement, 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 and the purchase of
the Related Equipment. Buyer shall retain title to all of the
Manufacturing Equipment, including the Related Equipment.
-12-
<PAGE>
c. If during the Agreement Term 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 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. After the moving and reinstallation of the
Manufacturing Equipment has been completed, in the event Buyer or
Producer thereafter desire to make any capital expenditures that relates
to the Manufacturing Equipment and the production of either the Products
for the Buyer or table syrup products for private label brands produced
by Producer, such capital expenditures shall not be made unless the
parties mutually agree on the allocation of the financial responsibility
for such capital expenditures and the ownership of the capital
improvements.
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. Provided that Producer delivers Products in accordance with the terms of
shipping orders delivered to the Producer by Buyer under Section 7(a) of
this Agreement, Buyer agrees that, in addition to using the
Manufacturing Equipment for the production of the Products, Producer
shall be entitled to use the Manufacturing Equipment in connection with
the production of table syrup products for private label brands produced
by Producer. Producer agrees that it shall not use such equipment for
any other purpose.
g. Notwithstanding the provisions of Sections 13(a) and 13(b) of this
Agreement, Buyer and Producer agree that, with respect to the moving and
reinstallation of the Manufacturing Equipment to the designated Approved
Facilities and the purchase of the Related Equipment, Buyer shall be
responsible for the lesser of (1) 50% of all costs related to the moving
and reinstallation of such Manufacturing Equipment and the purchase of
the Related Equipment; or (2) $2,500,000.00. Producer shall
-13-
<PAGE>
be responsible for all other costs related to the moving and
reinstallation of the Manufacturing Equipment to the designated Approved
Facilities and the purchase of the Related Equipment. Buyer and Producer
acknowledge and agree that the removal and packaging of the
Manufacturing Equipment for the Log Cabin/R/ lines shall be the
responsibility of the Buyer, and the costs to Buyer of removal and
packaging such equipment shall not be applied in calculating the cap on
the Buyer's costs described in the immediately preceding sentence. Buyer
shall contract directly with one or more other persons for removal and
packaging of the Manufacturing Equipment.
h. Subject to the provisions of Section 13(g) of this Agreement, Producer
shall submit to Buyer on a weekly basis one master billing statement for
all invoices under $5,000 received by Producer for goods or services
purchased by Producer in connection with to the moving and
reinstallation of the Manufacturing Equipment to the designated Approved
Facilities or the purchase of the Related Equipment. The master billing
statement shall itemize the goods or services purchased by the Producer
that are the subject of the master billing statement. In submitting such
master billing statement to Buyer, Producer warrants to Buyer that the
goods and services have been purchased by the Producer and that the
amount set forth in the master billing statement is due to be paid by
the Producer. Subject to the provisions of Section 13(g) of this
Agreement, within twenty four hours after Buyer receives such master
billing statement from the Producer, Buyer shall mail or send via
overnight courier a check payable to the Producer in an amount equal to
fifty percent (50%) of the master billing statement. Producer shall use
the proceeds of such check to pay the Buyer's share of the cost of the
goods and services purchased by the Producer, and shall pay the
remaining balance due to the providers of the goods and services with
its own funds. In the event Buyer fails within twenty four hours after
Buyer receives such master billing statement from the Producer to mail
or send via overnight courier the amount due to the Producer, Producer
shall be entitled to charge Buyer interest on the unpaid amount at the
rate of 10% per annum until the amount flue is paid in full from the
date such payment was to be sent to Producer.
i. Subject to the provisions of Section 13(g) of this Agreement, Producer
shall submit to Buyer on a weekly basis each invoice that equals or is
in excess of $5,000 that is received by the Producer during the
preceding calendar week for goods or services purchased by Producer in
connection with the moving and reinstallation of the Manufacturing
Equipment to the designated Approved Facilities or the purchase of the
Related Equipment. In submitting such an invoice to Buyer, Producer
warrants to Buyer that the goods and services have been purchased by the
Producer and that the amount set forth in the invoice is due to be paid
-14-
<PAGE>
by the Producer. For each such invoice, Producer shall clearly identify
the date that Producer is contractually required to pay the amount of
the invoice to the provider of the goods or services. Subject to the
provisions of Section 13(g) of this Agreement and provided that Buyer
receives the invoice at least ten days prior to the date the invoice is
due, Buyer shall mail or send via overnight courier a check payable to
the Producer in an amount equal to fifty percent (50%) of each such
invoice not less than five days prior to the date such invoice is due.
Producer shall use the proceeds of such check to pay Buyer's share of
the invoice, and shall pay the remaining balance due on the invoice with
its own funds. In the event Buyer fails to mail or send via overnight
courier the amount due to the Producer within five days prior to the
date the invoice is due, Producer shall be entitled to charge Buyer
interest on the unpaid amount at the rate of 10% per annum until the
amount due is paid in full from the date such payment was to be sent to
Producer.
14. CERTAIN PAYMENTS TO PRODUCER.
a. Subject to the terms and conditions of this Agreement, if, during any
year after the first year of the Original Term, Buyer shall fail to
order the applicable Annual Minimum number of equivalent cases of
Products from the Producer for such year (with such calculation being
determined in accordance with the provisions of Section 3 of this
Agreement, including the provisions of paragraph d of Section 3), then,
within thirty days after the end of such year, Buyer shall pay to
Producer an amount equal to the product of (x) $.15 and (y) the number
that results from subtracting from the applicable Annual Minimum number
of equivalent cases of Products to be ordered by Buyer for such year
(with such applicable Annual Minimum being determined in accordance
with the provisions of Section 3 of this Agreement) the number of
equivalent cases of Products deemed ordered by Buyer for such year
(with such number being determined in accordance with the provisions of
Section 3 of this Agreement, including the provisions of paragraph d of
Section 3 relating to the use of carry forward equivalent cases to
reduce the amount that may be due to the Producer hereunder).
b. Subject to the terms and conditions of this Agreement, if pursuant to
Section 1 of this Agreement, Buyer shall give notice not to renew this
Agreement past the end of the Original Term, and at the end of the
Original Term, the Amortization Amount (as hereinafter defined) exceeds
the Amortization Credit (as hereinafter defined), then Buyer shall pay
to the Producer, within thirty (30) days of the end of the Original
Term, the difference between the Amortization Amount and Amortization
Credit.
-15-
<PAGE>
The term ("Amortization Amount") shall mean an amount equal to the
lesser of (i) $2,500,000 or (ii) one half of the amounts spent by the
Producer for costs related to the moving and reinstallation of the
Manufacturing Equipment and purchase of Related Equipment.
The term "Amortization Credit" shall mean an amount equal to the sum of:
(i) the product of the total number of equivalent cases of Products paid
for by Buyer during or within thirty days after the Original Term times
$.15; (ii) the total amounts previously paid to the Producer by the
Buyer pursuant to Section 14(a) of this Agreement; and (iii) the product
of the total number of equivalent cases of table syrup for private label
brands produced by the Producer using the Manufacturing Equipment during
the Original Term times $.15.
15. PRIVATE LABEL PRODUCTION REPORTS.
a. Within thirty days after the end of each year during the Agreement Term,
Producer shall deliver to Buyer a production report certified by the
President of the Producer that details the number of equivalent cases of
table syrup for private label brands produced by the Producer during
such year pursuant to Section 13(f) of this Agreement. Upon the request
of Buyer, Buyer shall be entitled to inspect and audit the books and
records of the Producer relating to the production report so that Buyer
may independently verify the accuracy of the certified production
report.
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
-16-
<PAGE>
by Producer in accordance with its obligations under this Agreement,
including those contained in Section 17 of this Agreement.
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.
-17-
<PAGE>
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
nonconformity 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 far 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 incurrence of
additional costs in connection with the production of the Products
unless Buyer agrees to pay such additional costs.
-18-
<PAGE>
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 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
-19-
<PAGE>
(collectively, the "Producer Indemnified Persons") for, and will pay to
the Producer Indemnified Persons, (i) 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 Buyers breach of this Agreement, negligence or willful misconduct
and (ii) the amount of any Damages incurred by the Producer Indemnified
Persons arising, directly or indirectly, from or in connection with any
infringement, alleged infringement or any other violation or alleged
violation of any patent, trademark, trade dress or copyright rights or
other proprietary rights owned or controlled by third parties by reason
of the manufacture, production, use, distribution, advertising or sale
of the Products.
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 provided 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
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
-20-
<PAGE>
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 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 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
-21-
<PAGE>
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 by the Producer as a result of a breach of any of the
provisions of this Agreement by Buyer or by the Producer 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
(including any other amounts which are due and owing to Producer under
this Agreement), within thirty days after such termination, an amount
equal to the difference between the Amortization Amount and the
Amortization Credit
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 an amount equal to the difference between
the Amortization Amount and the Amortization Credit.
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 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;
-22-
<PAGE>
(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 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
-23-
<PAGE>
(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: Aurora Foods, Inc.
445 Hutchinson Avenue
Suite 960
Columbus, Ohio 43235
Attention: Thomas J. Ferraro
Facsimile: (614) 436-6655
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, super-seded
or altered except by an instrument in writing duly executed and
delivered on behalf of each of the parties hereto.
-24-
<PAGE>
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 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 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. Subject to other provisions of this Section 25,
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. 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 450,000
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.
Notwithstanding the foregoing, Producer shall not have a right of first
opportunity to bid or otherwise quote for the production of the "Portion
Pac" business for Mrs. Butterworths/R/ products, Log Cabin/R/ products or
other branded syrup products.
-25-
<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.
AURORA FOODS, INC. THE RED WING COMPANY, INC.
("Buyer") ("Producer")
By: /s/ Herrar By: /s/ Eugene W. Bailer
--------------------------- ------------------------
Its: President Its: President
-------------------------- -----------------------
-26-
<PAGE>
SCHEDULE A
LIST OF PRODUCTS
<TABLE>
<CAPTION>
BRAND SKU DESCRIPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
Log Cabin 43000 000360 12oz. Regular
000370 24oz. Regular
000560 36oz. Regular
349010 Gallon Regular
000530 12oz. Lite
000520 24oz. Lite
000390 36oz. Lite
349020 Gallon Lite
Country Kitchen 000660 24oz. Regular
000710 36oz. Regular
000640 24oz. Lite
000710 36oz. Lite
001130 24oz. Butter
Wigwam 849140 Gallon Wigwam
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
SPECIFICATIONS
The Buyer's Operating Manual, which as been separately delivered to producer, is
deemed td be included herein and a part of the Agreement.
<PAGE>
SCHEDULE C
CONFIDENTIAL TREATMENT FOR SCHEDULE C HAS BEEN REQUESTED
<PAGE>
SCHEDULE D-1
Related Equipment
<TABLE>
<CAPTION>
Item NY Main Line CA Flex Line
- --------------------------------------------------------------------------------
<S> <C> <C>
PACKAGING LINE
- --------------------------------------------------------------------------------
Misc. Rebuilds $75,000 $75,000
- --------------------------------------------------------------------------------
Change Parts $120,000
- --------------------------------------------------------------------------------
Stretch Wrap $65,000 $30,000
- --------------------------------------------------------------------------------
Vendor Service $15,000 $15,000
- --------------------------------------------------------------------------------
On Line Labeling $100,000 $100,000
- --------------------------------------------------------------------------------
Conveyor Revisions $100,000 $50,000
- --------------------------------------------------------------------------------
Palletizer $100,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SWEETENER(S)
- --------------------------------------------------------------------------------
Tanks $235,000 $40,000
- --------------------------------------------------------------------------------
Pumps/Piping Revisions $20,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGISTICS
- --------------------------------------------------------------------------------
Forklift(s) $50,000 $50,000
- --------------------------------------------------------------------------------
Misc. Case Conveyor Revisions $25,000 $25,000
- --------------------------------------------------------------------------------
Loading Dock Leveler(s)/Restraint(s). $25,000 $50,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
LOG CABIN SYRUP BUSINESS
CHICAGO, ILLINOIS
JULY 1, 1997
<TABLE>
<CAPTION>
QUANTITY MANUFACTURER MODEL DESCRIPTION SERIAL NUMBER
- -------- ------------ ----- ----------- -------------
<S> <C> <C> <C> <C>
MACHINERY AND EQUIPMENT
2 12,000-gal. vertical insulated maple
syrup storage tanks, with
controls and wiring, pipe and
connections, and concrete pad
4 Viking 3" rotary gear transfer pumps
1 Viking 3" rotary gear transfer pump
1 Kraft Foods, Inc. Special 12-oz, 24-oz, 36-oz main line auto.
maple syrup bottle filling
and packaging line consisting of
4 - Walker Stainless Equipment Co. Inc. 3,000-
gal. cap. vertical batch mixing tanks
4 - Waukesba 130" x 3" rotary gear transfer pumps
2 - Walker Stainless Equipment Co. Inc. 300-
gal. cap. vertical cook tanks
1 - Waukesha 55" x 2" rotary gear transfer pump
2 - Walker Stainless Equipment Co. Inc.
1,000-gal. cap. vertical gum slurry mixing tanks
1 - Waukesha 130" x 3" rotary gear transfer pump
1 - Minor ingredient feed system
1 - Crepaco Inc. 3,000-gal. cap. vertical holding tank
1 - Waukesha 130" x 3" rotary gear transfer pump
1 - APV Co. Inc. model R-56 platetype pasteurizer
1 - Empty bottle feed system, with Tubar
hydraulic tote dumper, power infeed conveyor Hoppman
Corp. bottle dump hopper, and 2 Hopprnan Corp. model
FRS-60 unscrambler feeders
1 - Consolidated 40-spout rotary filling machine
1 - Morrison Tinting Screw Co. model C09-10-12120-001
bottle orienter
1 - Waukesha 130" x 3" rotary gear transfer pump
1 - Capem capping machine
1 - All stainless steel bottle cap feed system
1- Inline filled battle tunnel washer/dryer
1- PDC International Corp. model 75 C-ER
tamper-seal applicator
2 - Videojet Excel P bottle date coders
</TABLE>
<PAGE>
LOG CABIN SYRUP BUSINESS
CHICAGO, ILLINOIS
JULY 1, 1997
<TABLE>
<CAPTION>
QUANTITY MANUFACTURER MODEL DESCRIPTION SERIAL NUMBER
- -------- ------------ ----- ----------- -------------
<S> <C> <C> <C> <C>
1 - Goring Kerr model TEK21 metal detector/ejector
1 - R.A. Pearson Co. model 1703-15 LCS case creator
1 - R.A. Pearson Co. case partition inserter
1 - Hartness International Inc. model 900 case packer
1 - WA. Pearson Co. case sealer
1 - Videojet Maxum case coder
1 - Overhead power belt case conveyor system
1 - Alvey model 300PLC2 - 40" x 48" x 5 1/2"
pallettzing machine
1 - Lot of PVC slat bottle conveyor
5 - The Aeroacoustics Corp. bottle conveyor
vacuum blowers
1 - New York Blower vacuum fan
1 - Plate heat exchanger
Controls and wiring
Pipe, fittings, and valves
1 Kraft Foods, Inc. Special 12-oz., 24-oz., 36-oz flex line auto. maple
syrup bottle filling and packaging line consisting of
2 - Walker Stainless Equipment Co. Inc.
2,000-gal. cap. vertical batch mixing tanks
2 - Wankesha model 60 rotary gear transfer pumps
1 - Crepaco Inc. 3,000-gal. cap. vertical holding tank
1 - Waukesha model 60 rotary, gear transfer pump
1 - Insulated heat exchanger holding tank
1 - APV Crepaco Inc. model R57 plate-type pasteurizer
1 - Empty bottle feed system
1 - U.S. Bottlers Mfg. Co. model DS16 rotary
bottle air cleaner
1 - 32-spout rotary filling machine
1 - capping machine
1 - Anderson Machine Group rotary bowl cap orienter
1 - Inline filled bottle tunnel washer/dryer
1 - Reclaim tank/pump unit
1 - PDC International Corp. model 75C-ER
tamper-seal applicator
1 - Videojet Excel P bottle date coder
1 - Goring Kerr model TEK21 metal detector/ejector
1 - Packing table
1 - A-B-C Packaging Machine Corp. model 36 case sealer
</TABLE>
<PAGE>
LOG CABIN SYRUP BUSINESS
CHICAGO, ILLINOIS
JULY 1, 1997
<TABLE>
<CAPTION>
QUANTITY MANUFACTURER MODEL DESCRIPTION SERIAL NUMBER
- -------- ------------ ----- ----------- -------------
<S> <C> <C> <C> <C>
1 - A-B-C Packaging Machine Corp. case palletizer
1 - Lot of PVC slat bottle conveyor
Controls and wiring
Pipe, fittings, and valves
</TABLE>
TOTAL MACHINERY AND EQUIPMENT
<PAGE>
SCHEDULE D
<TABLE>
<CAPTION>
BEST EFFORT COMPLETION DATES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Production Line Facility Delivery Installation Produce
- --------------- -------- -------- ------------ -------
Flex San Jose, CA w/o 02/01/98 2/98 - 4/98 04/01/98
Main Dunkirk, NY w/o 04/01/98 4/98 - 6/98 06/01/98
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.20
EXHIBIT 1.45
FORM OF TRANSITIONAL SUPPLY AGREEMENT
This is a TRANSITIONAL SUPPLY AGREEMENT ("TS Agreement"), dated November ___,
1997 between The Procter & Gamble Manufacturing Company, an Ohio corporation
("Supplier"), and MBW Investors LLC, a Delaware limited liability company
("Buyer"'). Each of Supplier and Buyer may hereafter be referred to as a "Party"
or, collectively, as "Parties."
WHEREAS, Supplier, certain of Supplier's Affiliates, and Buyer have entered into
an Asset Sale and Purchase Agreement, dated as of November ___ 1997 ("Sale
Agreement"), pursuant to which Buyer will purchase the Acquired Assets (as
defined in the Sale Agreement and a Transitional Services Agreement ("Services
Agreement") dated November _____, 1997 pursuant to which Supplier's Affiliates
will provide certain transitional services to Buyer); and
WHEREAS, in connection with the acquisition, Buyer wishes that Supplier continue
Manufacturing (as defined hereinafter) Products (as defined hereinafter) for the
period set forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements, and conditions contained herein, the parties hereto agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 General. Any capitalized term used but not defined herein will have the
meaning set forth in the Sale Agreement or the Services Agreement.
1.02 "Contract Manufacturing" means the Manufacturing of Products of the
Business by any third party pursuant to an agreement with Supplier. The
terms "Contract Manufacture", "Contract Manufacturer" and "Contract
Manufactured" will have the appropriate derivative meanings.
1.03 "Major Repairs" means repairs or replacements of equipment (including
Equipment) or facilities used in the Manufacture of Products to the extent
such repairs or replacements exceed the monthly repair, replacement and
maintenance cost assumed in Schedule TS9.01.
1.04 "Manufacturing" means the sourcing and warehousing of raw and packaging
materials, compounding, component preparation, incoming and outgoing
quality control, fabrication, filling, inspecting, labeling, packing,
packaging and/or
<PAGE>
warehousing of any Product, or any part thereof as well as associated
activities, in accordance with the Specifications and the terms and
conditions of this TS Agreement. It will also mean the management of any
Contract Manufacturing. The terms "Manufacture" and "Manufactured" will
have the appropriate derivative meanings.
1.05 "Plant" means that portion of Supplier's facility located in Jackson,
Tennessee, that is used exclusively in the Business and/or such other
facility of Supplier as may be used exclusively in the Manufacture of
Products.
1.06 "Products" means, except where specifically qualified in this TS
Agreement, all of the SKUs of the Business as formulated and packaged for
sale as of Closing, whether Manufactured before or after the date hereof
together with any Mandatory Changes, Alterations and/or Additional
Modifications.
1.07 "Product Category" means the particular type of Product. For purposes of
this TS Agreement, a Product may be categorized as one of the following:
angel food cake mix; brownie mix; layer cake mix; cookie mix; frosting;
muffin mix; and all other mixes.
1.08 "SKUs" means Stock Keeping Units.
1.09 "Specialty Mixes" means angel food cake mix, brownie mix, cookie mix,
muffin mix and all other mixes except layer cake mix.
1.10 "Specifications" means the procedures, requirements, formula(e) and
standards related to Products employed by Supplier as of the Closing Date,
as amended pursuant to this TS Agreement.
1.11 "Transitional Period" means that period commencing on the Closing Date
ending on the following date for the following Products:
Specialty Mixes 6 months after the Closing Date
frosting 9 months after the Closing Date
layer cake mix 15 months after the Closing Date
1.12 Other Definitions. Other terms defined in this Agreement, and the location
where they are defined, are:
"Affected Party".....................Section 18.04
"Additional Modifications"...........Section 6.03
"Alterations"........................Section 6.02
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"Baseline"........................................Section 3.02(b)
"Buyer"...........................................Preamble
"Closing Date Month"..............................Section 3.01
"Defaulting Party"................................Section 17.01
"Demands".........................................Section 13.01
"Distribution Center Pipeline Inventory"..........Section 5.05
"FIFO"............................................Section 5.02
"First Going Month"...............................Section 3.01
"First Removal"...................................Schedule TS2.01
"Forecast"........................................Section 3.02
"Forecast Update".................................Section 3.03
"Initial Forecast"................................Section 3.01
"Mandatory Changes"...............................Section 6.01
"Next Month"......................................Section 3.02
"Non-Affected Party"..............................Section 17.04
"Non-Defaulting Party"............................Section 16.01
"Party"/"Parties".................................Preamble
"Sales Agreement".................................Preamble
"Second Month"....................................Section 3.02(b)
"Second Removal"..................................Schedule TS2.01
"Services Agreement"..............................Preamble
"Supplier"........................................Preamble
"Technical Services"..............................Section 11.01
"Technical Services Period".......................Section 11.01
"Third Month".....................................Section 3.02(b)
"Third Removal"...................................Schedule TS2.01
"Training Services"...............................Section 11.02
"TS Agreement"....................................Preamble
"TS Agreement Termination Date"...................Section 17.01
</TABLE>
ARTICLE II
BASIC OBLIGATIONS
2.01 Supplier's Obligation. Subject to the limitations and conditions of this
TS Agreement, during the Transitional Period Supplier will Manufacture for
Buyer, or arrange to have a third party Contract Manufacture for Buyer,
or arrange for an Affiliate of Supplier to sell to Buyer, all or a
portion of Buyer's requirements (up to the maximums set forth in Schedule
TS2.01) for Products in compliance with the Specification and will perform
certain Technical Services and Training Services for Buyer pursuant to
Article 11.
-3-
<PAGE>
2.02 Buyer's Obligation. Subject to the limitations and conditions of this TS
Agreement, during the Transitional Period Buyer will purchase from
Supplier all or a portion of its requirements (up to the maximums set
forth in Schedule TS2.01) for Products, at the prices set forth on
Schedule TS9.01 or at such other prices as may be determined in accordance
with this TS Agreement. Buyer will also be responsible for paying various
other expenses related to the Manufacture and shipment of the Products and
related to the Technical Services and Training Services, as set forth
elsewhere in this TS Agreement.
ARTICLE III
MANUFACTURING SCHEDULING/REPORTS/LOCATIONS
3.01 Initial Forecast. Prior to the Closing Date, Buyer and Supplier will work
together in good faith to develop a forecast ("Initial Forecast") of
Buyer's requirements, by SKU and by shipment location (as designated
pursuant to Section 5.01), for the period from the Closing Date until the
end of the calendar month in which the Closing Date falls (the "Closing
Date Month"), as well as for the first calendar month after the Closing
Date Month (the "First Going Month"). On the Closing Date, this Initial
Forecast will constitute a firm written purchase order, and Supplier will
Manufacture and Buyer will purchase the quantities set forth in this
Initial Forecast.
3.02 Rolling Forecast. On the 8th calendar day of the First Going Month and
each subsequent month, Buyer will deliver to Supplier a forecast (the
"Forecast") of Buyer's requirements, by SKU and by shipment location (as
designated pursuant to Section 5.01) for the calendar month following the
month in which the Forecast is delivered (the "Next Month"), as well as
for all subsequent months of the Transitional Period.
(a) Permitted Variations from Forecast for Next Month. Upon delivery, the
Forecast will constitute a firm written purchase order for the Next
Month; provided, however, that if Buyer provides written notice to
Supplier prior to the 5th calendar day of the Next Month, Buyer will
be permitted to vary the quantities specified in the Forecast for
that Next Month by up to 10% by SKU, with a maximum variation of up
to 5% by Product Category.
(b) Permitted Variations from Forecast for Two Subsequent Months. First
-----
Forecast. The first Forecast delivered by Buyer will also form a
--------
baseline order ("Baseline") for the month following the Next Month
(the "Second Month"), and for the month after that (the "Third
Month"). Between the time of the first Forecast and the time when the
quantities specified in that Forecast for the Second Month constitute
a firm written purchase order, Buyer may vary the Baseline quantities
for the Second Month by up to 20% by SKU, with a maximum variation of
up to 10% by Product Category (in addition to the variation permitted
after the forecasted quantities constitute a firm written purchase
order by Section 3.02(a) above). Subsequent
----------
-4-
<PAGE>
Forecasts. Each Forecast after the first Forecast will form a Baseline
---------
for the Third Month. Between the time of any Forecast (including the
first Forecast) and the time when the quantities specified in that
Forecast for the Third Month constitute a firm written purchase order,
Buyer may vary the Baseline quantities by up to 20% by SKU, with a
maximum variation of up to 10% by Product Category (in addition to the
variation permitted after the forecasted quantities constitute a firm
written purchase order by Section 3.02(a) above).
An illustration of these permitted variations is set forth in Schedule TS3.02.
Notwithstanding the foregoing, if during any period, Buyer desires to purchase a
quantity of Products that exceeds the amounts set forth in any Forecast, Buyer
will notify Supplier in writing, and Supplier will consider such request and
may, in its sole discretion, accommodate Buyer, but will be under no obligation
to supply such additional quantities.
3.03 Forecast Updates. On Thursday of each week, Buyer will provide Supplier
with an interim update ("Forecast Update") to the most recent Forecast.
Forecast Updates will have no impact on the firm written purchase order
quantities, the Baseline quantities, or any variations from such
quantities permitted by Section 302, but will serve as a means to identify
in advance any problem areas.
3.04 Reports by Supplier. If requested by Buyer, Supplier will provide Buyer
with monthly raw material, packing material and finished Product reports
reflecting Manufacturing, Contract Manufacturing, shipments, inventories,
and non-binding projections related thereto. These reports will be issued
during the first 10 Business Days of the month following the date of the
request, provided the request is received by the 20th calendar day of the
previous month.
3.05 Relocation of Manufacturing. If during the Transitional Period for any
Product(s), Supplier elects to relocate any Manufacturing or Contract
Manufacturing of such Product(s) to a facility(ies) different from the
facility(ies) then Manufacturing or Contract Manufacturing Product,
Supplier will notify Buyer at least 30 days prior to such relocation and
will be solely responsible for any additional Manufacturing expenses
during the Transitional Period for such Product(s) resulting from such
relocation; provided, however, that if such relocation is mutually agreed
upon between Supplier and Buyer (Buyer's agreement not to be unreasonably
withheld if it intends to utilize such different facility(ies) on an
ongoing basis after the Transitional Period), Buyer will be responsible
for any such additional expenses.
-5-
<PAGE>
ARTICLE IV
MATERIALS AND EQUIPMENT
4.01 Sources of Materials. Supplier will source all raw and packaging materials
required for Manufacturing or Contract Manufacturing Products from vendors
reasonably selected by Supplier consistent with Supplier's ordinary past
business practices and in quantities reasonably calculated to meet Buyer's
Forecasts in a cost-effective manner.
4.02 Decisions About and Costs of Major Repairs. Buyer and its agents will be
permitted reasonable access to the Plant to make an independent assessment
of the need for and estimated cost of Major Repairs. Buyer will have the
right, in its sole discretion, to determine whether a Major Repair should
be made. Buyer will also have the right to select, and determine the
method of selection of, the Person to make Major Repairs, including by
means of solicitation of bids, subject in all cases to Supplier's
approval, which will not be unreasonably withheld. The cost of Major
Repairs will be borne by Buyer, except to the extent Major Repairs are due
to Supplier's negligence, gross negligence, intentional misconduct or
breach of this TS Agreement, in which case such cost will be borne by
Supplier. Supplier will not be held liable for Manufacturing delays,
disruptions, or adverse effects upon Product quantity or quality arising
out of or related to Buyer's exercise of its rights under this Section
4.02, except to the extent any such delays, disruptions or adverse effects
upon Product quantity or quality are the direct result of Supplier's
negligence, gross negligence, intentional misconduct or breach of this TS
Agreement.
4.03 Normal Repair and Replacement of Equipment. Supplier will be responsible
for all repairs or replacement of equipment (including Equipment) or
facilities used in the Manufacture of Products to the extent such repairs
or replacements are not Major Repairs.
ARTICLE V
STORAGE AND SHIPPING
5.01 Storage and Shipping.
(a) During the Transitional Products Shipment Period, Supplier will store
Products at existing Supplier plants and distribution centers.
Supplier will be responsible for all damages to or loss of Products
that take place while Products are stored in Supplier controlled
distribution centers.
(b) After the Transitional Products Shipment Period, Supplier will ship,
or arrange for a Contract Manufacturer to ship, Products in full
truckload quantities (on common carriers selected by Buyer) at
Buyer's expense (including without limitation any duties payable in
respect of any shipment)
-6-
<PAGE>
and risk of loss from the Plant or Contract Manufacturer's facility
(i.e., F.O.B. Supplier Plant or F.O.B. Contract Manufacturer's
facility) to 5 locations specified by Buyer in writing at least 15
calendar days prior to Supplier's first shipment. Upon 30 calendar
days prior notice to Supplier, Buyer may change any destination for
shipment of Products from the Plant or any Contract Manufacturer's
facility. Neither Supplier nor any Contract Manufacturer will be
responsible for month-month storage of finished product inventory, it
being anticipated that all Product Manufactured will be shipped
pursuant to Buyer's Forecast for each month.
5.02 Order of Use for Raw and Packaging Materials and Inventory by Supplier.
Supplier will use raw and packaging materials for its Manufacture of
Products on a first-in, first-out basis ("FIFO") consistent with
Supplier's past ordinary business practices. Any Product inventory as of
Closing will likewise be used first to satisfy Buyer's requirements.
5.03 Common Carrier Claims. After the Transitional Products Shipment Period,
all claims by or to common carriers in connection with Products will be
the responsibility of Buyer, except to the extent any such claim by a
common carrier is due to Supplier's negligence, gross negligence,
intentional misconduct or breach of this TS Agreement.
5.04 Pallets. Supplier and any Contract Manufacturer will ship Products to
Buyer on CHEP pallets. After the Transitional Products Shipment Period,
Buyer will, at its discretion, either pay Supplier for such pallets at
Supplier's or any Contract Manufacturer's actual cost, as applicable, or
establish a lease contract for such pallets directly with Chep USA.
5.05 Distribution Center Pipeline Inventory. Prior to the Closing, Supplier and
Buyer will mutually agree on a commercially reasonable inventory of
Products (the "Distribution Center Pipeline Inventory") which Supplier
will, by the end of the Transitional Products Shipment Period, ship to
Buyer's distribution centers to help Buyer meet anticipated customer
orders from its distribution centers after the Transitional Products
Shipment Period.
ARTICLE VI
CHANGES TO SPECIFICATIONS
6.01 Mandatory Changes. Prior to the Closing, Supplier and Buyer will mutually
agree on artwork and label changes to remove Supplier's names and consumer
information telephone number ("Mandatory Changes"), which Supplier may
make on its own timing; provided, however, that if Supplier elects not to
use the
-7-
<PAGE>
Mandatory Changes after 3 months after Closing, such election will not
constitute a breach by Buyer of Section 6.25 of the Sale Agreement.
6.02 Alterations. Upon 90 days' prior written notice to Supplier, Buyer may
alter the Specifications for artwork and label copy of Product
("Alterations") without the consent of Supplier; provided that Buyer will
be responsible at the time of the notice for:
(a) providing Specifications and any other materials required or prudent
for implementation of such Alterations, including, without
limitation, artwork;
(b) having secured from any Governmental Entity any approvals that may be
necessary or advisable in connection with any Alteration, and Buyer
will also be responsible for;
(c) any resulting increases in Manufacturing costs;
(d) all liabilities, costs or expenses, including those of third parties,
arising out of or related to Alterations, including those related to
the failure or alleged failure of the Alterations to comply with
applicable laws and regulations; and
(e) all costs of scrapping raw or packaging materials (including the
costs of the raw or packaging materials) or secondary market
disposition of finished goods associated with any Alterations;
provided, however, that Supplier and Buyer will share on an equal
basis any scrapping costs for packaging materials associated with any
Alterations after the 90 day notice period.
6.03 Additional Modifications. Buyer will not require Supplier to Manufacture
any new SKUs that have not previously been marketed by Supplier as part of
the Business. If, during the Transitional Period, Buyer wishes Supplier to
Manufacture any SKUs that have previously been marketed but are not
currently marketed by Supplier as part of the Business, or to make changes
to the Specifications for existing SKUs other than Alterations
(collectively "Additional Modifications"), Supplier will in good faith
conduct a study into the cost and feasibility of such Additional
Modifications. If, based on this study, Supplier concludes that the
Additional Modifications can be achieved without significant hardship to
Supplier or to the relocation of the Equipment, and if Supplier and Buyer
reach a mutually acceptable agreement regarding the price and other
particulars of the Additional Modifications, Supplier will make a good
faith effort to implement the Additional Modifications.
For any Additional Modifications agreed to by Supplier and Buyer:
(a) Supplier and Buyer will mutually agree upon a schedule for any such
Additional Modifications to minimize the incremental costs resulting from
such Additional Modifications;
(b) Buyer will be responsible for the same requirements and expenses as set
forth above with respect to Alterations;
(c) Buyer will pay for and provide any new Equipment necessary to Manufacture
Products with such Additional Modifications; and
-8-
<PAGE>
(d) the prices (and all components thereof) charged for the Products as set
forth on Schedule TS9.01 thereto may be adjusted by Supplier (on a
retroactive basis to the date of such Additional Modifications) to reflect
incremental costs resulting from any such Additional Modifications.
6.04 Discontinuations. With 90 days written notice, and subject to Supplier's
approval (which will not be unreasonably withheld), Buyer may from time to
time discontinue existing SKUs.
ARTICLE VII
QUALITY ASSURANCE
7.01 Supplier Tests. Supplier and any Contract Manufacturer will perform
quality control tests and assays on raw and packaging materials and
finished Products in accordance with Specifications.
7.02 Buyer Inspections. Supplier will permit Buyer's designated representatives
to inspect and visit from time to time the Plant for the purpose of
determining compliance with this TS Agreement. Such inspections will occur
during regular business hours after reasonable written notice to Supplier.
Buyer will not disrupt Supplier's operations.
7.03 Buyer Tests. At Buyer's request Supplier or any Contract Manufacturer
will, at Buyer's expense, send a reasonable number of Product samples to
Buyer for examination and testing, at Buyers expense, to assure conformity
with Specifications.
ARTICLE VIII
COMPLIANCE WITH LAWS
8.01 Laws Related to Manufacturing. Supplier will comply in all Material
respects with laws and regulations relating to environmental matters,
wages and hours, equal employment opportunity, tax withholding on
payrolls, working and sanitary conditions and workers' compensation, in
each case at the Plant with respect to Products.
8.02 Laws Related to Products. Notwithstanding Section 8.01, Buyer will be
responsible for complying in all material respects with all other laws and
regulations relating to Products (without regard to whether such Products
have been the subject of any Alteration or Additional Modification),
including without
-9-
<PAGE>
limitation laws relating to the formulation, transportation, labeling,
sale, marketing and distribution of Products.
ARTICLE IX
PRICE
9.01 Pricing and Cost Assumptions. Schedule TS9.01 sets forth, by SKU, the
price Buyer will pay Supplier for Products. Schedule T59.01 also sets
forth major assumptions concerning the Manufacturing or Contract
Manufacturing costs of Products. In the event of any increase or decrease
in Manufacturing or Contract Manufacturing costs, (not including cost
changes associated with any decision by Supplier to switch from
Manufacturing Products itself to partial or full Contract Manufacturing of
some or all Products, except as provided in Section 3.05) Supplier will
pass such increase or decrease through to Buyer, such that the price Buyer
will pay Supplier for Products will reflect such increase or decrease.
Supplier will notify Buyer in writing of any such increase or decrease at
least 15 calendar days prior to the effectiveness of such increase or
decrease. The notice will include:
(a) the reason for the increase or decrease;
(b) the date when the increase or decrease will take effect; and
(c) the amount of the increase or decrease.
Supplier will use its reasonable efforts to minimize Manufacturing and
Contract Manufacturing cost increases consistent with its ordinary past
business practices; provided, however, that this requirement will not
limit Supplier's ability to switch from Manufacturing Products itself to
partial or full Contract Manufacturing of some or all Products.
ARTICLE X
PAYMENT
10.01 Invoicing and Payment. Supplier will send Buyer an invoice for each
truckload shipment of Products. All invoices will be based upon the bill
of lading describing the Products and quantity of Products shipped to
Buyer (or shipped to trade customers during the Transitional Products
Shipment Period). Buyer will be responsible for paying each invoice
within 30 calendar days of the date of such invoice and payment will not
be delayed pending delivery of Products by any common carrier or
resolution of any disputes between Buyer and any common carrier regarding
the shipment. Buyer will pay Supplier a late payment charge of 12% per
annum on any payment not received within the time period set forth above.
Payment will be made in United States dollars and sent to the location
designated in advance by Supplier.
-10-
<PAGE>
ARTICLE XI
TECHNICAL AND TRAINING SERVICES
11.01 Technical Services. From the Closing Date until the earlier of the
termination of this TS Agreement or 15 months after the Closing Date (the
"Technical Services Period"), Supplier will provide up to five thousand
(5,000) person-hours of the time of appropriate personnel of Supplier or
its Affiliate to assist Buyer in its efforts to prepare to Manufacture
the Products (the "Technical Services").
11.02 Location and Scheduling of Technical Services. The Technical Services
will be performed at such facilities of Buyer's or of Buyer's Contract
Manufacturers as Buyer will designate or at other locations mutually
agreed to by Supplier and Buyer (including Supplier's pilot Plant
facility in Cincinnati, Ohio). Supplier and Buyer will mutually agree in
good faith upon the scheduling of such Technical Services; provided,
however, that such scheduling must not unreasonably interfere with the
normal operations of Supplier or its Affiliates.
11.03 Payment for Technical Services. Buyer will reimburse Supplier for
Supplier's out-of-pocket costs of providing the Technical Services. Such
out-of-pocket costs include the cost of transporting the personnel
performing the Technical Services, as well as their reasonable charges
for food and lodging, but will not include their wages, salary or
benefits.
11.04 Additional Technical Services. If Buyer desires a commercially reasonable
level of additional hours of Technical Services during the Technical
Services Period beyond the five thousand (5,000) hours specified in
Section 11.01, it may so inform Supplier. If Supplier agrees to provide
such Technical Services (such agreement not to be unreasonably withheld),
Buyer will, in addition to making the payments to Supplier described in
Section 11.03, pay Supplier one hundred fifty United States dollars (US
$150) per hour for the services of the personnel who provide such
Technical Services.
11.05 Training Services. From the Closing Date until the earlier of the
termination date of this TS Agreement or 15 months after the Closing
Date, Supplier will permit up to 20 employees of Buyer's or of any
entity(ies) designated by Buyer to spend up to 20 Business Days at
Supplier's Plant to receive training from personnel of Supplier's on the
Manufacturing of the Products (the "Training Services"). Buyer will not
be obligated to make any payment to Supplier for the Training Services,
but Buyer will bear all of its costs in making its personnel (or the
personnel of such other entity(ies) as it may designate) available at
Supplier's Plant to receive the Training Services. Supplier and Buyer
will mutually agree in good faith to schedule such Technical Services;
provided, however, that such scheduling must not unreasonably interfere
with the normal operations of Supplier or its Affiliates.
-11-
<PAGE>
ARTICLE XII
SUPPLIER'S WARRANTY AND DISCLAIMER
12.01 Warranty. Supplier warrants that it or Contract Manufacturer will pass to
Buyer good and marketable title to the Products, free and clear of all
material liens, claims, security interests and encumbrances of any kind,
and that, at the time of Manufacture, the Products will be manufactured
in accordance with and will comply with the Specifications therefor and
will not be adulterated.
12.02 Limitation of Warranties. SUPPLIER MAKES NO WARRANTY, OTHER THAN THE
WARRANTIES SET FORTH HEREIN OR IN THE SALE AGREEMENT. THE WARRANTIES SET
FORTH HEREIN AND THEREIN ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTY THAT THE SERVICES
PROVIDED UNDER THIS AGREEMENT WILL BE SUFFICIENT TO ALLOW BUYER TO
SUCCESSFULLY TRANSITION, MANAGE OR OPERATE THE BUSINESS.
ARTICLE XIII
INDEMNIFICATION
13.01 Buyer's Indemnification. Subject to Section 13.03, Buyer will defend,
indemnify, and hold Supplier harmless from and against:
(a) all claims, losses, liabilities damages, costs and expenses
(including without limitation reasonable fees and expenses of
attorneys incurred in investigation or defense) (collectively
"Demands"), of any third-party Action arising out of or related to
Products or breach of this TS Agreement by Buyer, except to the
extent such Demand arises out of or relates to Supplier's breach of
this TS Agreement,
(b) all Demands arising from personal injury to employees of Buyer (or
of any entity(ies) designated by Buyer) while at Supplier's Plant to
receive Technical Services or Training Services, unless such Demands
result from the sole negligence of Supplier; and
(c) all costs and expenses of Supplier (including without limitation
reasonable fees and expenses of attorneys) incurred in connection
with the successful enforcement of any rights of Supplier under the
indemnity provided in this Section 13.01.
-12-
<PAGE>
13.02 Suppliers Indemnification. Subject to Section 13.03, Supplier will
defend, indemnify and hold Buyer harmless from and against:
(a) any Demand of any third-party Action to the extent such Demand
arises out of or relates to breach of this TS Agreement by Supplier,
(b) all Demands arising from personal injury to employees of Supplier or
its Affiliates while at facilities of Buyer or of Buyers Contract
Manufacturers to provide Technical Services, unless such Demands
result from the sole negligence of Buyer or of Buyer's Contract
Manufacturers; and
(c) all costs and expenses of Buyer (including without limitation
reasonable fees and expenses of attorneys) incurred in connection
with the successful enforcement of any rights of Buyer under the
indemnity provided in this Section 13.02.
13.03 Applicable Provisions of the Sale Agreement. Sections 9.01(b), (c), (d)
and (e) and Sections 9.02(b), (c), (d) and (e) of the Sale Agreement will
apply to the indemnification obligations under this TS Agreement as if
the Demands hereunder were either a Supplier's Assertion or a Buyer's
Assertion, as applicable, provided, however, all references therein to
Seller will be deemed to be references to Supplier.
ARTICLE XIV
INTELLECTUAL PROPERTY
14.01 Ownership of Intellectual Property. All Intellectual Property owned by
either party will at all times be and remain the exclusive property of
the owner thereof and this TS Agreement will not constitute a license
except to the extent required to fulfill each party's obligations
hereunder.
ARTICLE XV
SUPPLIER'S USE OF BUYER'S PROPERTY
15.01 Books and Records. During the Transitional Period Supplier will be
permitted, at no cost to Supplier, to retain and use any Books and
Records or other documents transferred to the Buyer pursuant to the Sale
Agreement to the extent necessary or advisable for Supplier to fulfill
its obligations under this TS Agreement.
15.02 Equipment. During the Transitional Period Supplier will be permitted, at
no cost to Supplier, to retain and use any Equipment transferred to the
Buyer pursuant to the Sale Agreement to the extent necessary or advisable
for Supplier to fulfill its obligations under this TS Agreement. Buyer
will be permitted to label such Equipment as Buyer's property. Supplier
will not assert or cause any lien to be placed on such Equipment. At the
reasonable request of any secured lender of
-13-
<PAGE>
Buyer, Supplier will confirm that it waives any rights it may have under
local law to assert landlord's, mechanic's or similar liens on such
Equipment.
ARTICLE XVI
TERM
16.01 Term of Agreement. This TS Agreement will be effective for the duration
of the Transitional Period.
ARTICLE XVII
TERMINATION/EXPIRATION
17.01 Notice of Default. In addition to any other rights or remedies Buyer or
Supplier may have at law or in equity, a party not in default under this
TS Agreement (the "Non-Defaulting Party") may terminate this TS Agreement
by giving written notice to the other party (the "Defaulting Party") of
the Non-Defaulting Party's intention to terminate this TS Agreement upon
the occurrence of either or both of the following events:
(a) a breach by the Defaulting Party of any of its obligations hereunder;
or
(b) the filing by or against the Defaulting Party of a petition in
bankruptcy, or any appointment of a receiver for the Defaulting Party
or any substantial part of its assets, or any assignment for the
benefit of the Defaulting Party's creditors.
Such notice will identify a date for termination of this TS Agreement,
which date will not be sooner than 20 Business Days after receipt of such
notice by the Defaulting Party ("TS Agreement Termination Date"). If the
event on which the notice is based is not cured prior to the TS Agreement
Termination Date, then this TS Agreement will terminate on the TS
Agreement Termination Date.
17.02 Termination Without Cause. Buyer may terminate this TS Agreement at any
time without cause and without penalty by giving 90 calendar days prior
written notice to Supplier.
17.03 Effect on Other Agreements/Survival of Certain Provisions. Termination of
this TS Agreement will have no effect on any other agreements between
Buyer and Supplier, unless an effect is mutually and specifically agreed
in writing between the parties the termination of this TS Agreement will
not relieve either party of any liability to the other based on acts or
omissions prior to the termination of this TS Agreement. The following
Sections will survive termination: Sections 13.01, 13.02, 13.03 and
17.04.
-14-
<PAGE>
17.04 Unshipped Products and Materials. Upon termination or expiration of this
TS Agreement, Supplier and any Contract Manufacturer will promptly ship
to Buyer at the address(es) designated by Buyer pursuant to Section 5.01,
and Buyer will purchase:
(a) any unshipped Products as of the Termination Date or the date of
expiration, at the price(s) set forth in Schedule TS9.01 as modified
pursuant to Section 9.01; and
(b) any unused but usable raw and packaging materials exclusively related
to Products, at Supplier's actual cost.
Buyer will be responsible for paying for the shipment of, and will bear
the risk of loss for, usable raw and packaging materials and Products to
the designated location(s).
ARTICLE XVIII
MISCELLANEOUS
18.01 Entire Agreement. The Transaction Documents constitute the entire
agreement among Supplier, certain of Supplier's Affiliates, and Buyer
with respect to, among other things, the Manufacture of Products. In the
event of any inconsistency between the Transaction Documents and any
subsequently-issued document, including without limitation a written
purchase order, the Transaction Documents will prevail.
18.02 Taxes. Buyer and Supplier each agree to pay all taxes assessed on all
materials, excluding Products, to which they have title. Buyer will be
responsible for paying all taxes assessed on finished Products.
18.03 Supplier's Employees and Independent Contractor Status. During the term
hereof, and for a period of 1 year after the expiration or termination of
this TS Agreement, Buyer and its Affiliates and agents will not without
Supplier's prior written agreement directly or indirectly solicit for
employment or hire any employees of Supplier or its Affiliates who have
worked primarily in the Manufacture of Products. Supplier is acting as an
independent contractor.
18.04 Force Majeure. Neither party (the "Affected Party") will be liable to the
other (the "Non-Affected Party") for failure to perform any part of this
TS Agreement if such failure results from an act of God, war conditions,
revolt, revolution, sabotage, actions of a Governmental Entity, laws,
regulations, embargo, fire, strike, other labor trouble, or any cause
beyond the Affected Party's control. Upon the occurrence of any such
event which results in, or will result in, delay or failure to perform
according to the terms of this TS Agreement, the Affected Party will
promptly give notice to the Non-Affected Party of such occurrence and the
effect and/or anticipated effect of such occurrence. The Affected Party
will use its
-15-
<PAGE>
reasonable efforts to minimize disruptions in its performance and to
resume performance of its obligations under this TS Agreement as soon as
practicable, provided, however, the resolution of any strike or labor
trouble will be within the sole discretion of the Affected Party.
18.05 No Right of Set-Off. Notwithstanding any other provisions of this TS
Agreement or any other agreement between the parties, all payments to be
made by either party under the Transaction Documents will be made free of
any set-off and will be promptly remitted to the party entitled to
receive payment hereunder.
18.06 Employment Relationship. The personnel of each Party performing any
services hereunder will be the employees of that Party, and the other
Party will have no labor relationship with such personnel nor will the
other Party be liable for wages, salaries, benefits or collective
bargaining liabilities to such employees.
18.07 Confidentiality. Each Party will regard as confidential and proprietary
all of the information communicated to it by the other Party in
connection with this Agreement (which information will at all times be
the property of the other Party). Each Party will not, without the prior
written consent of the other Party, at any time (a) use such information
for any purpose other than in connection with the performance of its
obligations under this Agreement or (b) disclose any portion of such
information to third parties, excluding Party's agents or subcontractors
which are directly performing services for Supplier in connection with
this Agreement (and who will be informed of and subject to the
requirements of this section). Each Party will at the termination or
expiration of this Agreement return to the other Party all such
information which is in written or tangible form (including all copies,
summaries and notes of the contents thereof).
18.07 Limitation. Any other Action pursuant to this TS Agreement, including any
Action with respect to an indemnity obligation, must be commenced within
1 year after the expiration or termination of this TS Agreement.
18.08 Notices. All notices required or permitted to be given under this TS
Agreement will be in writing and will be deemed to be properly given when
actually received by the Person entitled to receive the notice at the
address stated below, or at such other address as Supplier or Buyer may
provide by notice to the other:
Supplier: The Procter & Gamble Manufacturing Company
Two Procter & Gamble Plaza
Cincinnati, OH 45202
Attention:
Fax:
-16-
<PAGE>
With a copy to: Sharon Abrams, Esq.
Associate General Counsel
The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, OH 45202
Fax: (513) 983-4274
Buyer:
Attention:
Fax:
With copies to:
Fax:
18.09 Waiver of Certain Defaults. All claims for failure or alleged failure of
Products to meet Specifications will be deemed waived unless received by
Supplier in writing within 15 calendar days after receipt by Buyer of the
Products in question.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have signed this TS Agreement on the date first
set forth above.
THE PROCTER & GAMBLE MBW INVESTORS LLC
MANUFACTURING COMPANY
By: _____________________________ By: _____________________________
Name printed: ___________________ Name printed: ___________________
Title: __________________________ Title: __________________________
-18-
<PAGE>
Schedule TS2.01
Confidential treatment for Schedule TS2.0l has been requested
<PAGE>
SCHEDULE T53.02
ILLUSTRATION OF PERMITTED FORECAST VARIATIONS
PAGE 1 OF 2
For purposes of this illustration, assume the Closing Date is December 15, 1997;
therefore the First Going Month is January 1998. Fractional case quantities will
be used below for clarity, even though they will not be produced in practice.
On January 8,1995, Buyer must deliver to Supplier a Forecast for February 1998
(the Next Month), March 1998 (the Second Month), April 1998 (the Third Month)
and each remaining month in the Transitional Period. For purposes of this
illustration, assume that Buyer forecasts its requirements for every month of
the Transitional Period at 7,000 cases per month, divided evenly among the
Product Categories (i.e., 1,000 cases in each Product Category). Further assume
that each Product Category contains 10 SKUs, and that Buyer forecasts its
requirements as being split evenly among all SKUs (i.e., Buyer forecasts
requirements of 100 cases for each SKU).
The Baseline quantities specified for February on January 8 by Buyer are firm,
subject to Buyer's right to make changes until February 5 of 10% or less by SKU,
with a maximum variation of 5% by Product Category. This means that, as long as
Buyer notifies Supplier by February 5, Supplier will be required to Manufacture
during February between 90 and 110 cases of each SKU, with the total cases for
each Product Category being between 950 and 1,050.
The Baseline quantities specified for March on January 8 are subject to Buyer's
right to make changes until February 8 of 20% or less by SKU, with a maximum
variation of 10% by Product Category. Thus, the Forecast delivered on February
8 could call for between 80 and 120 cases of each SKU, with the total cases for
each Product Category being between 900 and 1,100. Assume that the February 8
Forecast for March production calls for 97 cases of each SKU, for a total of 970
cases per Product Category. Then, as long as Buyer notifies Supplier by March 5,
Buyer can further vary these quantities by the amounts permitted for quantities
that have become firm written purchase order-i.e., another 10% or less by SKU,
with a maximum variation of 5% by Product Category. Thus, if Supplier receives
the proper notice by March 5, it will be required to Manufacture during March
between 87.3 and 106.7 cases per SKU, with the total cases for each Product
Category being between 921.5 and 1,018.5.
<PAGE>
SCHEDULE T53.02
ILLUSTRATION OF PERMITTED FORECAST VARIATIONS
PAGE 2 OF 2
The Baseline quantities specified for April on January 8 are subject to Buyer's
right to make changes until March 8 of 20% or less by SKU, with a maximum
variation of 10% by Product Category. Thus, the Forecast delivered on March 8
could call for between 80 and 120 cases of each SKU, with the total cases for
each Product Category being between 900 and 1,100. [Note that these figures will
not vary depending on the numbers in the February 8 Forecast, because March's
Baseline quantities were set on January 8]. Assume that the March 8 Forecast for
April production calls for 110 cases of each SKU, for a total of 1,100 cases per
Product Category. Then, as long as Buyer notifies Supplier by April 5, Buyer can
further vary these quantities by the amounts permitted for quantities that have
become firm written purchase orders-i.e., another 10% or less by SKU, with a
maximum variation of 5% by Product Category. Thus, if Supplier receives the
proper notice by April Sit will be required to Manufacture during April between
99 and 121 cases per SKU, with the total cases for each Product Category being
between 1,045 and 1155.
Note that the Baseline quantities for March and April were set by the January 8
Forecast. Likewise, the Baseline quantities for May would be set by the February
8 Forecast; the Baseline quantities for June would be set by the March 8
forecast, and so forth.
<PAGE>
Schedule TS9.01
Confidential treatment for Schedule TS9.0l has been requested
<PAGE>
Exhibit 12.1
Aurora Foods Inc.
Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Year ended
December 27,
1997
------------
<S> <C>
Income before income taxes $ 2,014
Fixed charges:
Interest expense 18,393
Amortization of deferred financing expense 3,059
Interest portion of rentals 33
-------
Earnings available for fixed charges $23,499
=======
Fixed charges:
Interest expense $18,393
Amortization of deferred financing expense 3,059
Interest portion of rentals 33
-------
$21,485
=======
Ratio of earnings to fixed charges 1.09
=======
</TABLE>
(1) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. Fixed
charges consist of interest expense, whether expensed or capitalized,
including amortization of deferred financing expense and the portion
(one-third) of rental expense that management believes is representative of
the interest component of rent expense.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND A STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-27-1997
<CASH> 4,717
<SECURITIES> 0
<RECEIVABLES> 13,976
<ALLOWANCES> 140
<INVENTORY> 6,902
<CURRENT-ASSETS> 30,376
<PP&E> 15,086
<DEPRECIATION> 1,011
<TOTAL-ASSETS> 372,739
<CURRENT-LIABILITIES> 28,227
<BONDS> 202,419
63,988
0
<COMMON> 0
<OTHER-SE> 1,235
<TOTAL-LIABILITY-AND-EQUITY> 372,739
<SALES> 143,020
<TOTAL-REVENUES> 143,020
<CGS> 45,729
<TOTAL-COSTS> 104,042
<OTHER-EXPENSES> 18,431
<LOSS-PROVISION> 140
<INTEREST-EXPENSE> 18,393
<INCOME-PRETAX> 2,014
<INCOME-TAX> 779
<INCOME-CONTINUING> 1,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,235
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
