<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities Exchange Act Of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AURORA FOODS INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
[AURORA FOODS INC. LOGO]
Aurora Foods Inc.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
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Notice of Annual Meeting of Stockholders
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To the Stockholders of Aurora Foods Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of Aurora
Foods Inc. (the "Company") on Thursday, May 20, 1999, at 1:00 p.m., local time,
at the Ritz-Carlton Hotel at 600 Stockton Street in San Francisco. The meeting
will be held for the following purposes:
1. To ratify a Board of Directors;
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for fiscal 1999; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
This notice is accompanied by a form of proxy, a Proxy Statement and the
Company's 1998 Annual Report to stockholders. All of the above matters are more
fully described in the Proxy Statement. Only stockholders of record at the
close of business on March 26, 1999 are entitled to notice of and to vote at the
meeting or any postponement or adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED OR VOTE BY PHONE OR THE
INTERNET AS PROMPTLY AS POSSIBLE IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
PROXY CARD TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. You may revoke
your proxy at any time before the shares to which it relates are voted at the
Annual Meeting. Please note that a ticket is required for admission to the
Annual Meeting. If you plan to attend and shares are registered in your name
as of March 26, 1999, please check the appropriate box on your proxy card or
when voting on the Internet or indicate when prompted if voting by telephone.
A ticket of admission will be forwarded to you. If your shares are held in the
name of a broker or other nominee, you should have your broker or agent in
whose name the shares are registered contact the Company to request a ticket
before May 6, 1999. Otherwise, you must bring proof of ownership (e.g.
broker's statement) in order to be admitted to the Annual Meeting.
By order of the Board of Directors,
/s/ Ian R. Wilson
Ian R. Wilson
Chairman of the Board and
Chief Executive Officer
San Francisco, California
March 29, 1999
<PAGE>
[AURORA FOODS INC. LOGO]
Aurora Foods Inc.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
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Proxy Statement
----------------------------------------
Your proxy in the form enclosed is solicited by the Board of Directors of Aurora
Foods Inc. (the "Company") for use in voting at the Annual Meeting of
Stockholders to be held on Thursday, May 20, 1999 at 1:00 p.m., local time, or
at any adjournment thereof. The Annual Meeting will be held at the Ritz-Carlton
Hotel at 600 Stockton Street in San Francisco. This Proxy Statement and the
enclosed form of proxy, together with the Company's Annual Report for fiscal
1998, were first mailed to stockholders on or about April 8, 1999.
The Company's principal executive offices are located at 456 Montgomery Street,
Suite 2200, San Francisco, California 94104 and its telephone number is (415)
982-3019. Continental Stock Transfer & Trust Company, who is assisting with the
mechanics of the return of the proxies, may be contacted at (212) 509-4000.
The shares represented by those proxies received, properly dated and executed,
and not revoked, will be voted at the Annual Meeting. A proxy may be revoked at
any time before it is exercised by delivering to the Secretary of the Company at
the Company's principal executive offices, no later than the start of the Annual
Meeting, a written notice of revocation or a duly executed proxy relating to the
same shares bearing a later date than the revoked proxy or by attending the
Annual Meeting and voting the shares covered by the proxy in person. All shares
represented by proxies that are properly dated, executed and returned, and which
have not been revoked, will be voted in accordance with the specifications on
the enclosed proxy. If no such specifications are made, the shares represented
by such proxy will be voted FOR the ratification of the Board of Directors
listed in this Proxy Statement and FOR the approval of the appointment of
PricewaterhouseCoopers LLP as the independent auditors of the Company for fiscal
1999 and, with respect to such other matters that may properly come before the
Annual Meeting, in accordance with the judgement of the persons named as proxies
in the enclosed proxy.
The Company will bear the expense of preparing, printing and mailing this Proxy
Statement and the proxies solicited hereby and will reimburse brokerage firms
and nominees for their reasonable expenses in forwarding solicitation materials
to beneficial owners of shares held of record by such brokerage firms and
nominees. In addition to the solicitation of proxies by mail, officers and
regular employees of the Company may communicate with stockholders either in
person or by telephone or facsimile for the purpose of soliciting such proxies;
no additional compensation will be paid for such solicitation. The Company has
retained Continental Stock Transfer & Trust Company at an estimated cost of
$3,000, plus reimbursement of expenses, to assist in the solicitation of proxies
from brokers, nominees, institutions and individuals.
Outstanding Shares and Voting Rights
Only stockholders of record as of the close of business on March 26, 1999 will
be entitled to vote at the Annual Meeting. As of that date, there were
67,016,173 shares of Common Stock, par value $0.01 per share ("Common Stock"),
issued and outstanding and entitled to vote at the Annual Meeting. Stockholders
are entitled to one vote for each share held.
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The presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. Assuming a quorum is present,
the affirmative vote of a plurality of the total votes cast will be required to
ratify the Board of Directors and to approve all other matters to come before
the Annual Meeting, including the appointment of PricewaterhouseCoopers LLP as
the independent auditors of the Company.
Ratification of Board of Directors
(Proposal 1 on Proxy)
The Company's Bylaws provide that the Board of Directors shall consist of not
less than one nor more than eleven directors. The Board of Directors,
pursuant to the authority conferred on them by the Bylaws, has set the current
number of directors at ten. Unless you request on your proxy card that voting
of your proxy be withheld, proxies will be voted for the ratification of the
Board of Directors comprised of the individuals named below.
The Board of Directors has designated Ian R. Wilson, James B. Ardrey, Clive A.
Apsey, Charles Ayres, David E. De Leeuw, Charles J. Delaney, Richard C.
Dresdale, Andrea Geisser, Peter Lamm and Tyler T. Zachem as directors of the
Company subject to ratification at the Annual Meeting. If ratified, each
director will serve until the next Annual Meeting of Stockholders and until
their successors are elected or chosen. Each nominee is currently a director of
the Company. For more information about each nominee, see "Directors and
Executive Officers". The Company does not have a nominating committee.
The Board of Directors has no reason to believe that any of its nominees will be
unable or unwilling to serve if ratified. In the event any director named below
becomes unable or unwilling to serve, the proxies in the form solicited will be
voted for an alternative or alternatives designated by the present Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE BOARD OF DIRECTORS.
Appointment of Auditors
(Proposal 2 on Proxy)
The firm of PricewaterhouseCoopers LLP has served as independent auditors for
the Company since fiscal 1997 and has been appointed by the Audit Committee of
the Board of Directors as the Company's independent auditors for the fiscal year
1999, subject to ratification by the stockholders at the Annual Meeting.
Representatives of PricewaterhouseCoopers LLP are expected to be available at
the Annual Meeting to respond to appropriate questions from stockholders and
will have the opportunity to make a statement if they wish.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
Other Matters
General
- - -------
The Board of Directors does not know of any business to be presented at the
Annual Meeting other than the matters described above. If any other business
should properly come before the meeting, it is the intention of the persons
named in the proxies to vote in accordance with the recommendation of the Board
of Directors. Discretionary authority for them to do so is contained in the
proxy cards.
Deadline for Stockholder Proposals
- - ----------------------------------
Any stockholder proposal intended for presentation at the 2000 Annual Meeting
must be received by the Secretary of the Company at the Company's principal
executive offices located at 456 Montgomery Street, Suite 2200, San Francisco,
CA 94104, by January 15, 2000 for inclusion in the Company's proxy materials
related to that meeting.
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Directors and Executive Officers
The following table provides information concerning the directors and executive
officers of the Company:
<TABLE>
<CAPTION>
Name Age Position(s)
- - ------------------------------------- ------------- ---------------------------------------------------------
<S> <C> <C>
Ian R. Wilson 69 Chairman of the Board and Chief Executive Officer
James B. Ardrey 40 Vice Chairman and Director
Ray Chung 50 Executive Vice President
M. Laurie Cummings 35 Chief Financial Officer and Secretary
Thomas O. Ellinwood 44 President, Frozen Food Division
Thomas J. Ferraro 50 President, Dry Grocery Division
Anthony A. Bevilacqua 42 Executive Vice President, Sales and Marketing, Frozen
Food Division
C. Gary Willett 44 Executive Vice President, Dry Grocery Division
Clive A. Apsey 49 Director
Charles Ayres 38 Director
David E. De Leeuw 53 Director
Charles J. Delaney 37 Director
Richard C. Dresdale 42 Director
Andrea Geisser 55 Director
Peter Lamm 46 Director
Tyler T. Zachem 32 Director
</TABLE>
Executive officers serve at the pleasure of the Board of Directors until their
resignation or removal. A brief biography of each director and executive
officer follows:
Ian R. Wilson has served as Chairman of the Board and Chief Executive Officer of
the Company since June 1998. Prior to that time, Mr. Wilson was Chairman of
both Van de Kamp's, Inc. ("VDK") from September 1995 to June 1998 and AurFoods
Operating Co., Inc. (formerly known as Aurora Foods Inc.) ("AurFoods") from
December 1996 to June 1998. Mr. Wilson is the Managing Partner of Dartford
Partnership L.L.C. ("Dartford"), a private partnership focused on the food and
beverage industries. From 1995 to 1998, Mr. Wilson was the Chairman of Windy
Hill Pet Food Company, Inc. ("Windy Hill"). From 1989 through 1995, Mr. Wilson
was Chairman and Chief Executive Officer of Windmill Holdings Corporation
("Windmill"), a leading specialty miller and supplier of branded food products.
From 1985 through 1989, Mr. Wilson was Chairman and Chief Executive Officer of
Wyndham Foods, Inc. ("Wyndham"), a major cookie company he founded and
positioned as a 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, Inc. (now known as Dole Food Company, Inc.), an international
food and real estate concern. Prior to Castle & Cooke, Inc., Mr. Wilson spent
25 years with The Coca-Cola Company, serving 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
service as a director includes Chairman of the Board of Wyndham, Windmill and
Windy Hill and membership on the boards of Novell, Inc., Revlon, Inc., Crown
Zellerbach Corporation and Castle & Cooke, Inc.
James B. Ardrey has served as Vice Chairman and Director of the Company since
June 1998. Prior to that time, Mr. Ardrey was Executive Vice President and
Director of VDK from September 1995 to June 1998 and Executive Vice President
and Director of AurFoods from December 1996 to June 1998. Mr. Ardrey is a
partner of Dartford. From 1996 to 1998, Mr. Ardrey was Executive Vice President
of Windy Hill. From 1993 to 1995, Mr. Ardrey was a consultant to Windmill,
conducting its divestiture program. From 1984 to 1992, Mr. Ardrey was an
investment banker with PaineWebber Incorporated, serving as Managing Director
from 1990 to 1992. Prior to joining PaineWebber, Mr. Ardrey was a consultant
with Booz, Allen & Hamilton.
Ray Chung has served as Executive Vice President of the Company since June 1998.
Prior to that time, Mr. Chung was Executive Vice President of VDK and Director
of VDK Holdings, Inc. from September 1995 to June 1998 and Executive Vice
President and Director of AurFoods from December 1996 to June 1998. Mr. Chung
is a founding partner of Dartford. Mr. Chung has previously served as a
Director and Executive Vice President of Windy Hill from
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1995 to 1998, 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. He currently serves as a director
of Doane Pet Care Enterprises, Inc.
M. Laurie Cummings has served as Chief Financial Officer and Secretary of the
Company since June 1998. Prior to that time, Ms. Cummings was Vice President
and Secretary of VDK from September 1995 to June 1998 and Vice President and
Secretary of AurFoods from December 1996 to June 1998. Ms. Cummings is a
partner of Dartford. Ms. Cummings served as Vice President and Secretary of
Windy Hill from 1995 to 1998. 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.
Thomas O. Ellinwood has been with VDK since 1995. Mr. Ellinwood has been
responsible for the management of VDK since Pet Incorporated ("Pet") acquired
Van de Kamp's, Inc. from Grand Metropolitan, PLC in October 1989, when he headed
the acquisition and integration team as Director/Marketing Manager. Mr.
Ellinwood was Vice President and General Manager of Pet from March 1992 until
VDK bought the Van de Kamp's, Inc. business in 1995. Between 1990 and 1992, Mr.
Ellinwood held the position of Vice President, Marketing at Pet. Prior to Pet's
acquisition of Van de Kamp's, Inc., from 1986 to 1989, Mr. Ellinwood held
various positions of increasing responsibility with Pet's sales and marketing
departments. Mr. Ellinwood served as General Manager of Omar, Inc., a privately
owned aerospace manufacturing company, from 1983 to 1986.
Thomas J. Ferraro has been with AurFoods since its incorporation in December
1996. From September 1994 to June 1996, Mr. Ferraro served as President of
Campfire, Inc., which merged into International Home Foods, Inc. 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
Dracket products, a division of Bristol-Meyers Squibb Company, where he held a
variety of marketing and sales positions.
Anthony A. Bevilacqua joined VDK in February 1998 and is responsible for the
frozen food division's sales and marketing functions. Prior to joining VDK, Mr.
Bevilacqua was Senior Vice President at Aramark's Spectrum Healthcare Services
from September 1994 to December 1997. Between 1980 and 1994, Mr. Bevilacqua
held various positions of increasing responsibility in sales and marketing with
Ralston Purina Company ("Ralston"). In 1992, he was promoted to Vice President
of Marketing at Ralston's Eveready Battery Canadian division.
C. Gary Willett joined AurFoods in December 1996. From August 1995 to September
1996, he served as Executive Vice President/General Manager of Campfire, Inc.,
which merged into International Home Foods, Inc. Prior to joining 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, a division of Borden, Inc.
Clive A. Apsey has served as a Director of the Company since June 1998. Prior
to that time, Mr. Apsey was a Director of VDK from September 1995 to June 1998.
Mr. Apsey was an Executive Director of Tiger Oats Ltd. ("Tiger Oats") from 1987
to 1998 and currently serves as non-Executive Director and consultant to the
group.
Charles Ayres has served as a Director of the Company since June 1998. Prior to
that time, Mr., Ayres was a Director of AurFoods from December 1996 to June
1998. Mr. Ayres is a managing director of McCown De Leeuw & Co., Inc. ("MDC").
Mr. Ayres has been associated with MDC since 1991. Prior to joining MDC, 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
The Brown Schools, Inc.
David E. De Leeuw has served as a Director of the Company since June 1998.
Prior to that time, Mr. De Leeuw was a Director of AurFoods from December 1996
to June 1998. Mr. De Leeuw is a managing director of MDC. Prior to founding
MDC 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.
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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 Outsourcing Solutions Inc., American
Residential Investment Trust and DIMAC Holdings, Inc.
Charles J. Delaney has served as a Director of the Company since June 1998.
Prior to that time, Mr. Delaney was a Director of VDK from September 1995 to
June 1998. Mr. Delaney has been President of UBS Capital LLC ("UBS") since it
was established in 1993 as a subsidiary of Union Bank of Switzerland (now UBS
AG). From 1989 to 1993, Mr. Delaney headed the UBS Leverage Finance Group of
the Corporate Banking Division. Mr. Delaney is also a director of ETM
Entertainment Network, Inc. and Peoples Telephone Company, Inc.
Richard C. Dresdale has served as a Director of the Company since June 1998.
Prior to that time, Mr. Dresdale was a Director of AurFoods from December 1996
to June 1998. Mr. Dresdale is President and was a founding partner of Fenway
Partners, Inc. ("Fenway"). Fenway is a New York-based private equity firm for
institutional investors with the primary objective of acquiring leading middle-
market companies. Prior to founding Fenway with Messrs. Lamm and Geisser, Mr.
Dresdale was employed by Clayton, Dubilier and Rice, Inc. from June 1985 to
March 1994, most recently as a Principal. Mr. Dresdale serves as a director of
a number of Fenway's portfolio companies, including Blue Capital Management,
LLC, Central Tractor Farm & Country, Inc., Delimex Holdings, Inc. and Simmons
Company.
Andrea Geisser has served as a Director of the Company since June 1998. Prior
to that time, Mr. Geisser was a Director of VDK from September 1995 to June 1998
and a Director of AurFoods from December 1996 to June 1998. Mr. Geisser has
been a Managing Director of Fenway since the firm's founding in 1994. Prior to
founding Fenway with Messrs. Lamm and Dresdale, Mr. Geisser was employed by
Butler Capital Corporation ("BCC") from February 1989 to June 1994, most
recently as Managing Director and General Partner of each of the management
partnerships of the investment partnerships sponsored by BCC. From 1986 to
1989, Mr. Geisser was a Managing Director of Onex Investment Corporation, the
largest Canadian leveraged buyout company, and prior to that started the U.S.
operations of EXOR, a European investment company, where he was a Senior Vice
President and Director. Mr. Geisser serves as a director of a number of
Fenway's portfolio companies, including Decorative Concepts, Inc., New Creative
Enterprises, Inc., Iron Age Corporation and Valley Recreation Products, Inc.
Peter Lamm has served as a Director of the Company since June 1998. Prior to
that time, Mr. Lamm was a Director of VDK from September 1995 to June 1998 and a
director of AurFoods from December 1996 to June 1998. Mr. Lamm is Chairman and
Chief Executive Officer of Fenway and was a founding partner. Prior to founding
Fenway with Messrs. Dresdale and Geisser, Mr. Lamm was employed by BCC from
February 1982 to April 1994, most recently as Managing Director and General
Partner of each of the management partnerships of the investment partnerships
sponsored by BCC. Mr. Lamm serves as a director of a number of Fenway's
portfolio companies, including Blue Capital Management, LLC, Central Tractor
Farm & Country, Inc., Delimex Holdings, Inc. and Iron Age Corporation.
Tyler T. Zachem has served as a Director of the Company since June 1998. Prior
to that time, Mr. Zachem was a Director of AurFoods from December 1996 to June
1998. Mr. Zachem is a managing director of MDC. Mr. Zachem has been
associated with MDC 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.
Meetings and Committees of Directors
The Board of Directors held two meetings during 1998 since the incorporation of
the Company on June 19, 1998. No directors were absent from any of the
meetings.
The Board of Directors has two committees: the Compensation Committee and the
Audit Committee. The Compensation Committee, which met once during 1998,
determines the compensation of executive officers, including bonuses, subject to
ratification by the Board of Directors. The Compensation Subcommittee
administers the Company's 1998 Incentive Plan and the 1998 Employee Stock
Purchase Plan. The Audit Committee, which met once during 1998, recommends to
the Board of Directors the engagement of the Company's independent accountants
and reviews the plans for, and the results and scope of, the annual auditing
engagement. The Compensation Committee is comprised of Messrs. Ayres, Dresdale
and Lamm. The Compensation Subcommittee is comprised of Messrs. Apsey
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and Delaney. The Audit Committee is comprised of Messrs. Apsey and Delaney. No
director attended fewer than 75% of the meetings of committees of the Board of
Directors on which he served during 1998.
Compensation of Directors
Directors who are officers, employees, or otherwise affiliates of the Company do
not receive compensation for their service as directors. Non-employee directors
receive an annual retainer of $20,000, plus $2,000 for attending each committee
meeting of the Board of Directors and $5,000 per annum for serving as a Chairman
of any committee of the Board of Directors. Directors of the Company are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors or committees thereof.
Executive Compensation
The following Summary Compensation Table sets forth the compensation received by
the officers of the Company (together, the "Named Executive Officers"), during
the years ended December 31, 1998 and December 27, 1997.
Summary Compensation Table
- - --------------------------
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
--------------------------------- -------------------
Securities
Name and Principal Position Underlying All Other
as of December 31, 1998 Year Salary (1) Bonus (1) Options Compensation
- - ----------------------------------- ---------- ----------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Ian R. Wilson 1998 $1,000,000 $450,000 - $ -
Chairman of the Board and
Chief Executive Officer
James B. Ardrey 1998 600,000 270,000 - -
Vice Chairman
Ray Chung 1998 350,000 157,500 - -
Executive Vice President
M. Laurie Cummings 1998 250,000 112,500 - -
Chief Financial Officer and
Secretary
Thomas O. Ellinwood 1998 275,000 123,750 175,000 8,895
President, Frozen Food Division
Thomas J. Ferraro 1998 275,000 165,000 175,000 9,000
President, Dry Grocery Division 1997 175,000 143,000 - 9,000
</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.
Aurora Incentive Plan
- - ---------------------
The Amended and Restated Limited Liability Company Agreement of MBW Investors
LLC ("MBW LLC") contained an incentive plan (the "Aurora Plan") as a means by
which certain key employees and other specifically designated persons ("Aurora
Covered Employees") of AurFoods and/or affiliated with AurFoods, were given an
opportunity to benefit from appreciation in the value of AurFoods. Under the
Aurora Plan, Aurora Covered Employees were issued a
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specific class of limited liability company member units ("Management Units"),
at a nominal value, as a means to participate in the appreciation of the equity
value of AurFoods. The Management Units were subject to vesting requirements
based on terms of employment or other factors.
Prior to the closing of the initial public offering of the Company's Common
Stock on July 1, 1998 at $21.00 per share (the "Equity Offerings"), the final
value of all classes of Management Units were determined based on the valuation
of the Common Stock held indirectly by MBW LLC, and upon the closing of the
Equity Offerings all unvested Management Units became fully vested. The
aggregate value of all Management Units was $58.9 million. Through December 27,
1997, the Company had recorded estimated incentive plan expense of $2.3 million
based on the estimated valuation of the Company at that time. Additional
incentive plan expense of $56.6 million was recorded in the first and second
quarters of 1998.
The incentive plan expense was recorded as a liability of MBW LLC as sponsor of
the Aurora Plan. However, because the Aurora Plan was for the benefit of Aurora
Covered Employees, expense recognized under the Aurora Plan has been pushed down
to the Company as incentive plan expense and as additional paid-in capital from
its parent. No additional incentive plan expense will be recorded under the
Aurora Plan.
MBW LLC satisfied its liability under the Aurora Plan by distributing 4,152,417
shares of Common Stock of the Company based on the valuation of the Management
Units at the initial public offering price of the Company's Common Stock on the
dissolution of MBW LLC.
Pursuant to the Aurora Plan, Dartford, Thomas J. Ferraro and C. Gary Willett
received 2,699,071, 427,454 and 267,158 shares of Common Stock, respectively,
on the closing of the Equity Offerings in respect of the Aurora Plan. In
addition, 56 other employees received an aggregate of 758,734 shares pursuant to
the Aurora Plan.
VDK Incentive Plan
- - ------------------
VDK Foods LLC ("VDK LLC") provided a compensation arrangement (the "VDK Plan")
as a means by which certain key employees, and other specifically designated
persons ("VDK Covered Employees") of VDK and/or affiliated with VDK, were given
an opportunity to benefit from appreciation in the equity value of VDK. Under
the VDK Plan, VDK Covered Employees were issued a specific class of limited
liability company member units and/or performance-based units (collectively,
"VDK Management Units"), at a nominal value, as a means to participate in the
appreciation of the equity value of VDK. The VDK Management Units were subject
to vesting requirement based on terms of employment or other factors.
Prior to the closing of the Equity Offerings, the final value of all classes of
VDK Management Units were determined based on the valuation of the shares of the
Company held indirectly by VDK LLC, and upon the closing of the Equity Offerings
all unvested VDK Management Units became fully vested. The aggregate value of
all VDK Management Units was $66.7 million. Through December 31, 1997, no
incentive plan expense had been recorded by VDK based on the estimated valuation
of VDK at that time. Incentive plan expense of $66.7 million was recorded in the
first and second quarters of 1998. The incentive plan expense was recorded as a
liability of VDK LLC as sponsor of the VDK Plan. However, because the VDK Plan
was for the benefit of VDK Covered Employees, expense recognized under the VDK
Plan was pushed down to VDK as incentive plan expense and as additional paid-in
capital from its parent. All expense recognized was recorded on VDK's books
prior to its acquisition by the Company; no expense has been recorded on the
Company's books. No additional incentive plan expense will be recorded under
the VDK Plan.
VDK LLC (or the Company as described below) will distribute a fixed number of
shares of Common Stock of the Company upon the dissolution of VDK LLC, based on
the valuation of the VDK Management Units at the initial public offering price
of the Company's Common Stock.
The VDK Plan provides for tax gross-up payments on certain distributions.
Because the Company will receive the tax benefit of such distributions and
related tax gross-up payments, and because the tax benefit is expected to exceed
the amount of the tax gross-up payments, the Company will bear the liability for
any such tax gross-up payments due. The estimated tax gross-up payment is $12.4
million and has been recorded as additional incentive plan expense and other
liabilities. The tax benefit of the tax gross-up payment and related
distributions of $19.6 million, which more than offsets the gross-up payments,
has been recorded to income tax expense and as a deferred tax asset.
7
<PAGE>
On April 8, 1998, MBW LLC and VDK LLC formed Aurora/VDK LLC ("New LLC") by
contributing their respective businesses to New LLC (the "Contribution"). To
facilitate payment of the tax gross-up obligation and recognition of related tax
benefits, VDK adopted a new incentive plan (the "New VDK Plan" and together with
the VDK Plan, the "VDK Plans"), which was assumed by the Company in connection
with the Contribution. Under the New VDK Plan, the Company is obligated to
distribute no later than July 1, 1999, 1,801,769 shares of the Company's Common
Stock to VDK Covered Employees who were granted certain types of VDK Management
Units under the VDK Plan. The issuance of such shares (the "MC Shares") will not
increase the number of outstanding shares of Common Stock because the Company's
obligations to issue the MC Shares is contingent upon the Company's receiving
from VDK LLC, as a contribution, a number of shares of the Company's Common
Stock owned by VDK LLC equal to the number of MC Shares. The Company will have
no obligation to issue MC Shares unless it receives a contribution of an equal
number of shares from VDK LLC. VDK LLC is obligated to contribute such shares to
the Company after the closing of the Equity Offerings. The Company's obligation
to make the tax gross up payments referred to above is subject to the Company
being allowed a deduction for federal income tax purposes with respect to the
payment of the MC Shares and tax gross up payment.
Pursuant to the VDK Plan, Dartford, Thomas O. Ellinwood, and Anthony A.
Bevilacqua are entitled to receive 2,255,334, 244,072, and 91,756 shares of
Common Stock, respectively, under the VDK Plans no later than July 1, 1999. In
addition, 27 employees are entitled to receive an aggregate of 979,067 shares
pursuant to the VDK Plans no later than July 1, 1999.
Stock Option Grants
The following table sets forth information with respect to stock option grants
to the Named Executive Officers during 1998. The options were granted at an
exercise price equal to 100% of the fair market value of the Common Stock on the
date of grant. The options vest ratably over three years beginning in the third
year after the date of grant and expire ten years after the date of grant.
Option Grants in the Last Fiscal Year
- - -------------------------------------
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted to
Options Employees in Exercise Expiration Grant Date Present
Name Granted (1) Fiscal Year Price Date Value (2)
- - -------------------------- ----------------- ------------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Ian R. Wilson - - $ - - $ -
James B. Ardrey - - - - -
Ray Chung - - - - -
M. Laurie Cummings - - - - -
Thomas O. Ellinwood 175,000 8.6% 21.00 7/1/08 5.96
Thomas J. Ferraro 175,000 8.6% 21.00 7/1/08 5.96
</TABLE>
(1) Options were granted pursuant to the Company's 1998 Incentive Plan on July
1, 1998 and vest ratably over three years beginning with the third year
after the date of grant.
(2) Present value was calculated using the Black-Scholes single option pricing
model with the following weighted-average assumptions: dividend yield of
0%, expected volatility of 0.20, a risk-free interest rate of 4.8% and
expected option lives of five years.
8
<PAGE>
Option Exercises and Year-end Value of Unexercised Options
The following table sets forth information with respect to each exercise of
stock options during the 1998 fiscal year by a Named Executive Officer and the
number and value of unexercised stock options held by the Named Executive
Officers at December 31, 1998.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option
- - --------------------------------------------------------------------------
Values
- - ------
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-
Underlying Unexerciesed Options Money Options at Fiscal Year
at Fiscal Year End End(2)
Shares ------------------------------- ------------------------------
Acquired on Value
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- - -------------------- ----------------- ---------------- ------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Ian R. Wilson - $ - - - $ - $ -
James B. Ardrey - - - - - -
Ray Chung - - - - - -
M. Laurie Cummings - - - - - -
Thomas O. Ellinwood - - - 175,000 - -
Thomas J. Ferraro - - - 175,000 - -
</TABLE>
(1) The Value Realized is equal to the fair market value on the date of
exercise, less the exercise price, times the number of shares acquired. No
options were exercised during the last fiscal year.
(2) The Value of Unexercised In-the-Money Options at Fiscal Year End is equal
to $19.8125, the fair market value of each share underlying the options at
December 31, 1998, less the exercise price, times the number of options.
No options were in the money at December 31, 1998.
Employment Agreements
Mr. Ian R. Wilson serves as the Chairman of the Board and the Chief Executive
Officer of the Company pursuant to an employment agreement dated July 1, 1998.
Under the agreement, Mr. Wilson receives an annual base salary of $1.0 million
during the term of the agreement and is eligible to receive a bonus of up to 80%
of his base salary based on certain earnings criteria. The employment agreement
provides for a term of two years and a non-compete covenant for the term of his
employment and thereafter, if applicable, until the earlier of July 1, 2000 or
the first anniversary of employing a Chief Executive Officer other than Mr.
Wilson. Upon termination by the Company other than for cause (as defined in the
employment agreement), Mr. Wilson shall receive his salary and shall be eligible
to receive his bonus through the remaining term of the non-compete period. In
addition, a termination of Mr. Wilson by the Company other than for cause shall
also constitute a termination of Messrs. Ardrey and Chung and Ms. Cummings other
than for cause under the employment agreements described below.
Mr. James B. Ardrey serves as the Vice Chairman of the Company pursuant to an
employment agreement dated July 1, 1998. Under the agreement, Mr. Ardrey
receives an annual base salary of $600,000 during the term of the agreement and
is eligible to receive a bonus of up to 80% of his base salary based on certain
earnings criteria. The employment agreement provides for a term of two years
and a non-compete covenant for the term of his employment and thereafter, if
applicable, until the earlier of July 1, 2000 or the first anniversary of
employing a Chief Executive Officer other than Mr. Wilson. Upon termination by
the Company of Mr. Ardrey or Mr. Wilson other than for cause, Mr. Ardrey shall
receive his salary and shall be eligible to receive his bonus through the
remaining term of the non-compete period.
Mr. Ray Chung serves as the Executive Vice President of the Company pursuant to
an employment agreement dated July 1, 1998. Under the agreement, Mr. Chung
receives an annual base salary of $350,000 during the term of the agreement and
is eligible to receive a bonus of up to 80% of his base salary based on certain
earnings criteria. The employment agreement provides for a term of two years
and a non-compete covenant for the term of his employment and thereafter, if
applicable, until the earlier of July 1, 2000 or the first anniversary of
employing a Chief Executive
9
<PAGE>
Officer other than Mr. Wilson. Upon termination by the Company of Mr. Chung or
Mr. Wilson other than for cause, Mr. Chung shall receive his salary and shall be
eligible to receive his bonus through the remaining term of the non-compete
period.
Ms. M. Laurie Cummings serves as the Chief Financial Officer and Secretary of
the Company pursuant to an employment agreement dated July 1, 1998. Under the
agreement, Ms. Cummings receives an annual base salary of $250,000 during the
term of the agreement and is eligible to receive a bonus of up to 80% of her
base salary based on certain earnings criteria. The employment agreement
provides for a term of two years and a non-compete covenant for the term of her
employment and thereafter, if applicable, until the earlier of July 1, 2000 or
the first anniversary of employing a Chief Executive Officer other than Mr.
Wilson. Upon termination by the Company of Ms. Cummings or Mr. Wilson other
than for cause, Ms. Cummings shall receive her salary and shall be eligible to
receive her bonus through the remaining term of the non-compete period.
Mr. Thomas J. Ferraro serves as the President of the Dry Grocery Division
pursuant to an employment agreement, dated as of December 31, 1996, as amended
(the "Ferraro Employment Agreement"). He receives an annual base salary of
$290,000 (subject to annual adjustments) during the term of the agreement and is
eligible to receive a bonus of up to 80% of his base salary based upon certain
earnings criteria. The Ferraro Employment Agreement provides for a two-year
term ending December 31, 2000; however, on each December 31st, the term
automatically extends for one additional year so that the term ends three years
after such December 31st unless notice by either the Company or Mr. Ferraro to
terminate is given 30 days prior to the automatic extension. If the Company
terminates Mr. Ferraro's employment without cause, the Ferraro Employment
Agreement requires the Company 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 his
employment agreement. Mr. Ferraro is also entitled to receive any bonus for the
preceding fiscal year which has not been paid as of the date of his termination
plus a pro rata portion of any base and supplemental bonus with respect to such
fiscal year based upon the actual number of days the Company employed Mr.
Ferraro during such fiscal year. Mr. Ferraro may not compete with or solicit
employees from the Company until the later of the first anniversary of his
termination and the end of the current term of his employment agreement.
Mr. Thomas O. Ellinwood serves as the President of the Frozen Food Division
pursuant to an employment agreement, dated as of March 1, 1997 as amended (the
"Ellinwood Employment Agreement"). The Ellinwood Employment Agreement provides
for a three-year term; however, on each September 30th, the term automatically
extends for one additional year so that the term ends three years after such
September 30th unless notice by either the Company or Mr. Ellinwood to terminate
is given 30 days prior to the automatic extension. Mr. Ellinwood receives an
annual base salary of $290,000 (subject to annual adjustment) during the term of
the agreement and is eligible to receive a bonus of up to 80% of his base salary
based upon certain earnings criteria. If the Company terminates Mr. Ellinwood's
employment without cause before a change of control (as defined in the
agreement), the Company is required to pay him the greater of (i) 200% of his
base salary then in effect or (ii) the base salary he would have been entitled
to receive through the end of the current term of the employment agreement plus
his base bonus pro rated according to the actual number of days the Company
employed him for such fiscal year. If the Company terminates Mr. Ellinwood's
employment without cause after a change of control (as defined in the agreement)
or Mr. Ellinwood terminates his employment with the Company for "Good Reason"
(as defined in the agreement) after a change of control, the Company must pay
him the sum of 200% of his base salary then in effect plus his bonus pro rated
according to the actual number of days the Company employed him for such fiscal
year. The pro rated portion of his bonus is payable as if the Company's
financial results equal exactly 100% of the EBITDA target for that year. Mr.
Ellinwood's employment agreement also provides that for one year following his
termination of employment with the Company (other than a termination by the
Company without cause), Mr. Ellinwood may not compete with or solicit employees
from the Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors consists exclusively of
non-employee directors and is responsible for setting and administering the
policies that govern the compensation of executive officers of the Company. The
Compensation Committee also administers the Company's 1998 Incentive Plan and
the 1998 Employee Stock Purchase Plan.
10
<PAGE>
Compensation Philosophy
The Company's compensation program for its executive officers is based on the
following objectives:
* Total compensation of the executive officers should be linked to the
financial performance of the Company.
* The compensation paid to the executive officers of the Company should
compare favorably with executive compensation levels of other
similarly-sized companies so that the Company can continue to attract
and retain outstanding executives.
* The compensation program should reward outstanding individual
performance and contributions as well as experience.
Compensation Methodology
The Company's executive compensation program has three components: base salary,
annual bonus and stock options.
The Compensation Committee reviews executive compensation in light of the
Company's performance during the fiscal year and compensation data of companies
that are considered comparable. In reviewing the Company's performance during
1998, the Compensation Committee considered a variety of factors: pro forma net
sales increased 8.3% to $947.0 million in 1998 from $874.2 million in 1997; pro
forma operating income increased 12.7% to $116.8 million in 1998 from $103.5
million in 1997 excluding non-cash incentive plan expense; and adjusted pro
forma EBITDA increased 12.4% to $173.5 million in 1998 from $154.4 million in
1997. During 1998, the Company also consummated the purchase of the Duncan
Hines(R) brand in January, the merger with VDK in April and the initial public
offering of its common stock in July. The Compensation Committee considered
these strong operating results as a whole without assigning specific weights to
particular factors. The Company, however, sets aggressive standards in
determining executive compensation and, as such, annual bonuses earned were
generally not the maximum allowable under the respective employment agreements.
Base Salary
The annual base salary is designed to compensate executives for their sustained
performance and level of responsibility. The Compensation Committee approves
all salary increases for executive officers, which is then subject to
ratification by the Board of Directors. The salaries of all executive officers
are established by employment agreements as previously discussed.
Annual Bonus
The annual bonus is given to promote the achievement of the Company's
performance objectives. The specific performance objectives for each executive
officer and the payments made relative thereto are governed by earnings criteria
as established in the employment agreements. Such criteria are primarily
measured by Company and/or divisional operating earnings and working capital
targets established in the annual operating budget process. The annual bonus
also takes into consideration any major acquisitions and the executive's
performance in integrating such acquisition into the Company's operations.
Stock Options
Stock options are designed to provide long-term incentives and rewards tied to
the price of the Company's Common Stock. The Compensation Committee believes
that stock options, which provide value to participants only when the Company's
stockholders benefit from stock price appreciation, are an important component
of the Company's executive compensation program. The Compensation Committee has
not established any target level of ownership of the Company's Common Stock by
the Company's executives. Retention of shares of the Company's Common Stock,
however, is encouraged. Stock options are awarded under the Company's 1998
Incentive Plan. Stock options granted to executive officers have exercise
prices equal to the market price of the Company's Common Stock on the date of
11
<PAGE>
grant, vest over five years and have terms of ten years. The Compensation
Subcommittee approves all stock option grants, which is then subject to
ratification by the Board of Directors.
Concurrent with the Company's initial public offering, Messrs. Ellinwood and
Ferraro were each granted options to purchase 175,000 shares of the Company's
Common Stock. The grants were made to give Messrs. Ellinwood and Ferraro
incentives tied to the long-term price of the Company's Common Stock. Messrs.
Wilson, Ardrey and Chung and Ms. Cummings were not granted any stock options
under the 1998 Incentive Plan due to their pre-existing ownership of the
Company's Common Stock through Dartford (See "Security Ownership of Certain
Beneficial Owners and Management").
Compensation of the Chief Executive Officer
Mr. Wilson became Chairman of the Board and Chief Executive Officer of the
Company in June 1998. Mr. Wilson and the Company entered into an employment
agreement dated July 1, 1998 as described in "Executive Compensation -
Employment Agreements".
The Compensation Committee and the Board of Directors approved a total
compensation package that was designed to be competitive with compensation
provided to chief executive officers at companies of comparable size to the
Company as well as provide a compensation level and structure necessary to
obtain an executive with Mr. Wilson's experience and credentials.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986 ("Section 162(m)"), as
amended, limits the federal income tax deductibility of compensation paid to the
executive officers named in the Summary Compensation Table on page 6. The
Company generally may deduct compensation to such an officer only if the
compensation does not exceed $1,000,000 during any fiscal year or is
"performance-based" as defined in Section 162(m). The Compensation Committee
intends to design the Company's compensation programs so that total compensation
paid to any employee will not exceed $1,000,000 in any one year, except for
compensation payments in excess of $1,000,000 which qualify as "performance-
based". However, the Company may pay compensation that is not deductible in
limited circumstances when prudent management of the Company so requires.
The Compensation Committee believes these executive compensation policies and
programs effectively serve the interests of stockholders and the Company and are
appropriately balanced to provide increased motivation for executives to
contribute to the Company's future success.
THE COMPENSATION COMMITTEE
Charles Ayres
Richard C. Dresdale
Peter Lamm
12
<PAGE>
Performance Graph
The following graph compares the cumulative total return to stockholders of the
Company's Common Stock from July 1, 1998 through December 31, 1998 to the
cumulative total return of (1) the Russell 2000 Index and (2) the S&P Mid Cap
Food Index over the same period (assuming the investment of $100 in the
Company's Common Stock and in each of the other indexes and reinvestment of all
dividends).
Comparison of Cumulative Total Return Among Aurora Foods Inc., the
Russell 2000 Index and the S&P Mid Cap Food Index
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
7/1/98 7/31/98 8/31/98 9/30/98 10/30/98 11/30/98 12/31/98
- - --------------------- --------- ----------- ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AOR 100.0 83.3 69.6 65.5 83.3 93.2 94.3
Russell 2000 100.0 91.3 73.5 79.1 82.2 86.4 91.8
S&P Mid Cap Food 100.0 89.9 72.6 77.1 85.8 87.0 91.2
</TABLE>
13
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, as of February 17, 1999 by (a) each
person who is known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock, (b) each director and executive officer
of the Company, and (c) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that the persons or
entities listed below have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them, except to the extent such
power may be shared with a spouse.
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
------------------------------------------
Name and Address of Owner Number Percent
---------------------- ------------------
<S> <C> <C>
VDK Foods LLC(2) 22,949,265 34.2%
Fenway Partners Capital Fund, L.P.(3) 16,626,412 24.8%
McCown De Leeuw & Co. entities(4)(5) 16,384,371 24.4%
California Public Employees Retirement System(5) 3,737,581 5.6%
Dartford Partnership L.L.C.(6) 7,275,685 10.9%
Tiger Oats Limited(7) 4,237,394 6.3%
UBS Capital LLC(8) 4,237,394 6.3%
Officers and Directors:
Ian R. Wilson(6) 7,275,685 10.9%
James B. Ardrey(6) 7,275,685 10.9%
Ray Chung(6) 7,275,685 10.9%
M. Laurie Cummings(6) 7,275,685 10.9%
Thomas O. Ellinwood(9) 280,514 *
Thomas J. Ferraro(10) 486,444 *
Clive A. Apsey(7) 4,237,394 6.3%
Charles Ayres(4) 16,384,371 24.4%
David E. De Leeuw(4) 16,384,371 24.4%
Charles J. Delaney(8) 4,237,394 6.3%
Richard C. Dresdale(3) 16,626,412 24.8%
Andrea Geisser(3) 16,626,412 24.8%
Peter Lamm(3) 16,626,412 24.8%
Tyler T. Zachem(4) 16,384,371 24.4%
All directors and executive officers of the Company as a group
(14 persons) 49,528,214 73.9%
</TABLE>
* Less than 1%.
(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. The table above
assumes that VDK LLC was dissolved on July 1, 1998 and 22,949,265 shares of
Common Stock were distributed to the members of VDK LLC based on the $21.00
per share initial public offering price of the Common Stock. Of the
22,949,265 shares directly held by VDK LLC, 2,470,132 shares are
distributable under the VDK Plans and the remaining shares are distributable
by VDK LLC to its members upon its dissolution, which will occur no later
than July 1, 1999. The number of shares of Common Stock distributable to
the members of VDK LLC upon its dissolution will be based on the average
closing sales price of the Common Stock for the actual number of trading
days during the 60-day period immediately preceding the actual date of
dissolution.
(2) Immediately prior to the closing of the Equity Offerings, New LLC was the
sole stockholder of the Company. New LLC has been dissolved and its shares
of Common Stock were distributed to MBW LLC and VDK LLC, its sole members.
MBW LLC was dissolved after the dissolution of New LLC and its shares of
Common Stock were distributed to its members including MDC, Fenway Partners
Capital Fund, L.P., Dartford, California Public Employees Retirement System
("CALPERS"), Sunapee Securities Inc. and Squam Lake Investors II, L.P., and
certain divisional management. Each of these beneficial owners is party to
the Securityholders Agreement dated April 8, 1998 (the "Securityholders
Agreement"). The address of VDK LLC is 456 Montgomery Street, Suite 2200,
San Francisco, CA 94104.
(3) Includes 16,301,510, 194,619 and 130,283 shares of Common Stock owned
directly or indirectly by the Fenway Partners Capital Fund, L.P. (the
"Fenway Fund"), FPIP, LLC and FPIP Trust, LLC, respectively (assuming the
dissolution of VDK LLC). Does not include shares of Common Stock directly
owned by VDK LLC resulting from the dissolution of New LLC in
14
<PAGE>
respect of which Fenway does not have an economic interest and as to which
Fenway disclaims beneficial ownership. The Fenway Fund holds a majority of
the voting interests of VDK LLC, and as such may be deemed to have the power
to vote or dispose of the shares of Common Stock held directly by VDK LLC.
FPIP, LLC and FPIP Trust, LLC are entities formed by the investment
professionals of Fenway to make co-investments alongside the Fenway Fund.
The managing member of each of FPIP, LLC, and FPIP Trust, LLC is Fenway. The
general partner of the Fenway Fund is Fenway Partners, L.P., a Delaware
limited partnership, whose general partner is Fenway Partners Management,
Inc., a Delaware corporation. Peter Lamm, Richard Dresdale, and Andrea
Geisser are directors and officers of each of Fenway Partners Management,
Inc. and Fenway, and as such may be deemed to have or share the power to
vote or dispose of the shares of Common Stock held by the Fenway Fund, FPIP,
LLC and FPIP Trust, LLC. Each of Messrs. Lamm, Dresdale, and Geisser has no
direct ownership of any shares of the Common Stock and disclaims beneficial
ownership of any of such shares except to the extent of their direct or
indirect partnership or membership interests in the Fenway Fund, FPIP, LLC
and FPIP Trust, LLC. The address of Fenway is 152 West 57th Street, New
York, New York 10019.
(4) Includes 5,897,598 shares of Common Stock owned by McCown De Leeuw & Co.
III, L.P., an investment partnership whose general partner is MDC Management
Company III, L.P. ("MDC III"), 418,687 shares of Common Stock owned by
McCown De Leeuw & Co. III (Europe), L.P., an investment partnership whose
general partner is MDC III, 98,124 shares of Common Stock owned by McCown De
Leeuw & Co. III (Asia), L.P., an investment partnership whose general
partner is MDC Management Company IIIA, L.P. ("MDC IIIA"), 127,571 shares of
Common Stock owned by Gamma Fund LLC, a California limited liability
company, 5,885,400 shares of Common Stock owned by McCown De Leeuw & Co. IV,
L.P., an investment partnership whose general partner is MDC Management
Company IV, LLC ("MDC IV"), 95,308 shares of Common Stock owned by Delta
Fund LLC, a California limited liability company and 124,102 shares of
Common Stock owned by McCown De Leeuw & Co. IV Associates, L.P. In
addition, includes 3,737,581 shares of Common Stock held by CALPERS for
which McCown De Leeuw & Co. III, L.P. has an irrevocable proxy which
provides the power to vote all of the securities held by CALPERS. The
voting members of Gamma Fund LLC and Delta Fund LLC are George E. McCown,
David E. De Leeuw, David E. King, Robert B. Hellman, Jr., Charles Ayres, and
Steven A. Zuckerman, who are also the only general partners of MDC III and
MDC IIIA and the only managing members of MDC IV. Voting and dispositive
decisions regarding the securities are made by Mr. McCown and Mr. De Leeuw,
as Managing General Partners of each of MDC III and MDC IIIA who together
have more than the required two-thirds-in-interest vote of the Managing
General Partners necessary to effect such decision on behalf of such entity
and by a vote or consent of all of the managing members of MDC IV. Voting
and dispositive decisions regarding securities owned by Delta Fund LLC and
Gamma 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
securities and disclaim beneficial ownership of such shares except, in the
case of Gamma Fund LLC and Delta Fund LLC, to the extent of their
proportionate membership interests. The address of each of the above
referenced entities is c/o McCown De Leeuw & Co., 3000 Sand Hill Road,
Building 3, Suite 290, Menlo Park, CA 94025.
(5) Under an irrevocable proxy, CALPERS has granted McCown De Leeuw & Co. III,
L.P. the right to vote all of the shares of Common Stock it holds. The
address of California Public Employees Retirement System is Lincoln Plaza,
400 P Street, Sacramento, CA 95814.
(6) Includes 1,249,031 shares, 796,268 shares, 776,942 shares, 510,800 shares
and 519,292 shares held directly by Ian R. Wilson, James B. Ardrey, Ray
Chung, M. Laurie Cummings and Cary S. Fitchey, respectively. Also includes
903,595 shares of Common Stock held directly by VDK LLC and indirectly by
Dartford, and 2,255,334 shares of Common Stock to be distributed to Dartford
under the VDK Plan no later than July 1, 1999. Assuming the dissolution of
VDK LLC, also includes 130,017 shares of Common Stock held directly or
indirectly by a trust for the benefit of certain family members of Ian R.
Wilson, an aggregate of 101,526 shares of Common Stock held directly or
indirectly by trusts for the benefit of certain family members of Ray Chung,
and 32,880 shares of Common Stock held directly or indirectly by certain
family members and trusts for the benefit of certain family members of James
B. Ardrey. Pursuant to the Securityholders Agreement, such permitted
transferees of Dartford are included for the purpose of determining the
number of persons Dartford may designate to the Board of Directors of the
Company. Mr. Ian R. Wilson is the managing partner, and Messrs. James B.
Ardrey and Ray Chung and Ms. M. Laurie Cummings are partners, of Dartford
and, as such, they may be deemed to have or share the power to vote or
dispose of the Company's Common Stock beneficially owned by Dartford. Each
of Messrs. Wilson, Ardrey, and Chung and Ms. Cummings disclaim beneficial
ownership of any such shares of the Company's Common Stock except for those
shares held directly by him or her, respectively, or otherwise in which they
have a pecuniary interest. Does not include shares of Common Stock directly
owned by VDK LLC resulting from the dissolution of New LLC in respect of
which Dartford does not have an economic interest. Dartford is a member
manager of VDK LLC, together with UBS, Gloriande (Luxembourg) SarL
("Gloriande"), and Fenway and as such, may be deemed to have the shared
power to vote or dispose of such shares. Dartford disclaims beneficial
ownership of any such shares. The address of Dartford is 456 Montgomery
Street, Suite 2200, San Francisco, CA 94104.
(7) Includes 3,773,085 shares held directly by VDK LLC. Tiger Oats' shares are
held by Gloriande, a corporation organized under the laws of Luxembourg,
which is the owner of record of the Company's Common Stock. Gloriande is an
indirect wholly-owned subsidiary of Tiger Oats. The shares of capital stock
of Tiger Oats are traded publicly on the Johannesburg Stock
15
<PAGE>
Exchange. Mr. Clive A. Apsey is a director of Tiger Oats and as such may be
deemed to have the power to vote or dispose of the Company's Common Stock
held by Tiger Oats. Mr. Apsey disclaims beneficial ownership of any such
shares. Does not include shares directly owned by VDK LLC resulting from
the dissolution of New LLC in respect of which Tiger Oats does not have an
economic interest. Gloriande is a member manager of VDK LLC, together with
Dartford, UBS and Fenway and as such may be deemed to have or share the
power to vote or dispose of the Company's Common Stock distributed to VDK
LLC. Gloriande disclaims beneficial ownership of any such shares. The
address of Tiger Oats Limited is 85 Bute Lane, Sandown, Sandton 2196,
Republic of South Africa.
(8) Includes 3,773,085 shares held directly by VDK LLC. UBS is a member manager
of VDK LLC, together with Dartford, Gloriande, and Fenway and as such may
be deemed to have or share the power to vote or dispose of the Company's
Common Stock distributed to VDK LLC. UBS disclaims beneficial ownership of
any such shares. UBS is a wholly-owned indirect subsidiary of Union Bank of
Switzerland. Does not include shares directly owned by VDK LLC resulting
from the dissolution of New LLC in respect of which UBS does not have an
economic interest and UBS disclaims any beneficial ownership as to such
shares. The shares of capital stock of Union Bank of Switzerland (now UBS
AG) are publicly held. Mr. Charles J. Delaney, a director of the Company,
is the president of UBS and disclaims beneficial ownership of the Company's
Common Stock held by UBS. The address of UBS is 299 Park Avenue, 34th
Floor, New York, NY 10171.
(9) Includes 244,072 shares of Common Stock to be distributed to Mr. Ellinwood
under the VDK Plan no later than July 1, 1999.
(10) Includes 427,454 shares of Common Stock distributed to Mr. Ferraro under
the Aurora Plan and trusts for the benefit of certain of his family
members. Mr. Ferraro disclaims beneficial ownership as to the 128,236 of
such shares which were transferred to trusts for the benefit of certain of
his family members.
Certain Relationships and Related Transactions
As of March 29, 1999, Aurora Foods Inc. has maintained business relationships
and engaged in certain transactions described below.
Pursuant to an agreement, dated September 19, 1995 and terminated on the closing
of the Equity Offerings, Dartford, a beneficial owner of the Company, provided
management oversight on financial and operational matters to the Company with
respect to VDK. Dartford received $900,000, $1,800,000 and $631,000 for 1998,
1997 and 1996, respectively, under such agreement.
Pursuant to an agreement with the Company, dated December 31, 1996 and
terminated on the closing of the Equity Offerings, Dartford, a beneficial owner
of the Company, provided management oversight to the Company with respect to
AurFoods. Dartford received $951,419 and $768,000 for 1998 and 1997,
respectively, under such agreement.
Pursuant to an agreement, dated December 31, 1996 and terminated on the closing
of the Equity Offerings, MDC III, an affiliate of MDC, a beneficial owner of the
Company, advised the Company as to the structuring of the Company's bank
financing and the capital structure of the Company, identification and financing
of future acquisitions, and general management advice relating to the overall
strategy and positioning of the Company. MDC III received $318,000 and $293,000
for 1998 and 1997, respectively, under such agreement.
From December 31, 1996 through January 16, 1998, the Company paid the following
fees for services rendered in connection with the acquisitions of the Mrs.
Butterworth's(R) syrup business ("MBW") from Conopco, Inc., a subsidiary of
Unilever United States, Inc., the Log Cabin(R) syrup business ("LC") from Kraft
Foods, Inc. and the Duncan Hines(R) baking mix business ("DH") from the Procter
& Gamble Company: $1,250,000 to Dartford, whose partners, Messrs. Wilson, Ardrey
and Chung, and Ms. Cummings are executive officers and directors of the Company;
$184,000 to Mr. Ferraro (President, Dry Grocery Division) and $75,000 to Mr.
Willett (Executive Vice President, Dry Grocery Division); $5,700,000 to MDC III,
whose general partners and principal include Messrs. Ayres, De Leeuw and Zachem
(all directors of the Company); and $1,500,000 was paid to Fenway, whose
partners include Messrs. Dresdale, Geisser and Lamm (all directors of the
Company). Services provided in connection with such fees included the
identification and analysis of the acquisition opportunity, the negotiation of
the acquisition and the raising of financing for such acquisition. Fees of
$1,500,000, $2,925,000 and $4,025,000, in the aggregate, were paid in connection
with the acquisitions of MBW, LC and DH, respectively.
Also, from September 1995 through July 9, 1996, the Company paid the following
fees for services rendered in connection with acquisitions and related
financings of VDK's acquisitions: $1,950,000 to Dartford; $1,474,000 to
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Fenway; $294,000 to National Sun Industries Inc., an indirect wholly-owned
subsidiary of Tiger Oats, whose director is Mr. Apsey (a director of the
Company); and $294,000 to UBS, whose president is Mr. Delaney (a director of the
Company). Services provided in connection with such fees included the
identification and analysis of the acquisition opportunity, the negotiation of
the acquisition and the raising of financing for such acquisition. Fees of
$1,012,500, $950,000 and $2,050,000 in the aggregate were paid in connection
with the acquisitions of Van de Kamp's(R) and Mrs. Paul's(R) frozen food
business and The Quaker Oats Company frozen breakfast and pizza business,
respectively.
Each of Fenway, MDC III and Dartford earned $1,500,000, UBS earned $150,000 and
each of Tiger Oats and CALPERS earned $75,000 in fees in connection with the
Contribution.
The Company has entered into agreements pursuant to which it agreed to pay
transaction fees to each of Fenway, MDC and Dartford of 0.333% of the
acquisition price for future acquisitions by the Company. Acquisition price is
the sum of (i) the cash purchase price actually received by the seller, (ii) the
fair market value of any equity securities issued by the seller, (iii) the face
value of any debt securities issued to the seller less any discounts, (iv) the
amount of liabilities assumed by the Company plus (v) the fair market value of
any other property or consideration paid in connection with the acquisition,
with installment or deferred payments to be calculated using the present value
thereof.
The Company has agreed to pay Dartford $800,000 per year as reimbursement of
corporate headquarters expenses which include staff salaries, miscellaneous
office expenses related to the administration of the Company's corporate
headquarters and rent for the space leased by Dartford and used by the Company
as its corporate headquarters for a term ending the earlier of July 1, 2000 and
the date that Mr. Wilson is no longer Chief Executive Officer of the Company.
The Company and certain stockholders of the Company have entered into the
Securityholders Agreement which provides for certain rights, including
registration rights of the stockholders.
On December 31, 1996 and January 16, 1998, Mr. Thomas J. Ferraro, President, Dry
Grocery Division, executed promissory notes in the amount of $60,000 and
$131,000, respectively, in favor of the Company to evidence monies borrowed to
assist in the capitalization of his limited liability company interests held in
MBW LLC. The promissory notes mature December 31, 1999 and January 16, 2001.
Interest is due and payable quarterly at the rate of 8% per annum and there are
required annual principal payments. The aggregate balance outstanding on his
promissory notes was $151,000 as of December 31, 1998 and was $40,000 as of
December 27, 1997.
On September 19, 1995, Mr. Thomas O. Ellinwood, President, Frozen Food
Division, executed a promissory note in the amount of $125,000 in favor of the
Company to evidence monies borrowed to assist in the capitalization of his
limited liability company interests held in VDK LLC. The promissory note matures
March 31, 1999 with required annual payments. Interest is due and payable
quarterly at the rate of 8.5% per annum. The balance outstanding on his
promissory note as of December 31, 1998 and December 27, 1997 was $41,666.
Pursuant to the VDK Plans, Dartford, Thomas O. Ellinwood and Anthony A.
Bevilacqua are entitled to receive 2,255,334, 244,072 and 91,756 shares of
Common Stock, respectively, no later than July 1, 1999. See "Executive
Compensation - VDK Incentive Plan".
Compensation Committee Interlock and Insider Participation
The Board of Directors has appointed Messrs. Lamm, Ayres and Dresdale as members
of its Compensation Committee. Mr. Wilson, the Chairman of the Board and Chief
Executive Officer of the Company, is an ex officio member of the Compensation
Committee. Messrs. Apsey and Delaney are members of the Compensation
Subcommittee.
Mr. Wilson is the managing partner of Dartford and, until August 1998, was the
Chairman of the Board of Directors and Chief Executive Officer of Windy Hill.
Mr. Ardrey, Vice Chairman of the Company, is also a partner of
17
<PAGE>
Dartford and, until August 1998, was an Executive Vice President of Windy Hill.
Pursuant to an agreement, dated September 19, 1995 and terminated on June 26,
1998, Dartford provided management oversight on financial and operational
matters to the Company with respect to VDK. Dartford received $900,000,
$1,800,000 and $631,000 for 1998, 1997 and 1996, respectively, under such
agreement. Further, pursuant to an agreement with the Company, dated December
31, 1996 and terminated on July 1, 1998, Dartford provided management oversight
to the Company with respect to AurFoods. Dartford received $951,419 and $768,000
for 1998 and 1997, respectively, under such agreement. Also, Dartford earned
$1,500,000 in fees in connection with the Contribution.
From December 31, 1996 through January 16, 1998, the Company paid Dartford
$1,250,000 in fees for services rendered in connection with the acquisitions of
MBW, LC and DH. Also, from September 1995 through July 9, 1996, VDK paid
Dartford $1,950,000 in fees for services rendered in connection with
acquisitions and related financings by VDK.
The Company has entered into agreements pursuant to which it agreed to pay
transaction fees to each of Dartford, MDC and Fenway of 0.333% of the
acquisition price for future acquisitions by the Company.
The Company has agreed to pay Dartford $800,000 per year as reimbursement of
corporate headquarters expenses which include staff salaries, miscellaneous
office expenses related to the administration of the Company's corporate
headquarters and rent for the space leased by Dartford and used by the Company
as its corporate headquarters for a term ending the earlier of July 1, 2000 or
the date that Mr. Wilson is no longer Chairman or Chief Executive Officer of the
Company.
Messrs. Ayres, De Leeuw and Zachem are general partners of MDC. Pursuant to an
agreement, dated December 31, 1996 and terminated on July 1, 1998, MDC III, an
affiliate of MDC, a beneficial owner of the Company, advised the Company as to
the structuring of the Company's bank financing and the capital structure of the
Company, identification and financing of future acquisitions and general
management advice relating to the overall strategy and positioning of the
Company. MDC III received $318,000 and $293,000 during 1998 and 1997,
respectively, under such agreement. From December 31, 1996 through January 16,
1998 the Company paid MDC III $5,700,000 in fees for services rendered in
connection with the acquisitions of MBW, LC and DH. Also, MDC III earned
$1,500,000 in fees in connection with the Contribution.
Messrs. Dresdale, Geisser and Lamm are partners of Fenway. From December 31,
1996 through January 16, 1998, the Company paid Fenway $1,500,000 in fees for
services rendered in connection with the acquisitions of MBW, LC and DH. Also,
from September 1995 through July 9, 1996, VDK paid Fenway $1,474,000 in fees for
services rendered in connection with acquisitions and related financings by VDK.
Fenway earned $1,500,000 in fees in connection with the Contribution.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than ten percent
of the Company's Common Stock, to file reports of ownership and changes in
ownership of the Company's Common Stock and other equity securities with the
Securities and Exchange Commission and the New York Stock Exchange. Such
officers, directors and greater than ten-percent beneficial owners are required
by regulation of the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on the Company's review of copies of
such reports furnished to the Company and written representations from reporting
persons that no other reports were required for those persons, the Company
believes that, during the fiscal year ended December 31, 1998, each of the
entities or individuals who are signatories to the Securityholders Agreement
filed a Form 3 in either July or August 1998 instead of on the due date of June
25, 1998 and filed a Form 4 several days after the due date of August 10, 1998.
18
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Annual Report
The Company's Annual Report to stockholders for the year ended December 31,
1998, including financial statements, is being mailed herewith to all
stockholders entitled to vote at the Annual Meeting. The Annual Report does not
constitute a part of the proxy solicitation material. Copies of the Company's
annual report on Form 10-K are available without charge upon written request by
contacting the Company's Investor Relations Department, Aurora Foods Inc., 456
Montgomery Street, Suite 2200, San Francisco, CA 94104, or by calling the
Company's Investor Relations Department at (415) 982-3019.
By order of the Board of Directors,
/s/ Ian R. Wilson
Ian R. Wilson
Chairman of the Board and
Chief Executive Officer
San Francisco, California
March 29, 1999
19
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PROXY
AURORA FOODS INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ian R. Wilson and M. Laurie Cummings as
proxies, with power to act without the other and with power of substitution,
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of Common Stock, $0.01 par value, of Aurora Foods Inc. standing
in the name of the undersigned with all powers which the undersigned would
possess if present at the Annual Meeting of Stockholders of Aurora Foods Inc. to
be held Thursday, May 20, 1999 at 1:00 p.m., local time, at the Ritz-Carlton
Hotel at 600 Stockton Street in San Francisco or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
- - --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
PROXY BY MAIL
Please Mark
your votes [x]
like this
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Directors recommend a vote for ratification of the following directors
Directors:
1. - 01-Ian R. Wilson, 02-James B. Ardrey, 03-Clive A. Apsey, 04-Charles Ayres,
05-David E. De Leeuw, 06-Charles J. Delaney, 07-Richard C. Dresdale,
08-Andrea Geisser, 09-Peter Lamm, 10-Tyler T. Zachem
FOR all directors Withhold all directors
[ ] [ ]
Withhold authority to ratify any individual director. Write number(s) of
director(s) below.
- - ------------------------------------------------------------------------
Proposal(s):
2. - Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for fiscal 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
*Note* Such other business as may properly come before the meeting or any
adjournment thereof
I will attend meeting [ ]
- - ---------------------------------------------------------------------
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
- - ---------------------------------------------------------------------
**************************
* COMPANY NUMBER: *
* *
* PROXY NUMBER: *
* *
* ACCOUNT NUMBER: *
* *
**************************
Signature Signature Date
---------------------- --------------------------- ---------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- - --------------------------------------------------------------------------------
- FOLD AND DETACH HERE AND READ THE REVERSE SIDE -
[ICON] VOTE BY TELEPHONE OR INTERNET [ICON]
QUICK *** EASY *** IMMEDIATE
AURORA FOODS INC.
- You can now vote your shares electronically through the Internet or the
telephone.
- This eliminates the need to return the proxy card.
- Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET
- - ------------------------------
www.aurorafoods.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
- - --------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
- - ---------------------------
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF YOU VOTED ELECTRONICALLY
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